19 ms·

I am an investor in The Style Club. Or, at least, I thought I was

227 points by bmmayer1 10y ago

dharmon 10y ago
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 10y ago
  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 10y ago
    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 10y ago
      > 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.
      - koolba 10y ago
        It's a Texas Hold'em reference. The "nuts" is the ultimate best hand for a given flop. Such as the 4th ace if three are already on the board (without a straight flush possibility).
      - sparrish 10y ago
        It's a poker term. The 'nut' is the best possible hand in a given deal. The 'hole card' is the face-down card only the player knows.
      - bwoj 10y ago
        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.
      - bwoj 10y ago
        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.
  - digler999 10y ago
    They also waste their time airing a show with a false premise showcasing someone who is potentially doing something very dishonest. You can't just take a bunch of VCs' capital and develop business XYZ, then dump them and open up XYZ.1 that does the same thing while cutting out the VC's. So Mark's getting screwed by wasting his time with someone who doesn't own the rights to her own startup.
- clavalle 10y ago
  It seems fairly clear that the same web site, IP, and organization was used for both businesses. You can't just change the letterhead on the stationary and claim it's a new business and leave your investors behind.
  - dharmon 10y ago
    The latter two are arguable. Is it really the same IP and organization? And how much of that IP is her personal experience? Do investors really have claim to that? I agree she handled this very poorly, but just trying to look at the other side. Is she really so stupid to literately pitch the same exact company on TV, just with the LA changed to Global in the name? It's possible she is, but starting from that assumption is an excuse to avoid thinking, in my opinion. And on his side, if it was really as bald-faced as he claims, why is he moaning about it on his blog in a resigned manner rather than taking legal action?
    - clavalle 10y ago
      Well, by IP I mean primarily brand in this case, which is obvious to a casual observer like myself. I'd be willing to bet the rest hasn't changed much if someone were to do some digging. And, honestly, I don't know what he's trying to accomplish with the blog post. The post seems like a very bad idea for several reasons at least.
    - cestith 10y ago
      John Fogerty was sued for writing songs like John Fogerty. He nearly lost. http://mentalfloss.com/article/27501/time-john-fogerty-was-sued-ripping-john-fogerty http://mentalfloss.com/article/27501/time-john-fogerty-was-s... You can't separate yourself from your partners and claim you own the brand, the merchandise, the copyrights, the trademarks, the domain name, and other assets alone.
    - btilly 10y ago
      ...why is he moaning about it on his blog in a resigned manner rather than taking legal action? The obvious answer is that it is far cheaper to talk about what will happen if lawyers get involved than to actually involve them. It is in everyone's interest to resolve this through negotiation. There is no need to openly state the obvious fact that lawyers can get involved if needed. An example of a desirable result is that all assets are transferred back to the original company, the CEO remains in charge, chastened by the experience, Mark Cuban is cut into the deal with the original company, and previous investors get a piece of some future deal with Mark Cuban. This result is much better for EVERYONE than anything achievable with lawyers. But you can't get there if you get people unnecessarily outraged.
- edblarney 10y ago
  "Re-using almost the same business name is hardly a crime." It's not the 'name' that is in question. It's a separate legal entity. It's a completely different company. i.e. different shareholders. This is a definitely a crime.
  - wyldfire 10y ago
    Damages resulting from breach of contract are rarely considered criminal. This is covered really well by civil law.
    - edblarney 10y ago
      Yes - but transferring the assets from your company with one group of investors, over to another company, and then misrepresenting all of this entirely ... may be criminal.
sean_patel 10y ago
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?
- jraines 10y ago
  I read it as either: "because they invested in a dishonest person" or "because they invested in a house that was built on my bombing range and I'm gassing up the B-52"
  - throwawwr88 10y ago
    Was thinking along the "invested in dishonest person" lines as well. At the end he makes a comment about thinking she was "honest", which wasn't "proven true." Maybe a VC should have a better pulse on the companies they're investing in? Maybe as an investor, he should go to them and ask what happened first? Seems rather unprofessional to air dirty laundry in a one-sided way. It appears this guy is just a crappy investor, IMO. The title should maybe read "I possibly got screwed by not keeping a better eye on my investments."
    - droithomme 10y ago
      Welcome to HN, hope you have a nice time here after signing up 7 minutes before making your post. Looking forward to your future contributions.
- danielhooper 10y ago
  I noticed the author didn't really expand on that either, but I really don't think Mr. Cuban would be happy finding out someone he has invested in has previous history of defrauding investors. Not to mention how little investigation was required to find that out. You're right this doesn't really affect the tv show, people who work for the show, and the cable network. Absolutely nobody cares if the companies are "fake."
pkaye 10y ago
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 10y ago
  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 10y ago
    > 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.
- sean_patel 10y ago
  > Sharks get to do due diligence after the deal is made. Correct. And in many episode's they also said how some shark "backed out after agreeing verbally to a deal during the taping of the show.
Nicholas_C 10y ago
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.
kenferry 10y ago
It doesn't sound like Marks has asked Hahn what's up? Seems like you'd want to do that before publicly trashing her…
gavman 10y ago
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-shark-tank-deal-2015-10/ http://www.businessinsider.com/what-happens-after-closing-sh... Edit: formatting
- kilroy123 10y ago
  I would love to know the returns they see from these deals. It must be profitable.
  - ohyoutravel 10y ago
    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 10y ago
      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 10y ago
    > He said: "Out of the 71, I would say ten or 11 are netting a minimum of half-a-million dollars a year, doing $8 million to $15 or in some cases, $20+ million revenue. I would say about 30% of my companies have returned all of my investment and then some." Source: http://www.inc.com/chris-matyszczyk/this-is-how-many-of-mark-cubans-shark-tank-investments-actually-succeed.html http://www.inc.com/chris-matyszczyk/this-is-how-many-of-mark... Also in the same story > "Of the 71 startups that I've invested in through Shark Tank, two have gone out of business, three are so stupid they don't know they're out of business."
bratsche 10y ago
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. :)
brilliantcode 10y ago
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.
- mundo 10y ago
  I read it as "I feel like I got screwed, but I don't want to sound whiny, so I'll frame it as 'Mark Cuban got screwed' instead because it affects him too".
  - brilliantcode 10y ago
    He did get screwed. It's not the author's fault for not knowing the behind the scenes due process that isn't televised. I'm just shocked by why the background checks come after the the pitch and not before. It's not the author or audiences job to know and protect Mark Cuban or any of the shark's reputation or financial well being. I'm also wondering why there are so many Koreans circle jerking Mark Cuban in the linkedin comments. As a Korean myself, wtf? Did he pull the Incheon Landing or something?
    - 10y ago
Animats 10y ago
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/
JoblessWonder 10y ago
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
- deeth_starr_v 10y ago
  Wow. Looks like Cuban did invest in them. That's a massive f*-up.
  - JoblessWonder 10y ago
    [Edit: The press release was the same day the show aired.] Well, I wouldn't be surprised if she put out this press release before the papers were signed...
- wyldfire 10y ago
  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 10y ago
    Ah, thanks for the correction. I think I just assumed he fired that off rather quickly... I should have double checked the dates.
zilchers 10y ago
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.
mark-r 10y ago
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 10y ago
  I don't think the issues is two URL's, I think the issue is two separate corporations.
  - mark-r 10y ago
    Right. What I meant to say was that the early domain registration isn't evidence of a pre-existing corporation.
    - RIMR 10y ago
      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 10y ago
        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.
wheelerwj 10y ago
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 10y ago
  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 10y ago
    well that seems like pretty foolish claim.
alex- 10y ago
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 10y ago
  They also appear to be deleted now. I am guessing the lawyers have been activated :-)
api 10y ago
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."
disposablezero 10y ago
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.
laresistance 10y ago
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
startengineceo 10y ago
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.

227 points by bmmayer1 10y ago

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 10y ago
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 10y ago
  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 10y ago
    > 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.
    - koolba 10y ago
      It's a Texas Hold'em reference. The "nuts" is the ultimate best hand for a given flop. Such as the 4th ace if three are already on the board (without a straight flush possibility).
    - sparrish 10y ago
      It's a poker term. The 'nut' is the best possible hand in a given deal. The 'hole card' is the face-down card only the player knows.
    - bwoj 10y ago
      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.
    - bwoj 10y ago
      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.
- digler999 10y ago
  They also waste their time airing a show with a false premise showcasing someone who is potentially doing something very dishonest. You can't just take a bunch of VCs' capital and develop business XYZ, then dump them and open up XYZ.1 that does the same thing while cutting out the VC's. So Mark's getting screwed by wasting his time with someone who doesn't own the rights to her own startup.
clavalle 10y ago
It seems fairly clear that the same web site, IP, and organization was used for both businesses. You can't just change the letterhead on the stationary and claim it's a new business and leave your investors behind.
- dharmon 10y ago
  The latter two are arguable. Is it really the same IP and organization? And how much of that IP is her personal experience? Do investors really have claim to that? I agree she handled this very poorly, but just trying to look at the other side. Is she really so stupid to literately pitch the same exact company on TV, just with the LA changed to Global in the name? It's possible she is, but starting from that assumption is an excuse to avoid thinking, in my opinion. And on his side, if it was really as bald-faced as he claims, why is he moaning about it on his blog in a resigned manner rather than taking legal action?
  - clavalle 10y ago
    Well, by IP I mean primarily brand in this case, which is obvious to a casual observer like myself. I'd be willing to bet the rest hasn't changed much if someone were to do some digging. And, honestly, I don't know what he's trying to accomplish with the blog post. The post seems like a very bad idea for several reasons at least.
  - cestith 10y ago
    John Fogerty was sued for writing songs like John Fogerty. He nearly lost. http://mentalfloss.com/article/27501/time-john-fogerty-was-sued-ripping-john-fogerty http://mentalfloss.com/article/27501/time-john-fogerty-was-s... You can't separate yourself from your partners and claim you own the brand, the merchandise, the copyrights, the trademarks, the domain name, and other assets alone.
  - btilly 10y ago
    ...why is he moaning about it on his blog in a resigned manner rather than taking legal action? The obvious answer is that it is far cheaper to talk about what will happen if lawyers get involved than to actually involve them. It is in everyone's interest to resolve this through negotiation. There is no need to openly state the obvious fact that lawyers can get involved if needed. An example of a desirable result is that all assets are transferred back to the original company, the CEO remains in charge, chastened by the experience, Mark Cuban is cut into the deal with the original company, and previous investors get a piece of some future deal with Mark Cuban. This result is much better for EVERYONE than anything achievable with lawyers. But you can't get there if you get people unnecessarily outraged.
edblarney 10y ago
"Re-using almost the same business name is hardly a crime." It's not the 'name' that is in question. It's a separate legal entity. It's a completely different company. i.e. different shareholders. This is a definitely a crime.
- wyldfire 10y ago
  Damages resulting from breach of contract are rarely considered criminal. This is covered really well by civil law.
  - edblarney 10y ago
    Yes - but transferring the assets from your company with one group of investors, over to another company, and then misrepresenting all of this entirely ... may be criminal.

sean_patel 10y ago

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?

jraines 10y ago
I read it as either: "because they invested in a dishonest person" or "because they invested in a house that was built on my bombing range and I'm gassing up the B-52"
- throwawwr88 10y ago
  Was thinking along the "invested in dishonest person" lines as well. At the end he makes a comment about thinking she was "honest", which wasn't "proven true." Maybe a VC should have a better pulse on the companies they're investing in? Maybe as an investor, he should go to them and ask what happened first? Seems rather unprofessional to air dirty laundry in a one-sided way. It appears this guy is just a crappy investor, IMO. The title should maybe read "I possibly got screwed by not keeping a better eye on my investments."
  - droithomme 10y ago
    Welcome to HN, hope you have a nice time here after signing up 7 minutes before making your post. Looking forward to your future contributions.
danielhooper 10y ago
I noticed the author didn't really expand on that either, but I really don't think Mr. Cuban would be happy finding out someone he has invested in has previous history of defrauding investors. Not to mention how little investigation was required to find that out. You're right this doesn't really affect the tv show, people who work for the show, and the cable network. Absolutely nobody cares if the companies are "fake."

pkaye 10y ago

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 10y ago
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 10y ago
  > 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.
sean_patel 10y ago
> Sharks get to do due diligence after the deal is made. Correct. And in many episode's they also said how some shark "backed out after agreeing verbally to a deal during the taping of the show.

Nicholas_C 10y ago

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.

kenferry 10y ago

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

gavman 10y ago

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-shark-tank-deal-2015-10/ http://www.businessinsider.com/what-happens-after-closing-sh... Edit: formatting

kilroy123 10y ago
I would love to know the returns they see from these deals. It must be profitable.
- ohyoutravel 10y ago
  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 10y ago
    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 10y ago
  > He said: "Out of the 71, I would say ten or 11 are netting a minimum of half-a-million dollars a year, doing $8 million to $15 or in some cases, $20+ million revenue. I would say about 30% of my companies have returned all of my investment and then some." Source: http://www.inc.com/chris-matyszczyk/this-is-how-many-of-mark-cubans-shark-tank-investments-actually-succeed.html http://www.inc.com/chris-matyszczyk/this-is-how-many-of-mark... Also in the same story > "Of the 71 startups that I've invested in through Shark Tank, two have gone out of business, three are so stupid they don't know they're out of business."

bratsche 10y ago

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. :)

brilliantcode 10y ago

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.

mundo 10y ago
I read it as "I feel like I got screwed, but I don't want to sound whiny, so I'll frame it as 'Mark Cuban got screwed' instead because it affects him too".
- brilliantcode 10y ago
  He did get screwed. It's not the author's fault for not knowing the behind the scenes due process that isn't televised. I'm just shocked by why the background checks come after the the pitch and not before. It's not the author or audiences job to know and protect Mark Cuban or any of the shark's reputation or financial well being. I'm also wondering why there are so many Koreans circle jerking Mark Cuban in the linkedin comments. As a Korean myself, wtf? Did he pull the Incheon Landing or something?
  - 10y ago

Animats 10y ago

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/

JoblessWonder 10y ago

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

deeth_starr_v 10y ago
Wow. Looks like Cuban did invest in them. That's a massive f*-up.
- JoblessWonder 10y ago
  [Edit: The press release was the same day the show aired.] Well, I wouldn't be surprised if she put out this press release before the papers were signed...
wyldfire 10y ago
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 10y ago
  Ah, thanks for the correction. I think I just assumed he fired that off rather quickly... I should have double checked the dates.

zilchers 10y ago

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.

mark-r 10y ago

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 10y ago
I don't think the issues is two URL's, I think the issue is two separate corporations.
- mark-r 10y ago
  Right. What I meant to say was that the early domain registration isn't evidence of a pre-existing corporation.
  - RIMR 10y ago
    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 10y ago
      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.

wheelerwj 10y ago

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 10y ago
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 10y ago
  well that seems like pretty foolish claim.

alex- 10y ago

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 10y ago
They also appear to be deleted now. I am guessing the lawyers have been activated :-)

api 10y ago

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."

disposablezero 10y ago

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.

laresistance 10y ago

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

startengineceo 10y ago

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.