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

news.ycombinator.com

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

#11

Post by Mvandenbergh »

This looks pretty clear in the FAQ on their website. Every month that you're a member, you have the option to buy one of that month's items at a discounted price. If you don't take that option, you get a credit to buy additional items in subsequent months. If you don't want to sign up for the membership then you can select that option at checkout (and pay more).

Did it take your girlfriend 8 months to notice this recurring charge on her statement?

I have a story about forgetting to cancel my online newspaper subscription. Look for that on HN soon!

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

#12

Post by tisme »

davewiner wrote: post #6

It may be harder than you think to get the credit card company to stop the charges. http://uncrunched.com/2012/08/26/my-undead-credit-card/ Like it or not they have a good business model. And the VCs probably don't care if they're ethical, as long as they get a good ROI.

VCs investing in con artists are scum.

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

#13

Post by kmfrk »

davewiner wrote: post #6

It may be harder than you think to get the credit card company to stop the charges. http://uncrunched.com/2012/08/26/my-undead-credit-card/ Like it or not they have a good business model. And the VCs probably don't care if they're ethical, as long as they get a good ROI.

Charge-backs hurt their credit score, I believe, so it's going to hurt them well and proper, if it keeps happening.

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

#14

Post by robryan »

reitzensteinm wrote: post #7

So I went through their checkout process, and up until the credit card stage there is zero indication that it's a membership site (I read everything on every page). I've uploaded the credit card section here: http://i.imgur.com/3di93.png 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. It looks…

So the site doesn't force you to join the VIP program? The way it is structured would definitely see a lot of people check it and click through without checking. In my experience stuff we make a lot more obvious than this is plain ignored during checkout.

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

#15

Post by bmj1 »

reitzensteinm wrote: post #7

So I went through their checkout process, and up until the credit card stage there is zero indication that it's a membership site (I read everything on every page). I've uploaded the credit card section here: http://i.imgur.com/3di93.png 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. It looks…

Thank you for posting the screenshot. A clear example of a UI anti-pattern IMO.

http://wiki.darkpatterns.org/Main_Page

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

#16

Post by reitzensteinm »

robryan wrote: post #14
reitzensteinm wrote: post #7

So I went through their checkout process, and up until the credit card stage there is zero indication that it's a membership site (I read everything on every page). I've uploaded the credit card section here: http://i.imgur.com/3di93.png 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. It looks…

So the site doesn't force you to join the VIP program? The way it is structured would definitely see a lot of people check it and click through without checking. In my experience stuff we make a lot more obvious than this is plain ignored during checkout.

Just tried it without the checkbox ticked, and it does appear to be mandatory.

"You must read and agree to the JustFab VIP Membership Terms of Service."

Which makes sense - I bet they're making a killing on zombie subscription fees and little on legitimate users.

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

#18

Post by Kudos »

Mvandenbergh wrote: post #11

This looks pretty clear in the FAQ on their website. Every month that you're a member, you have the option to buy one of that month's items at a discounted price. If you don't take that option, you get a credit to buy additional items in subsequent months. If you don't want to sign up for the membership then you can select that option at checkout (and pay more). Did it take your girlfriend 8 months to notice this rec…

If your newspaper had a skeezy way of disguising a subscription as a purchase these things might be similar.

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

#19

Post by mgkimsal »

jonnathanson wrote: post #8

This business model reminds me of those fly-by-night mobile subscription services from the early 2000s. The ones who'd make you think you were buying a single ringtone, and the next thing you knew, you'd been surreptitiously signed up for a $29.99/month subscription. I remember evaluating the books for one of those companies back in the day. It was wildly successful at the surface level. But if you dipped below the s…

Those ringtone companies were just promoting ads and whatnot to get people to 'buy' something that made them, on average - what? - $70? If the cost of customer acquisition was, say, $20, they're making $50/head. For many people, having an automated business making $50/customer profit is pretty good.

Not every business is 'sustainable' through repeat customers - funeral homes come to mind. However, if the only way to be sustainable is to break laws, that's where the problem lies.

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

#20

Post by ALee »

It probably tells you more about the VCs who invested rather than the company. The opportunity cost of where to deploy their money is likely higher these days and a VC who is investing in a fairly scam-ridden business is probably looking to capitalize on a quick exit.

In this case, everyone knows the jig may be up quickly, so they're looking to expand quickly and leave before the known end.

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