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JustFab: The Billion Dollar Startup With A Dark Past

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What a messed up unicorn.

The journey of Goldenberg and his longtime partner, Don Ressler, from the murky fringes of internet marketing to the pinnacle of paper wealth in Silicon Valley is the story of how two men, for a decade, have been conning consumers into subscriptions for anti-aging shampoo and wrinkle cream under the guise of “brand-building” and “innovation.” Since at least 2004, consumers have accused the men’s businesses of exploiting their credit card information and sticking them with unwanted charges — complaints that are stacking up at JustFab and Fabletics.

But that history hasn’t stopped some in tech from viewing its business as The Next Big Thing. The men have raised more than $300 million in equity funding for JustFab, more than either Gilt Groupe or Warby Parker, from venture capital firms like Matrix Partners and Technology Crossover Ventures — small shops by Silicon Valley standards, but ones that have invested in other big names like Gilt, Dollar Shave Club, and Spotify.

It also hasn’t turned off JustFab’s celebrity backers, including Kimora Lee Simmons, who served as JustFab’s creative director until May, as well as Kate Hudson and her brother Oliver. And it has attracted little scrutiny from the tech and business press that have covered JustFab’s rise, with outlets like Bloomberg News and the Wall Street Journalinstead focusing on its lucrative business model, which is to sign up shoppers to recurring $30 to $50 monthly subscriptions for discounted clothes and shoes. Consumers, even if they don’t choose to receive any items, are charged unless they remember to opt out in the first five days of the month.

It’s a model the company says will rake in $500 million this year across sites including JustFab, Kate Hudson’s Fabletics, FabKids, ShoeDazzle, and FL2. That puts the company in the big leagues: The Container Store brought in about $780 million in sales last year, while Vera Bradley posted about $509 million in revenue. While JustFab has yet to post a profit, Goldenberg recently deemed last year’s funding a “pre-IPO round.” A spokesperson for JustFab said the company is on track to post a profit this year.

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