Growing too fast nearly sank company—how we fixed it

It’s part of the story Make CNBC The Moment series, in which highly successful people reveal the critical moment that changed the course of their lives and careers and discuss what pushed them to take a leap into the unknown.

Many CEOs may become pessimistic if their company loses more than half of its valuation. For Faire co-founder and CEO Max Rhodes, that feeling resembles relief and optimism that the best days of his business may still be ahead.

Faire is an online wholesale marketplace that connects artisans and other independent brands with small retailers looking for new products to sell in their stores. Its latest value was $5.2 billion. secondary share offer It’s less than half of its peak valuation of $12.59 billion in November, post-money after a fundraising round in May 2022, a Faire spokeswoman said.

Rhodes and his co-founders Marcelo Cortes, Jeffrey Kolovson and Daniele Perito founded the company in 2017 and quickly raised over $1 billion in the following five years. Investor interest was so compelling, Rhodes says, that soon the company began pursuing “vanity metrics” as it expanded its headcount to 1,200 employees.

“We’ve become addicted to growth rates,” says Rhodes, 39.

The company risked joining the ranks of cool startups that never figured out how to turn their lofty valuations into profitable, sustainable businesses; Until a moment in April 2022 that caused Rhodes to reevaluate his company’s approach.

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Faire’s revenue growth was slowing, Rhodes said, so he decided to look at some key numbers of the business. He says what he found has the potential to sink the Faire if left undisturbed; declining retention rates, customer complaints about the state of the platform, and users who only join to take advantage of short-term discounts and incentives before leaving Faire for good.

One option for Faire: spend more money in hopes of reigniting revenue growth. Instead the initiative was deliberately slowed down; cut spending, cut the company’s staff by about 20% and eliminated many of the incentives and discounts it used to attract new customers. Rhodes says the decision is painful, shameful and necessary.

But Rhodes says revenue growth has picked up over the months. Recently, Faire’s revenue in 2025 is up 32% from 2024, customer retention rates are “way, way up,” and the company is expected to “reach breakeven in the very near future,” he says. (Faire declined to provide documentation to confirm the revenue increase.)

Even if profitable, Faire may face stiff competition. Its closest rival also has a valuation of billions of dollars: Paris-based startup Ankorstore. It was reported to be worth $2 billion after the money As of January 2022. Both compete at physical trade shows, where some of the largest annual events can be held. Attracts the attention of tens of thousands of retailers purchasing inventory directly from participating brands.

After declining in popularity during the Covid-19 pandemic, these trade shows have reached an estimated market size of approximately $16 billion by 2024. According to PwC.

Here, Rhodes discusses the role “arrogance” played in Faire’s initial rise, the red flags that led to its restructuring, and why leaders should always avoid feeling invincible.

CNBC Make It: Looking back, why didn’t you see the warning signs sooner?

Rhodes: I’m ashamed to say this, but I definitely think there’s arrogance [factor]. Our valuation was doubling every six months. We went from a billion-dollar valuation to a 12 billion-dollar valuation in just 18 months. I think we lost our way a little in this process.

We started using shortcuts. We raised all of this money, about a billion dollars, and started using capital as a shortcut to faster growth. We doubled the number of people two years in a row and [revenue] growth continued to accelerate, so I saw that as a signal [our strategy was] study.

But it wasn’t actually working. Trade fairs in 2021 [that traditionally connect artisans with retailers] it was canceled and there was a ton of stimulus in the economy, so people had a lot of money and a lot of time on their hands. Part of what caused growth to change that way wasn’t actually what we were doing. This was just happening to us.

We had a billion dollars. It felt like an endless runway. Feeling like you have unlimited capital can actually lead you to lack discipline. I wasn’t skeptical. And I said, “Wow. Everything we do works. We’re unstoppable!” I said.

CNBC Make It: What were the biggest red flags you discovered when you started researching what was causing growth to slow?

Rhodes: I’ve spent a lot of time digging into all the metrics we’ve used in the past to assess the health of the business [including customer retention and spending habits]. I spent a lot of time talking to retailers and a lot of time using the product myself.

It was quite shocking. Retention was falling. Some of the clients I spoke to came through incentives and didn’t even know what Faire was, we didn’t have a real relationship with them. We added all this stuff and the website became very slow due to the load. It was a much worse product and experience than even a year ago [earlier].

This really started ringing alarm bells in my head – cognitive dissonance [going from] “We’re a $12 billion company, and in a few years we’ll be a $100 billion company,” as in, “Oh my God, if we don’t clean up our behavior, we won’t even have a company.”

Other signal: Frankly, I felt disgusting, if that makes sense. I felt it in a fundamental way. I felt like I wasn’t living my values. We felt invincible and lost our way.

CNBC Make It: What were the risks of cutting spending and reducing headcount?

Rhodes: I knew it was the right thing to do, so once we started looking at it, there wasn’t a lot of doubt that we were going to do it. [the underlying metrics]. But it was scary because it was like an acknowledgment that the world was changing, the mistakes we made and their consequences.

This is definitely the hardest thing I’ve ever done in my professional life and perhaps my personal life. I was definitely worried about how people would see me and how they would see Faire. I was worried that people would leave and the shine of the company would fade.

We were burning so much [of cash]but it wasn’t existential [the sense]”We’re going to run out of money.” like. It was existential [the sense] We’ll lose all the momentum we’ve built and end up with a product that’s not that good.

Once this happens, it won’t work even if you have infinite runways. You may survive as a business for another 20 years, but you won’t be doing anything that matters. You will have no real impact on the world.

Ultimately it comes back to the North Star for us: Serve our community [and] Help our customers succeed. The organization was now very bloated. There was so much bureaucracy. once we [addressed that] We started to move much faster.

CNBC Make It: Is there anything you wish you had done differently?

Rhodes: It was so stressful that I honestly don’t know if it’s possible that wasn’t the case.

I wish I had tried to show more empathy towards myself because I was so hard on myself during this process. But in some ways going through something like this is a part of life. That’s part of starting a company. If you look at all the truly great companies I admire, nearly every one of them has had a near-death experience.

We are going through such a process [made Faire] a stronger company. I think I am a better leader as a result of being reminded in such a traumatic way of the importance of focusing on customers. [Our] employees knew our growth was slowing. We explained why we did this. We finished with goodness [employee] eclipse [after the layoffs].

And we started to accelerate growth again. We’re now back to a place where people can see our path to becoming a $12 billion company in the not-too-distant future.

CNBC Succeed: What is your advice to other entrepreneurs on how to look beyond positive results to see potentially devastating red flags?

Rhodes: Check your cognitive biases, especially if you’re starting to feel invincible or unstoppable. It can. Success can be dangerous.

The second and perhaps most important thing is to truly stick to your principles and core values. What made you successful in the first place? For us, we are mission-driven and customer-obsessed. We really care about the quality of the experience we create. [I should have] We stuck to our principles along the way. We have lost touch with who we are as an organization. I think I lost touch with who I was as a founder.

Having a great board and listening to your board is another; Having advisors who can check your reality and are willing to be honest with you.

This interview has been edited and condensed for clarity.

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