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

http://www.businessinsider.com/justfab-raises-76-million-to-create-the-hm-fashion-brand-of-the-web-2012-7

by wenxun • 14 years ago

5 4 14 years ago

wenxun• 14 years ago

I just stumbled upon this piece on Business Insider "JustFab Raises $76 Million To Create The H&M Fashion Brand Of The Web". http://www.businessinsider.com/justfab-raises-76-million-to-...

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.

tisme2• 14 years ago

Upvoted, I hope you get some more upvotes because this clearly is fraud or close to it. Some porn sites use this tactic and it should at a minimum cost them their merchant account.

Charge back as far as you can, most banks will do this up to 6 months no questions asked.

Credit card rebilling in a card-not-present situation is one of the few things where a consumer has a bit of power.

justscam• 14 years ago

I'm sorry for your gf's loss, but from what you have described I don't see anything justfab did wrong here. Next time read the terms first before giving credit card info!

tisme2• 14 years ago

Do you read the terms every time you swipe your card to buy a pair of shoes or a bag in a regular store? Why should it be any different online? If the intention of a consumer is clearly to buy a single item once for a fixed fee then a forced membership buried in the terms of service is not what they expect, and not something they should suspect.

It's a ridiculous stance to blame a consumer for trickery like this.

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

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