Mark Cuban and Shark Tank got Royally Screwed
I was one of millions of fans Shark Tank on November 4th. It is one of my favorite shows, and it’s certainly a favorite for my two kids. I was eagerly waiting to see Hilary Novell Hahn, whose company, The Style Club, was going in front of the sharks. I am an investor in The Style Club. Or, at least, I thought I was.
Hilary appeared confident and in control of the room. She got two offers from the sharks. She boldly picked Mark Cuban’s offer to invest $500K. He is a very smart and successful businessman with deep roots in technology and online commerce. He is part of this new generation of business leaders who are unafraid to take a chance on great entrepreneurs. Similarly, I have invested in over 60 startups in my career through the StartEngine accelerator (there is also a StartEngine crowdfunding website, check it out). Many failed but that’s not the point. I respect those entrepreneurs whom I financed because of their resiliency, tenacity, and grit. I see myself as their mentor and I make my time available for them when they need support, advice, or more capital.
Hilary answered one question from Mark Cuban that shocked my family room.
He asked her, “How long has The Style Club been in business?”
Her answer was one year.
Hold on a second — I invested in her company 4 years ago. So what happened?
Many scenarios ran through my head. I was perplexed and frankly scared that something may have happened to my investment. Did Hilary hijack the company StartEngine’s accelerator had invested in? Denied her main investor and mentor of any potential success? I was in a bad place.
I decided to find out. Every company I have invested in are incorporated in the State of Delaware. You may ask, “Why Delaware?” Well it turns out this state is great for investor protection; most Silicon Valley investors choose Delaware for their investments. I went to the Delaware corporation website and typed in “The Style Club.” To my surprise, two companies appeared. The one in which my accelerator invested was formed in 2012.
It turns out there are two companies with almost the same name:The Style Club LA which is formed in 2012 and The Style Club Global, formed in 2015. The latter company is the one Hilary pitched to the sharks.
I decided to open the StartEngine accelerator corporate cloud to see exactly what we invested in and I found the investment agreements.
I also went back to my emails with Hilary. I congratulated her when I heard she was going to appear on the show.
She knew I was no longer an investor in her new resurrected company. You can ask a logical question. “Why would she close The Style Club and then start a new company, The Style Club global, with the same domain name and logo?” So I went to who is to find out when the domain name was created.
As you can see above, the domain was created in 2012, the same time I invested in the company. So what happened? Did Hilary steal the main assets of the company? When StartEngine, the accelerator, invests, our agreements clearly stipulate 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.
I am utterly surprised that Mark Burnett’s team would not at least perform a basic level of due diligence on the companies it brings to the sharks. It is shocking to think they would deliberately accept a company that has stolen the assets of another company of the same name. But maybe they do not care. I cannot imagine the sharks would be happy to invest in a CEO and a company that has stolen assets in front of 6 million viewers. All they need to do was review the public website to quickly see there is another company with the same name, and then just simply ask the question, “Wait, who is The Style Club LA?” Now, if they do not care, they could be viewed as associates with this fraud.
The most perplexing issue is Mark Cuban. He is a sophisticated serial entrepreneur and investor who has invested in dozens of companies. I have exchanged emails with him in the past and we frequently invest in similar companies. Is it possible his legal team did not perform a basic check? What about looking at the domain name www.thestyleclub.com and see it was created in 2012? Who owned it then? Simple question. They just need to Google to find the evidence.
I found this email from Hilary I received a little under two years ago.
Hilary is very smart. She is a former teen pop star and went to Columbia. After college she went into fashion and with her keen sense of what teen girls wanted, she honed her skills in social media marketing just when it started exploding. I invested in her company because I liked her thesis and thought she was smart and honest. This clearly has not been proven true.
But I am not discouraged by this outcome because I am still going to invest in great entrepreneurs and help them become successful. Such is my goal and my passion. If my money is put to good use, we will see thousands of high paying jobs for our economy and our country. Doing the right thing should never be deterred by occasional let downs.
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