|Just learned from Venturebeat & Techcrunch that JustFab closed $40 million in a Series C round of funding .|
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 2012, 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. Then 8 months later, in September 2013 she finished her Master study in the US and returned to her home country. 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 getting 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" without your knowledge. 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 article published on BusinessInsider, JustFab "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.
ps. This is a re-post of my last year's post , hoping it will get upvoted to the frontpage of HN so that more people get to know the shady business JustFab does. Apparently VCs don't do due diligence any more, as long as scam companies like JustFab can bring them money.