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Name Game
Premium
join:2002-07-07
Grand Rapids, MI
kudos:7

Why was a scam company able to raise $76 Million Series B?

I just stumbled upon this piece on Business Insider "JustFab Raises $76 Million To Create The H&M Fashion Brand Of The Web". »www.businessinsider.com/justfab-···b-2012-7
It kept me wonder why a company with very questionable (I will try to avoid using the word "fraudulent") business model was able to raise big money. Didn't the VCs have to do the due diligence?

I didn't have any direct experience with JustFab. The victim was my girlfriend. Back in January or so, one of her friends emailed her a link to JustFab, then she bought a pair of shoes from www.justfab.com and never visit the website again. Only 8 months later, in early September she was appalled to find out that her credit card has been charged a $39.95 fee for the last eight months. Yes, $39.95 for 8 months, without geting anything from JustFab.

I then did a bit research on the internet. It turned out my girlfriend wasn't the only victim. Apparently JustFab works like this: once you buy something from their website, you become their "VIP member". Then you will have to log into their website between the 1st-5th of each month and click “Skip This Month”. If no action is taken (either skip this month, or cancel your account), they just charge you a $39.95 fee every month.

According to the Business insider article, JustFab "will generate about $100 million this year" in sales, I wonder how much of this $100 million are from people like my girlfriend who simply didn't read their entire 2,500 words Terms of Service and were unaware that they were charged $39.95 a month for nothing.

p.s. After JustFab CSR refused to refund, I decide to post this story again, hoping it will get upvoted to the frontpage of HN so that more people get to know what is really going on behind JustFab

pps. Anyone could just simply google "justfab scam" to see how many others have been victimized. It's outrageous such large scale scam got unnoticed.

»news.ycombinator.com/item?id=4592778
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StuartMW
Who Is John Galt?
Premium
join:2000-08-06
Galt's Gulch
kudos:2
I don't think this is anything new.

Some years ago I had a prepaid cell phone with one of the middle tier providers. I was trying to purchase a ringtone at their website (as I'd done in the past) without success so I tried from the phone. The screens on the phone browser (not a smartphone) were very small and hard to read and I inadvertently "signed-up" for a $10/month service (charged to my account).

When I saw the charge the next month I complained and got it reversed but still had to cancel the "service" I never wanted.

BTW I never did get the ringtone. No matter, I'm no longer with that provider.

The point is that this kind of stuff isn't rare. If you check your CC/other accounts frequently you'll be out one/two charges at most.
--
Don't feed trolls--it only makes them grow!

dave
Premium,MVM
join:2000-05-04
not in ohio
kudos:8
Reviews:
·Verizon FiOS

1 recommendation

reply to Name Game
"Why?"

Answered in article:
said by uncritical article written by illiterates :
So whether they're shopping or skipping, users always have to visit JustFab at least once per month; JustFab never has to re-acquire its customers.
Expand your moderator at work


Ian
Premium
join:2002-06-18
ON
kudos:3
reply to Name Game

Re: Why was a scam company able to raise $76 Million Series B?

said by Name Game:

It kept me wonder why a company with very questionable (I will try to avoid using the word "fraudulent") business model was able to raise big money. Didn't the VCs have to do the due diligence?

You do know that this would be pretty much the same people that lost $300 million dollars on a scheme to sell dog food and kitty litter by UPS with Pets.com, right?

This sounds no shadier than the Record and CD "clubs" from the 70s and 80s.
--
“Any claim that the root of a problem is simple should be treated the same as a claim that the root of a problem is Bigfoot. Simplicity and Bigfoot are found in the real world with about the same frequency.” – David Wong

romniE1

join:2012-10-03
reply to StuartMW
Yeah, there are scam companies out there. Take for example a story about Naveen Jain and his Intelius. The guy has a history (»seattletimes.com/news/business/infospace/) and that history is not good. Still, he runs Intelius and makes tons of money and nobody is doing nothing about it.