
I am an investor in The Style Club. Or, at least, I thought I was - bmmayer1
https://www.linkedin.com/pulse/mark-cuban-shark-tank-got-royally-screwed-howard-marks
======
brilliantcode
I don't get the comments bashing the author. This is downright deception and
he got screwed. Period.

It's morally wrong and I just don't understand how people can defend this in
the comments over at Linkedin. Why the fuck is the free market being used as a
blanket argument against morals and ethics?

There's even vaguely veiled threats against the author in the Linkedin
comments. I'm fucking appalled and I don't understand why someone would

A) kill your own reputation

B) put women in startups/tech in a bad light

C) use the same branding for the switcheroo that helps the author's case

D) not realize there's post-show background check (that results in 50% of
deals announced not going through according to comments)

If she had just been honest and not greedy (why would you be so desperate to
own 100% of nothing?) she could've avoided destroying her own goals.

I don't know how anyone can possibly trust her, unless, it was someone who
shared the same _tony-montana-esque_ attitude towards wealth & status,
bravado, chutzpah at the cost of others and your own soul, for more money in
your pocket.

But even Tony did not break his "word & balls" when starting his narcotic
empire, in which Alajendro Sosa invested in Tony, risked capital in his
business and he got paid. Imagine how angry Sosa would've gotten if never saw
his returns. It proved to be lethal for Tony in the end.

~~~
sean_patel
> This is downright deception and he got screwed. Period.

No one is disputing that. But the author's post title was (and still is) "Mark
Cuban and Shark Tank got Royally Screwed". =>
[https://www.linkedin.com/pulse/mark-cuban-shark-tank-got-
roy...](https://www.linkedin.com/pulse/mark-cuban-shark-tank-got-royally-
screwed-howard-marks)

Mark Cuban and Shark Tank didn't get screwed. It's the author and his
investment company that got screwed by a greedy founder.

~~~
brilliantcode
Mark Cuban and Shark Tank _did get screwed_ because somebody at the show
production thought viewer rating is more important than filtering out
entrepreneurs with bad intentions _before_ being asked to put their reputation
on line by announcing investments on national television which would expose
the Sharks to real risks with implications.

If I was Mark Cuban, I'd be fucking livid at the production for not seeing the
risks of doing due diligence at his own expense, both intangible and tangible
costs.

~~~
freddyc
Because, for a television production company, ratings fundamentally are more
important. Cuban knows it's an entertainment show first-and-foremost and he
bought into that (and frankly, from what I can tell, loves that aspect of it).

I've never looked into the details, but I imagine the paperwork Shark Tank
entrepreneurs sign includes something along the lines of "all deals agreed are
non-binding and subject to completion of satisfactory post-show diligence blah
blah". I'd be shocked if a decent percentage of the deals featured don't
ultimately fall through for one reason or another at the diligence stage with
zero impact on the investor's reputation, so I don't think Cuban will lose too
much sleep over it.

~~~
netizzio
Can't remember where I saw it, but recall reading that a significant number of
deals do fall through. Mark Cuban actually had one of the higher success rates
with about 80% of deals actually succeeding, and I think both Lori and Robert
were at around 45%.

Edit: From this AMA on reddit with Mark Cuban 3 years ago, he says that about
25% of deals have something wrong (and therefore presumably don't work out).

[https://www.reddit.com/r/IAmA/comments/15doqt/mark_cuban_thi...](https://www.reddit.com/r/IAmA/comments/15doqt/mark_cuban_this_is_my_ama/c7lkbfx/)

------
gavman
From everything I've read, the handshake deal on the show is meaningless.
After the show the investors do real due diligence, and not every deal works
out.

"First of all, the handshake deal that happens on the show isn't anything
binding. Filming for each season is split over the start of the summer and the
start of the fall. After each round, the Sharks and their teams do due
diligence on each of the companies to ensure that everything within the
company is how it was represented in the pitch room.

There are times when the numbers check out, but the entrepreneurs decide they
no longer want to make a deal, such as when the founders of evREwares decided
they weren't actually willing to sell 100% of their struggling company to
Cuban for $200,000 as they agreed to in season six.

Ultimately, said Cuban's fellow Shark Daymond John, about 80% of season
seven's deals made on camera closed, which is up from about 60% to 70% of past
seasons."

[http://www.businessinsider.com/what-happens-after-closing-
sh...](http://www.businessinsider.com/what-happens-after-closing-shark-tank-
deal-2015-10/)

Edit: formatting

~~~
kilroy123
I would love to know the returns they see from these deals. It must be
profitable.

~~~
ohyoutravel
I assume that, even if the deals are not particularly profitable, being paid
to be a judge on a show like Shark Tank is profitable in itself.

~~~
ethbro
I'm sure being seen as a judge on Shark Tank is profitable too. I can't
imagine he hasn't received deal offers because of his involvement in the show.

The majority are probably worthless, but there's a non-zero chance he gets a
buy-in on a new venture whose founder isn't savvy to chase normal money but
did contact "that famous guy from Shark Tank."

------
sean_patel
The title of the article - "Mark Cuban and Shark Tank got Royally Screwed" \-
makes no sense after reading the body.

The author is saying that 1 person, in whose company he'd invested 4 years
ago, closed her company down and registered another company just before
pitching to Shark Tank and getting 500K investment from Mark Cuban.

So? How did Mark Cuban or Shark Tank get "Royally Screwed"? I don't get it.
The author didn't state that he was going to sue the Style Club or enforce his
2012 investment agreement with Hillary (the founder of Style Club).

What am I missing? Or is this a half-baked poorly written angry op-ed?

~~~
btown
The author's perception is that Mark Cuban, in agreeing to do that deal, is
bound by contract to invest in someone now alleged to be committing fraud, and
is therefore "screwed." However, there are almost certainly clauses that any
deal on Shark Tank is subject to diligence _after_ the deal is made. Maybe,
and I'm just hypothesizing here, there are even punitive terms that if due
diligence falls apart, they need to pay the production company in exchange for
the exposure... in which case, it is the entrepreneur here who would be
royally screwed!

From the production company's perspective, why bother doing due diligence
beforehand if it still makes for good television, and they're protected in a
downside case? The true sharks are the ones who build the tank.

~~~
logn
They own a small percent of every company that appears on the show whether
they make a deal or not. After agreeing to a deal, it _is_ subject to due
diligence afterward.

~~~
koolba
> They own a small percent of every company that appears on the show whether
> they make a deal or not. After agreeing to a deal, it is subject to due
> diligence afterward.

They got rid of that clause after people called them out on it being
horrifically unfair to everyone that pitches on the show.

~~~
maxerickson
Notably, Mark Cuban says he called them out on it.

[http://www.inc.com/will-yakowicz/mark-cuban-forces-shark-
tan...](http://www.inc.com/will-yakowicz/mark-cuban-forces-shark-tank-to-
remove-equity-clause.html)

------
dharmon
If we learned anything from Cruise, it's that he should hang back, wait to see
if her new business is a success, then come forward and make an equity claim.
No sense wasting time and money just yet when 90% of businesses fail.

More seriously, it could very well be an entirely different business, and she
just liked the name Style Club. Re-using almost the same business name is
hardly a crime.

The biggest issue, in my opinion, is that she "shut down" her old business
without notifying her investors. Now, to be practical, most customer-less
startups (that is, most startups) don't have an official day where everyone
walks away. One founder gets a day job, another starts spending a little more
time on other projects, and so on. Everyone involved, including investors,
knows that its dead. Startups that haven't done anything for 4 years don't
suddenly take the world by storm.

Nevertheless, she should have "officially" shut down her startup if she was
going to go on national TV pitching her new one.

While she handled this poorly, I would be wary of placing too many
restrictions on allowing entrepreneurs to start new businesses. Although if
they are nearly identical and you are a success, you will get into trouble
(just ask Zuckerberg...)

~~~
sean_patel
Still, how do "Mark Cuban and Shark Tank" get screwed? It's foolish to expect
the producers to look at domain name registrations and LLCs and all that. I am
guessing that once a pitcher gets a commitment for funding, that lawyers from
the individual investors will do due diligence, and if anything Hillary
(founder of style club) gets in trouble and gets told that she cannot take the
investment from Mark Cuban. In which case, they don't technically get
"screwed", they just lose out on 1 of the 100s of startups they invest in
every year... big deal.

~~~
hornbaker
Exactly. Cuban and Shark Tank will still be able to back out of this deal and
stay squeaky clean, assuming Howard Marks' story holds up.

The parties who will get screwed are The Style Club (more specifically the
CEO), and Marks, who should have kept quiet and let her make the company a
huge success with Cuban's help before coming forward with the dirt. He had the
nut hole card but he flashed it too early.

~~~
sean_patel
> He had the nut hole card

ROFL. What's a Nut-hole Card? Hope it's not what I think it is lol.

You are right. I'd have held out and seen if it's a huge success and then
enforce the agreement. Revenge is best served cold.

~~~
bwoj
Poker analogy: the nut is the one card that forms the best possible hand out
of the shared cards on the table. Having the nut card in the hole means you
have it in your hidden cards. When you're in this position, you know you're
going to win the hand but the other players do not and your goal is to get
them to bid as much as possible on the hand without tipping them off that you
know you will win it.

------
alex-
Looks like Hilary has tweeted on the subject:

[https://twitter.com/HilaryNovelle/status/803788911403266049](https://twitter.com/HilaryNovelle/status/803788911403266049)

[https://twitter.com/HilaryNovelle/status/803790551149637632](https://twitter.com/HilaryNovelle/status/803790551149637632)

It appears she is saying he invested in some other company (Style Me Stylish).
I am guessing some lawyers out there are going to be making some money soon.

~~~
tripzilch
They also appear to be deleted now. I am guessing the lawyers have been
activated :-)

------
Animats
StartEngine claims to have contract terms which require that "if the CEO wants
to shut down the company, he/she needs StartEngine’s permission. If he/she
wants to sell assets to another company — this includes a domain name, a logo
and emails lists — needs our permission. Basically, a CEO cannot harm the
company in any way without a written agreement with the StartEngine
accelerator." This is a routine bit of corporate law, and it's time to send
lawyer letters.

Moving a substantial portion of the assets to a new corporate shell requires
shareholder notice and approval.[1] Even without those contract terms, the
company had an obligation to inform shareholders. A company just can't do this
because the CEO wants to. Delaware's Court of Chancery [2] has seen this
before and can deal with it.

[1]
[http://delcode.delaware.gov/title8/c001/sc10/](http://delcode.delaware.gov/title8/c001/sc10/)

[2]
[http://courts.delaware.gov/chancery/](http://courts.delaware.gov/chancery/)

------
kenferry
It doesn't sound like Marks has asked Hahn what's up? Seems like you'd want to
do that before publicly trashing her…

------
pkaye
I think the Sharks get to do due diligence after the deal is made. They let
pretty much anything interesting on the show for obvious reasons and quietly
terminate deals later down the line as needed.

~~~
rootedbox
In a interview with cuban I read.. half the deals don't go through after due
diligence.

I'm sure it's hard to find companies for the show, and it would be harder to
find them if you did due diligence first.

~~~
tnecniv
> I'm sure it's hard to find companies for the show

Really? If I had a company, I would fight to get on that show. The exposure is
reported to be worthwhile if nothing else.

------
JoblessWonder
First of all, yes, I think the founder screwed up.

I'm just amazed this investor doesn't have Google Alerts setup for every
company he invests in. The Style Club sent out a Press Release on 11/9/2016
saying they received an investment. [0]

Also, wouldn't you expect to be kept up to date with what happened on Shark
Tank as an investor? I'm assuming the filming takes place well in advance of
the broadcast. Wouldn't one think to set up a meeting afterwards but before
broadcast to see how it went? Or is that not how these things would normally
work?

[0]
[http://www.prweb.com/releases/2016/11/prweb13835196.htm](http://www.prweb.com/releases/2016/11/prweb13835196.htm)

~~~
wyldfire
The show aired before that press release.

From TFA: "I was one of millions of fans [watching] Shark Tank on on [sic]
November 4th."

~~~
JoblessWonder
Ah, thanks for the correction. I think I just assumed he fired that off rather
quickly... I should have double checked the dates.

------
Nicholas_C
The show is TV first and VC second. As long as the company is entertaining I'm
sure they don't really care. After the show I'm sure they do their due
diligence. I would be very surprised if they went ahead and invested in this
company.

------
zilchers
Lots of discussion here - is there any more hard info? Statement from the CEO,
press release, something like that? Could be innocuous, the first company
might be a major shareholder in the second, or similar.

------
bratsche
In case anyone else was confused in the same was I was at first, no the person
mentioned in here is not the same Hilary Hahn who is the famous violin
soloist. :)

------
wheelerwj
wait, there's no proof of anyone being screwed over at all. Did the author
even reach out to the company to ask for a clarification? maybe The Style Club
global is owned entirely by The Style Club LA? Or maybe there's another email
someplace the author isn't showing us that said the company went broke and was
restructuring?

At the moment this reads like a filthy attempt to cash in on some extra media
attention.

~~~
deeth_starr_v
Hilary on Twitter claims that the accelerator invested in a company called
"Style Me Stylish" and not The Style Club. But the signed contract contradicts
that.

~~~
wheelerwj
well that seems like pretty foolish claim.

------
startengineceo
My article has brought up some very interesting conversations about how a CEO
needs to behave in terms of corporate governance and ethics. The Style Club
story is not unique but I was able to show how the deception was created. I
want to thank Shark Tank for giving The Style Club national attention which
helped me get the story to be viewed by tens of thousands of fans.

------
disposablezero
I think Warren Buffet would suggest that without ethics, a person is an
untrustworthy liability bound to sabotage themselves or someone else,
eventually. History is littered with case-studies and it will be another scalp
on display in the museum of lapses of character.

------
api
_Only_ two companies with almost the same name?

As the dying replicant says at the end of the Blade Runner film, "I've seen
things you people wouldn't believe."

------
laresistance
I'm sick and tired of blog pages that require me to register before viewing
them in a walled garden fashion.

As a protest, I have made a screenshot of the page to share with everyone -
[https://i.imgur.com/fbZGvex.jpg](https://i.imgur.com/fbZGvex.jpg)

------
mark-r
Having a web site that was registered years ago isn't necessarily a smoking
gun. I have a few domains that I registered years ago for businesses that I
never started. That's not to dismiss the claims, only to say that it wouldn't
be a red flag.

~~~
edblarney
I don't think the issues is two URL's, I think the issue is two separate
corporations.

~~~
mark-r
Right. What I meant to say was that the early domain registration isn't
evidence of a pre-existing corporation.

~~~
RIMR
Ahem...

I don't think the issues is two URL's, I think the issue is two separate
corporations.

If you read the article, you would see that the fact that the corporation was
registered in 2012, and then a new company by the same name with the same
owner was registered in 2015. This is the smoking gun.

~~~
mark-r
I don't understand why I'm being downvoted. I'm not disagreeing!

Certainly there were two different corporations, and certainly the web site
was passed from one to the other. But the whois data presented in the post _is
not evidence of that_. You need to look elsewhere for that evidence. That's
the _only_ point I was trying to make.

