jdh

I am sure you are right, but as a long time resident, I think this is the trees not the forest -- I would estimate these barriers reduce 95-99% of the car traffic through them, even if someone cutting through is indeed a daily occurrence. Most are quite intimidating, many are totally impassable or require significant ground clearance.

Almost by definition, if it were a black swan, you couldn't hit 5/40 no matter how good or lucky you were.

Another point: it would help to know the terms associated with this investment to decide if it was smart.

Author treats stock as if it was a public company, which is understandable. i.e. these investors bought $1.2B of stock at a $17B valuation, and would need to see massive market growth, massive share, and margin stability to make 2x their money.

However, it's reasonable to assume they got preferred stock. So their return profile looks like: if Uber is worth anything more than a couple billion dollars (which they may view as near-certain), they get their money back + interest. Then they hold an option should Uber execute like Amazon, as others have suggested, and dramatically exceed their near-term market potential.

Valuing this is quite tricky: presumably the people who invested $250M less than a year ago thought: I only have to clear ~$400M to get my bait back, now that number is 3-4x higher.

While it is highly likely that the new investors have some sort of preferred return, it's possible (though less likely) that have a participating preferred or some other more complex instrument. Maybe the market price for straight preferred was "only" $12B valuation, and the company said: "How about we 'guarantee' you a 2x return, with a participating preferred instrument, but we want a 50% higher price, so in an upside case we are diluted less?"

This stuff is pretty common in these later rounds, though admittedly more on the "bubble unicorns" than the true unicorns, who have utmost market leverage. But you can see how even just the vanilla preferred stock would really change your personal calculation of whether you want to put your nest egg into Uber at this price.

Maybe not in the next few years. But people who pay with cash because they aren't allowed to be in this country and don't want a bank account (some portion of the unbanked) might enjoy shopping in the digital world by using some "digital cash".

Stock for stock deal. Price is arbitrarily set... All that matters is the percentage. If klout got ten percent, lithium just said they're value is $2B.

Klout did have a cool looking office for sure. Hard to find that in SF today.

" Why? Because that’s their job, to meet with entrepreneurs. It also means that if they schedule it on, say a Friday in SF at 11am, they can: a) avoid driving down to Sand Hill altogether, and b) arrive in Tahoe in time for a few evening runs. Be wary in thinking it’s anything more than that."

Thanks for the gratuitous kick in the nuts.

Did you consider that maybe the fact your meetings with VCs didn't result in good outcomes might be a signal of something else?

Having done both, running a company is definitely more work at the peak, but being a great VC is a ton of work, too.

You've got a lot to learn about VCs if you think we meet with you so we can go night skiing. Or that any VC goes night skiing.

<edit for tone at expense of humor >

Perfectly stated. Employee compensation is a contract freely entered into by the employee. If you think you deserve more, don't take the job.

However, I have sympathy for the fact that founder risk in SV has declined dramatically over the last twenty years, while employee risk has not, but if anything employee stock pools are smaller than they were a decade ago. Yet every founder says "it's impossible to hire good people".

I don't accept the word "misleading" -- I do not believe the page in any way misleads. It does not try to position it as anything other than a subscription, and the language is plain english.

Could they put the subscription details in bold? Could they use a larger font than all the other text? Sure. It's a tradeoff, for sure, and every retailer has to optimize their site to perform. Could they pop up three boxes after you click yes and say, "Are you sure?" "Are you really, really sure?" -- (yes, I know I'm being ridiculous) -- but yes, it is a tradeoff.

But with an NPS score in the 50's, nearing a million subscribers with very low churn rates -- happy users -- as investors we feel the business is healthy and being managed in an upfront way.

But, I can see how one might feel they would like it bolder or more prominent -- reasonable people could disagree on that.

I would submit that, when you come to view the site under the lens of clicking on a discussion about a fraud, and then go to it to decide if it is a fraud, and you (probably) aren't a likely customer and don't think "damn, that's a hot pair of boots for $40", you end up with a different lens.

You've posted this comment three times, and I won't reply on every thread, but let's be clear: these "review" sites are shady operations that extort retailers by aggregating negative reviews and charging to hide them.

Amazon's review is worse than JustFab's on the same site: http://www.consumeraffairs.com/online/amazon.html

You can Google a lot of e-commerce sites with the word "fraud" or "scam" and find a lot of negative stuff. This is the internet.

I don't dispute the fact that there are probably several hundred unhappy customers, as reported the site will do >$100M in revenue and everything costs $40 or less, with 2.5MM+ transactions, it's inevitable, but it's not indicative of a problem.

Oh for god's sakes, did you even look at the site you just linked to? A site that gathers negative reviews to get companies to pay them>

Did you read Amazon's review -- 1 out of 5 stars with 690 reviews, worse than JustFab's? http://www.consumeraffairs.com/online/amazon.html

I'm sure you'll enjoy 1SaleADay, with 5000 reviews and a 4 star rating! http://www.consumeraffairs.com/online/1saleaday.html

I'm the Series A investor in this company.

We in fact have done plenty of due diligence, and you will be pleased to know it is not a scam company. In fact, the company has very high customer satisfaction ratings, including an NPS that is in the ballpark of Amazon, and a very high customer retention rate. More than half of the people who subscribe to the service are still subscribers after two years, which is unusually high for a subscription service.

I obviously cannot speak to your girlfriend's experience. With nearly a million subscribers, there are certainly people with bad experiences -- same is true with any service. Netflix is great but I am sure there are a number of people who have had a bad experience.

I would encourage the HackerNews community to consider the opposite: if we assume the investors in this business do perform due diligence, is there another possible explanation? Is it possible that this case is not representative of the average case?

But hey, we don't have to be he-said-she-said here, anyone can just go to the site and verify if this claim is true. In essence, the claim is: "The site tricked me. I went to buy a single pair of shoes, and in doing so, they actually started taxing my credit card every month, and no one warned me."

Folks are right to be skeptical -- a lot of businesses have done this, tried to hide the fact there would be future charges. Does JustFab?

I just went to the site -- you can do this -- picked a random pair of boots and put them in my shopping cart. I then clicked checkout, and here is what that page looked like:

http://imagesup.net/?di=15138026329215

"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" -- Seriously, please look at the link above to the checkout flow and tell me that's how you see it, that you have to read the 2,500 word TOS to figure out that this is the case.

Seems pretty clear to me. You can get the boots for $39 if you join the VIP program. "With this purchase, you will be activating your VIP membership"

Under "How VIP Membership Works", it explains: " If you do not take action between the 1st and the 5th of the month, you will be charged $39.95 for a member credit on the 6th. Each credit can be redeemed for 1 JustFab item, so use it to shop later!"

It's in plain English, and in the same font size as everything else on the page. Over 800,000 people can manage their subscription account every month without racking up credits. I'm sorry it didn't work for your girlfriend, and I recognize she is not the only one who has not grokked the subscription element and been surprised -- but it's a tiny minority, and the information is quite clear on the site.

Finally, one may ask: why subscription at all? Well, $39 for a high quality pair of boots is a really, really good deal. Most e-commerce merchants have to reacquire their customers for every transaction. By asking members to commit to come back to the site once a month, the company doesn't have to constantly pay google or other traffic sources to acquire members, and to have prices like this you have to keep costs low. That's the deal. There are plenty of higher priced places to buy shoes if you don't want to subscribe.

Double finally: credits never expire. If you have 8 credits in your account, you can go get 8 pairs of shoes.

Justfab is an awesome company and is creating and H&M or Zara experience online: fast fashion at great prices. I'm not sure HN is the target demographic, but it's a great service and customers love it, and VCs have poured money into because of that.

Medallions required to pick people up on the street. Über is classified as a limo -- pre booked, no curbside pickup. Los dint need medallions.

However, the structure was created for old style limos: I.e. fat cat or prom kid books for hours, days in advance, not competitive with a taxi.

One could reasonably argue booking an uber 1 minute before pickup for a ten minute ride is a lot more like a taxi than a limo.

I agree, but I think there's a bigger problem.

I think first time entrepreneurs are prone to thinking that raising money is a win. Second time entrepreneurs almost never think that, they view it as an obligation.

A lot of young, first time entrepreneurs, if you told them: you can with certainty raise a $5M Series A, but with certainty the business will not work in the end, which you will figure out in 3 years -- they would still raise the money. They have a burning desire to to be a CEO, to build something, and they'll worry about the rest later.

In my view, raising money when you either have no idea if it's a good opportunity, or believe on early data that it's actually not (but you'll figure it out or pivot later), -- this is what I see in "fake it til you make it", "hustler" thinking -- is that when you're successful, you've now signed up to use some of the most productive years of your life chasing an opportunity that is likely not to be any good, when you could have held out for something better.

Happiness research indicates that people are consistently wrong about what's going to make them happy (or sad) -- the shiny new car will lift their spirits every time they get behind the wheel, but within a few weeks, it's just another car. I think this applies to fundraising as well: raising money for an idea you're not 100% convinced on has proven to tempt many founders, but in my experience, they later come to regret it.

Fundraising climates cycle from optimistic to pessimistic. If you take a ten year view, this would be an average to above average time to raise money in my view.

In the difficult environments, everyone has their wallets stashed in their pockets and it's hard for even good startups to raise money. In that environment I think engaging in "permissible levels of salesmanship" is probably rational.

But in an average to strong market, I agree, why compromise even at the margin? If it's a good idea you'll get funded.

Plastic goose?

> Option pool

I see the point that this is just a price negotiation. However, I don't understand why the form of presentation is so important to people. If you get a standard term sheet that says $2M investment at a $6M pre-money valuation and a 15% pool, it takes about 2 minutes to do the math to see this would be the same as a term sheet that said $2M on a $4.8M pre-money valuation, with the 15% pool coming in and diluting all parties after. The discussion on this thread seems to lean toward the idea that the latter term sheet is more founder friendly. I wouldn't see the latter term sheet as more founder-friendly, I would see them as equal.

Why do VCs continue to write term sheets the standard way? After all, if they thought entrepreneurs would really prefer the latter term sheet, it would obviously be in their interest to write it that way, and VCs are not dumb. I think they think that entrepreneurs prefer it the standard way, they like a cosmetically higher pre-money number, and I suspect they are generally right. I don't think on this matter they expect they are fooling the naive entrepreneur: this is pretty basic, and I doubt many would want to go into business with someone who couldn't grok this.

Now, diluting after but keeping the $6M pre-money... now that's founder friendly! Who doesn't like higher valuations! I suspect this is what a lot of people mean by founder friendly.

> Lawyers

As a founder I disliked this clause, I didn't understand why I had to pay the VCs legal bills. The major bummer on this is that VCs have less incentive to really grind down the amount if the company is paying, I agree with that.

But I have seen a lot of entrepreneurs grind on this particular term, and I think it's nuts to make this a point of principle.

VC's annual W-2 compensation is the management fee minus expenses. In the traditional customary structure of company pays, the deal expense comes out of the invested capital and doesn't impact annual compensation.

When you grind your VC on this point, you are saying this: listen you jerk, I am going to make you pay this out of your personal paycheck this year. And I'm going to make you go back to your partners and explain why, rather than customary deal terms, his partners have to eat their share of this bill personally.

Now, maybe it ought to be that way, I don't know -- I'm more with the other commenters that say what's the difference, just ask them to add $25K to the round size and scale up the pre-money accordingly and call it a day.

But running a business deciding what battles to fight or not.

As a founder, you can work valiantly to ensure that $25K of your $5M round comes directly out of the pocket of the guy who is going to be your partner in building the business for the next 5 years, instead of the family offices and endowments that are his investors, where it is customarily paid, but I think there are other points of negotiation you'd get more leverage out of pushing. Ask the VC to gross up the round size by the attorney's fees and use whatever leverage you have on more important points.

Incidentally, "company pays" can be a reasonable structure for angel investors as well as VCs: Say you have a $1M round with all angels, and for some reason your deal can't use one of the free open source docs out there. If there is a need for a lawyer (let's say you are raising from US investors but it's not an American company and they might reasonably want to understand any risks associated with this): if your lead investor is putting in $200K and then 16 other individuals are each putting in $50K, it's not reasonable for the lead to be out of pocket on the cost personally, and splitting the bill 17 ways makes no sense either, it would be much more sensible for the company to pay, and if need be the round be made slightly bigger. The same principle could apply to institutional rounds with multiple investors involved.

I don't see how a camera phone will be as good as a 5D Mark3 anytime soon. I mean, phones don't have focusing! Not to mention a sensor that is maybe a tenth the size?

I love me my iPhone 5 but unless you want a phone the size of a 1980s one, there are physical limitations. Try photographing a soccer play from the sideline or getting a shallow depth of field with a phone, things you pay thousands for a full frame SLR for.

Now, as good as a good point and shoot soon? And better because its Always in your pocket and connected? I'll buy that.

It is good work if you can get it. So is getting $10M a year to play basketball. If you have the rare talents that our 21st century economy demands from the top performers, a nursery in your office is the least of the perks you get.

If you have the less rare but still valuable talents of a yahoo programmer, you get no jet or crèche but you get six figures and free soda.

If you live in Detroit and know how to make fasteners, you get less than that in most cases today.

If you live in Somalia, well...

Fair it may not be, but I'm not crying for the poor Yahoo lead developer who has to go to the office now. It's a cold, cold world.

Battery is nice when you kick the kids out of the dinner table and they go to another room... No shutdown reboot. Also plugged in is great at a desk but at a dining table it means a tripping hazard. No biggie but a little battery would be great.

Not a politician but still a courageous voice :

http://online.wsj.com/article/SB1000142405270230381540457733...

I wonder if people bitched about mail ruining their life back then the way I feel about my email albatross today. "Cricket! Ten more letters to reply to! Summon the scribe."

Right. Let's consider the possible hypothesis that the customers like the service and know what they're getting into, and thus chargebacks aren't above average (which is the actual case with this company.)

Chargebacks don't lie, not at this scale. If customers were being scammed, they wouldn't be able to process cards.

Regarding your comment: "It says you'll be billed month per month on the right hand side under the VIP membership program, but I think it's pretty clear that the page is engineered to be misleading."

I'm sorry: you're talking about the section that explains "How the JustFab VIP Program Works"? Whose 4 bullet points say:

1. Get a boutique the first of the month 2. Browse and Buy 3. Don't like anything, skip 4. If you don't buy or skip by the 5th you'll be charged anyway?

And a default unchecked box that you read and agree?

I think the concept of "engineered to be misleading" might just put the points in say, a small font, or in the terms and conditions behind a link. If someone describes it clearly in bold font in a section explaining how the site works, well, that's a pretty strange way of misleading people.

Biased answer but with some facts: I'm an investor in the company, and many here on HN know me personally. JustFab is not a scam, and I would not be involved with it if it was -- indeed it's a spectacular and very consumer friendly company that I'm proud to be a part of and I think will be a great success.

This comment thread has been quick to conclude that it is a scam, on some fairly sketchy evidence. While I don't dispute that the author's friends experience might be true, the fact that someone didn't notice that they were signing up for a subscription product is somewhat undermined by the fact it took them 8 months to realize the charge was appearing on their credit card. It's possibly not a person who pays attention to details.

If you want to understand the degree to which the company's customer base understands and is in love with the company, check out their facebook page and the consumer engagement. Here's a pair of shoes they posted for a sneak peak this week: https://www.facebook.com/photo.php?fbid=10152125991230508...

90 Comments, 4,800 likes in a few days -- for a commercial promotion. Read the comments on this or any of their threads -- no one is bitching about being scammed or not understanding they are members of a suscription site -- they LOVE it.

Justfab has hundreds of thousands of subscribers. A new subscriber who joined last month will, given churn rates, be likely to be a paying subscriber for more than two years. They will make purchases in more than four months in their first year. They understand the premise: a personal shopper has selected a boutique for them at the beginning of the month, all the products are great value, and their obligation is to come and check the boutique that has been prepared. If they don't want anything that month, they just click skip and they're done.

Now, many of you would clearly prefer a world where you would not have to log in to say "no thanks" -- and that world is available to you at the mall. Justfab shoes are quality identical to shoes twice their price at the mall, because they have crushed the traditional retailer and supply value chain. But to deliver the value that the customers want, they need to be very thoughtful about costs.

The #1 challenge in ecommerce is customer acquisition. Pretty much every company has to spend more to acquire a customer than they will make in margin on the first transaction, so you're dependent on a lifetime value of purchases to make money. The reason few outside of Amazon have been able to make this work, and even Amazon (and it's bought businesses like Zappos and Diapers) make very little money is because you keep having to reacquire the customers to get their business... think of people just clicking through those google ads at the top, whether they've been there before or not.

The idea of the subscription model is to get customers in a regular habit of checking in. When they commit to that, Justfab can in turn commit to pricing for the quality they provide that would be unheard of anywhere else. Justfab's typical customer isn't wealthy but likes to look good, and can't afford to just disregard price, and JF is the place they find a style/quality/affordability combination that works for them.

To be clear: as stated, JustFab is on track to do $100M+ in sales this year, from hundreds of thousands of subscribers who check in every month and understand exactly what they're getting into. The site has a very high net promoter score, a return rate that is less than half of Zappos.

As a general rule, if a customer signs up for a subscription product, doesn't check in and calls in because they got charged, we explain the system and try to keep them as a customer, but if they want a refund they will generally get it. People who don't call for 8 months I'm less sure about what the standard policy is.

If I go to the homepage, the biggest call to action for me (it's customized so not everyone will get the same) is "Buy one get one free sale happening now. JOIN TODAY." If they were trying to trick you, would the call to action say Join?

As has been pointed out, when you join by making your first purchase, the purchase page which others have linked has two key things:

* A very clear description that you are signing up for a subscription program. This says plainly and in bold type, in the same font size as everything else on the page: "If You Do Not Make A Purchase Or Skip The Month By The 5th, You'll Be Charged $39.95 For A Member Credit On The 6th. Each credit can be redeemed for any JustFab style on the site."

* A check box that says you accept the terms of VIP membership. This box is in a clear and large font, uses the word membership, and is not opt-out -- you have to proactively opt-in.

I don't see how a reasonable person could argue that this is a scam or a trick. Not only are the terms presented in plain english and large fonts, the site has a huge number of passionate and loyal customers.

Just FYI us VCs aren't sitting around just hoping some rube will come by who is not incorporated so we know we can take advantage of him in a negotiation.

Our model isn't leveraged around finding naive people to take advantage of. No price is cheap enough for a bad team or deal...

What a great American dream story. How tragic the death of most of his children, I'd bet he'd trade the $B to change that.

This was posted before, got a bunch of votes and had a robust discussion.

For some reason it was deleted. Any way to know why this is?

http://hackerne.ws/item?id=3443005

I felt this way a decade ago when my wife and I rented Season 1 of the show 24. I never enjoyed it, but felt strangely compelled to find out what happened in the next episode, and would stay up too late watching. After one season I decided that was enough of that addiction.

For mega-rounds:

- SaaS companies like box flush it all on customer acquisition. Billboards on 101, google Adwords, telesales teams. See Jive's S1: $60m rev run rate and losing $2 for every buck of revenue.

- groupon, living social: customer acquisition also: web ads. Plus salesforce to call on local businesses

- four square plus everybody above: "secondary" I.e. into the pockets of founders, early shareholders and, once in a blue moon, employees.

If so, I'm blown away at the quality of morton's social media team. Who'd think they could attract someone with that nuanced judgment? Let's hire them into a startup!-