Rent the Runway has achieved unicorn status. Today, it announces a $125 million investment from institutional investors like Franklin Templeton, Bain Capital, and T. Rowe Price–along with existing lead investors–bringing the company’s total investment to $337 million. This new funding values the company at $1 billion.
Jennifer Hyman, Rent the Runway’s cofounder and CEO, is now part of an exclusive club of female CEOs running empires valued at more than $1 billion. This includes Stitch Fix’s Katrina Lake, 23andMe’s Anne Wokcicki, and Houzz’s Adi Tatarko. This week, Glossier’s Emily Weiss became part of this cohort, thanks to new Series D funding round. And Forbes estimates that Kylie Jenner’s cosmetic company is worth $900 million which means her net worth is now $1 billion.
When Hyman cofounded Rent the Runway in 2009 with her Harvard Business School classmate Jennifer Fleiss, the idea was to offer women rentable fancy gowns and dresses for events so they did not have to buy them. In 2016, Rent the Runway announced that it was profitable. That same year, Hyman decided to expand the company’s offerings to everyday clothes via a new program called Unlimited. “The primary use case that we knew women wanted was going to work because of the financial tax that is placed on female professionals to have variety in their wardrobe,” she says.
But what came next was surprising. Hyman says that women started using the unlimited service for much more than office wear. Unlimited subscribers were using the clothes on average 120 days a year. Women were renting activewear, maternity clothes, vacation outfits, and even jeans and sweatshirts.
This created an opportunity for Rent the Runway to scale drastically by accelerating the subscription business. “We believe this form of dynamic ownership is the future–and this is the beginning of uncovering how this changes a woman’s relationship to her closet,” she says.
Rent the Runway declined to share how many customers it has, but Hyman says that the Unlimited model has attracted many new women to the platform. She adds that last year, the subscription business grew 160% year over year. Hyman says that when the company specialized in gowns, it tended to appeal largely to women in their twenties and early thirties who attended events frequently. The Unlimited model, conversely, appeals to women outside this category–including customers from a wider range of socioeconomic and geographic backgrounds.
Hyman says that the subscriber base represents 76% of all zip codes in the United States. Nearly half of customers have household incomes of under $95,000 a year, and a quarter have household incomes of under $60,000 a year. There are also many women on the platform who make $200,000 a year or more.
With the new funds, Hyman says Rent the Runway is investing in creating more of a community for the subscriber base, including online tools that will allow women to comment on outfits with their friends. The company is also investing in its technology and logistical operations–from its extensive cleaning facility to its personalization tools.
Meanwhile, Rent the Runway will continue to expand its product selection–from offering more brands and products to entering entirely new categories. For instance, I recently reported about how the company was expanding into home goods, with a partnership with West Elm that would make bundles of bedding available to women using the Unlimited platform. Ultimately, Hyman believes all of this will attract even more Rent the Runway customers.
So is an IPO on the cards anytime soon? Hyman has said in the past that this is something she wants to do. She hints at it now, too. “This round gives us more strategic options about the timing of possibly going public,” she says. “For me, as a founder and CEO, I want feel like we are in control.”