Rent the Runway on Thursday announced a $125 million investment co-led by Franklin Templeton Investments and Bain Capital Ventures. All of the startup’s existing lead investors boosted their support this round and were joined by new ones, including funds and accounts advised by T. Rowe Price Associates and Hamilton Lane Advisors, on behalf of New York State Common Retirement Fund, according to a company press release emailed to Retail Dive.
This cycle marks the most the company has raised to date, brings its total equity raised to some $337 million since inception, and values it at $1 billion, the company noted in its release. Sara Araghi, Franklin Templeton research analyst and portfolio manager, has been appointed to the board, making her the fifth woman serving there.
Rent the Runway plans to use the funds "to dramatically accelerate its unique subscription service and continue to innovate its proprietary technology and infrastructure." In focus will be subscription growth, assortment expansion and further development of its reverse logistics tech and operations, per the release.
So-called "unicorns" — private companies with a valuation of $1 billion or more — may need another nickname soon, considering that the status has become less rare as venture capitalists look to fuel the most promising startups, especially in the tech sector. Rent the Runway joins Glossier, and possibly soon ThirdLove, Poshmark and Away, as retailers reaching the milestone.
There's no guarantee that the apparel, and now also home goods, rental subscription's investors will collect what they hope to from their bet. But Rent the Runway in the last 10 years has gone far in demonstrating not only the opportunity in renting items rather than selling, but also its own prowess in running a data-driven business based on the idea.
“Shared, dynamic ownership is a movement that Rent the Runway has pioneered over the last decade and we’re excited to continue to lead the market and innovate our subscription service,” Co-founder and CEO Jennifer Hyman said in a statement, in which the startup also emphasized that it's a "female-founded and female-led company," which, truth be told, may be the real unicorn of Silicon Valley.
The past decade hasn't been without its pains. In 2016, about a year after reports surfaced about a difficult work environment, the company shook up its compensation policies, for example. For the most part, the company has consistently focused on reaching more customers by expanding its assortment beyond designer gowns to casual wear, differentiating its offering with designer exclusives and opening up its well-oiled supply chain as a service to help other brands through the process of offering their clothing for rental.
Rent the Runway has also tackled the logistics of its massive undertaking, running its own dry cleaning operations and expanding its fulfillment. Last fall, the company set up drop-off locations at 15 WeWork locations in New York City, San Francisco, Los Angeles, Chicago, Washington, D.C. and Miami.
Investors cast another vote of confidence in the model this week. In addition to helping fashion customers meet their perennial desire for newness, the service appeals to consumers in other ways, as Araghi noted in a statement. "The apparel and accessories market is one of the largest consumer markets, and Rent the Runway is a truly disruptive force that will continue to create massive opportunities for consumers to live a more sustainable and cost-effective life," she said.