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A cautionary tale about subscription services and how not to shut down a startup

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Re: A cautionary tale about subscription services and how not to shut down a startup

#41

Post by pdonis »

patio11 wrote: post #34

It isn't necessary to dream up scenarios of unethical action on the part of anyone for this to happen. Startups fail. Fact of life. We talk about "burn rate" and "runway" because it is easier to say than "The number of days you have to find a working business model or secure additional investment, after which you have to fire all of your employees because you cannot make payroll." When startups know they're going to…

> When you're the non-technical CEO of a subscription commerce company, and you find yourself in an empty office without employees, if you're hypothetically aware that subscriptions are still active -- which you very well might not be aware of -- you have very limited options for actually fixing it.

You also have very limited options for avoiding liability for fraud. I don't think using the excuse that you were a non-technical CEO is one of them.

Re: A cautionary tale about subscription services and how not to shut down a startup

#42

Post by Animats »

Well, they seem to be in violation of the FTC's Mail Order Rule.

First, who are they? Their street address is

2409 20TH ST BOULDER CO 80304 US

which is a house.

A Colorado corporation search gives a second address:

1738 Pearl St., Suite 2A, Boulder, CO 80302, United States

which looks like office space above a restaurant in Google Street View. Their landlord is Pearl Street Properties (http://www.pearlstreetmallproperties.com) and calling them during working hours might be helpful.

They're incorporated in Delaware, but are delinquent in filing with Colorado. Delaware corporation search only works on weekdays, so not much is available from there tonight.

The founder is Alicia DiRago. Not only is the company not communicating, her rather busy personal online life has stopped.

Here's her Twitter feed, which stopped on September 3, 2014: https://twitter.com/aliciadirago

Here's her other startup, Dismount Creative, which was last updated on August 3, 2014: http://www.dismountcreative.com/

Her personal Facebook account, last updated in January 2014: https://www.facebook.com/alicia.dirago Definitely the right person; she's wearing a Whimseybox T-shirt in her profile picture.

She's married and lives in Boulder, CO. The address is a matter of public record, but I won't list it here. Her husband, Joseph DiRago, is an attorney in Boulder. No news items or obituaries for either of them.

This is a very tiny operation and there's probably a personal problem. This isn't a big enough business to be a scam.

Re: A cautionary tale about subscription services and how not to shut down a startup

#43

Post by escape_goat »

patio11 wrote: post #34

It isn't necessary to dream up scenarios of unethical action on the part of anyone for this to happen. Startups fail. Fact of life. We talk about "burn rate" and "runway" because it is easier to say than "The number of days you have to find a working business model or secure additional investment, after which you have to fire all of your employees because you cannot make payroll." When startups know they're going to…

I know that this must be your gut reaction to the article, because it was written less than an hour after the link was posted, and it's possible that you didn't read the blog post very carefully: it alleges two serious breaches of normative commercial behaviour that I won't characterize legally. There's firstly the failure to cancel a charge for a non-forthcoming product, of course; more seriously that the company is still signing up and charging new customers. So, with that in mind, I want to invite you to review it, because if it's a reaction that considers the full details of the matter, I have to say that it doesn't really pass the smell test, in my judgement.

You cite the failure mode of startups as a "fact of life" with regards to two particulars, and minimize the ethical responsibility of the hypothetical non-technical CEO on the basis of implied incompetence and his or her technical inability to do anything about the situation due to both his or her failure to plan for the eventuality and the actions that he or she has just taken. That leaves you with two "that's just how it is" statements and one "what can I [he] do about it anyways" statement, lined up against one "could this have been handled better? Yeah" statement. I believe you might agree that that looks like a pretty weak argument, on a second read; if not, I'm certainly interested in what you have to say about it.

If you're the non-technical CEO of a subscription commerce company in this situation, did you mean to do anything wrong? Of course not, no-one is going to assume that. Does that mean you aren't to blame and it's not your fault and you're not responsible for the situation because who knew startups were high-risk and computers are hard? In the scenario you outline, it would not give me confidence in a person to hear that he or she believed such a thing.

More notably, though, and perhaps interestingly, the author mentions that it does not give her any particular confidence in "Techstar" as a brand. Interesting because of the implicit assumption that the VC incubators are effectively vouching for the reliability of the startup and assuming a degree of governance / diligence with regards to the potential extremes of the outcome, which in turn raises the question of whether that's an idea that the incubators are selling (perhaps unwittingly) to their prospective investments. So, I think something like that might be more productive to talk about than situational ethics, really. But I didn't want to leave you with the mistaken belief that everyone had come to the same conclusions about the facts of life.

Re: A cautionary tale about subscription services and how not to shut down a startup

#44

Post by username223 »

jeremymcanally wrote: post #30
sgarman wrote: post #27

Earlier quoted context omitted.

If anything these X box a month services pop up so frequently I'm surprised there is not a startup to help people make their own x box a month companies.

There is actually, and it's nice! http://cratejoy.com

Hook that into http://bride.ru and you've got a winner!

More seriously, automating the process of harvesting credit card numbers and signing them up for monthly billing, then taking a cut, is evil genius.

Even more seriously, the sex-trade people were way ahead on this, by happily offering canceling customers refund checks with mind-blowingly dirty names on them to discourage deposit.

Re: A cautionary tale about subscription services and how not to shut down a startup

#45

Post by iopq »

This is why I want to just pay for everything with Bitcoin. I gave my credit card to a site (not a subscription site) and they charged me and never delivered. I contacted them and they said they refunded the charge and put in a new order (???). So now I had TWO charges. Why didn't they just ship me the stuff without charging me again? I disputed one charge with the credit card company and the company refunded me after they saw the chargeback. Then a month later they ordered again for me. I had to charge back a second time (and I got a refund back again).

Are you kidding me? The model of "I have your credit card number and the code on the back and I can charge you as many times as I want" is clearly broken.

Re: A cautionary tale about subscription services and how not to shut down a startup

#46

Post by adventured »

patio11 wrote: post #34

It isn't necessary to dream up scenarios of unethical action on the part of anyone for this to happen. Startups fail. Fact of life. We talk about "burn rate" and "runway" because it is easier to say than "The number of days you have to find a working business model or secure additional investment, after which you have to fire all of your employees because you cannot make payroll." When startups know they're going to…

This is a ridiculously absurd attempt at excusing fraud.

It is fraud, there should be no mistaking that. If you take someone's money with absolutely no intention of fulfilling the service or product they're purchasing, it is fraud, period.

It doesn't take a technical founder to log in to Stripe and shut down the payment processing. Or to call Stripe and get it turned off. It doesn't take a technical founder to alter the settings on the domain name and blank it that way either. I know people that can barely use email that can change settings on a domain.

It might cost $200 to $500 - worst case scenario - to hire someone to take down the consumer facing part of the site (or plainly neuter it). More than likely they could reach out to any number of contacts and get it down for a lot less than that. Don't have a few hundred dollars? Well then your responsibility is to go crawling to your family, your friends, Techstars, whomever to get it. Just to save their reputation, I'd be willing to bet Techstars would have helped in getting this shut down had they been asked.

There is no excuse for what they've done.

Re: A cautionary tale about subscription services and how not to shut down a startup

#47

Post by ams6110 »

iopq wrote: post #45

This is why I want to just pay for everything with Bitcoin. I gave my credit card to a site (not a subscription site) and they charged me and never delivered. I contacted them and they said they refunded the charge and put in a new order (???). So now I had TWO charges. Why didn't they just ship me the stuff without charging me again? I disputed one charge with the credit card company and the company refunded me afte…

virtual/single-use credit card numbers are a potential solution.

Re: A cautionary tale about subscription services and how not to shut down a startup

#48

Post by Sami_Lehtinen »

Unfortunately what you experienced is really common.

One company deliver "led lights" does everything, except deliver the goods. Web site is up, customer support answers to messages (as long as you're going to order something) and they'll accept payments. But that's where it ends.

My dad got a new cellphone and it got the number which is still being shown on that web page. It's nice to receive more and less angry calls all day long from people getting scammed all the time.

Unfortunately this seems to be quite common problem. Isn't it the business focus? Do the things which make money, don't mind about the rest. Web site, credit card handling, and customer support, all generate revenue. Delivering goods is bad business, it generates substantial expences.

One famous entrepreneur in finland said that invoicing is the thing that runs the business, rest is irrelevant.

Re: A cautionary tale about subscription services and how not to shut down a startup

#49

Post by PinguTS »

iopq wrote: post #45

This is why I want to just pay for everything with Bitcoin. I gave my credit card to a site (not a subscription site) and they charged me and never delivered. I contacted them and they said they refunded the charge and put in a new order (???). So now I had TWO charges. Why didn't they just ship me the stuff without charging me again? I disputed one charge with the credit card company and the company refunded me afte…

But bitcoin will not help you at all, when there is no delivery. Bitcoin has no charge back. Bitcoin is in this sense mor like Western Union.

The credit card system gives much better consumer protection most of the time.

Re: A cautionary tale about subscription services and how not to shut down a startup

#50

Post by annnnd »

I think Hanlon's razor applies here ("Never attribute to malice that which is adequately explained by stupidity.") - when startups fail it is difficult to fail gracefully. It leaves you with lots of stuff to do, all the time knowing that you will get nothing in return. Frustrating and tiring as hell. (I don't condone the founder's actions, I just say I can understand what has lead to this situation) That said, I hope they make it right as soon as possible.
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