Rent the Runway, the company known for lending designer dresses to women for special occasions, has received a new round of financing that increased its valuation to the unicorn level of $1 billion.
The valuation announced Thursday is a milestone for Rent the Runway, which was founded a decade ago and has been working for years to expand its business beyond formal-dress rentals. It introduced a subscription service for everyday clothing and accessories several years ago that has developed a particularly enthusiastic customer base among professional women. Recently, it announced a partnership with West Elm that will allow subscribers to rent “bundles” of pillows, throws and quilts for their living rooms and bedrooms.
“You’ll continue to see that this new living closet that we’ve created is going to apply not only to how you get dressed, but it’ll apply to all of the products that you use,” Jennifer Hyman, 38, the company chief executive and a co-founder, said in a phone interview. “Our goal is really to create the Amazon Prime of rental.”
The company said it had brought in $125 million in the latest fundraising round, which was led by Franklin Templeton Investments and Bain Capital Ventures. That brings the total equity the New York-based company has raised to $337 million, and adds to a $200 million credit facility it secured in August.
Those who subscribe to Rent the Runway can borrow up to four items at a time for $159 per month, cycling through designer garments and accessories — including maternity wear — with the option to buy goods at discounted prices. Rent the Runway declined to disclose its subscriber count or its revenue or to say if it was profitable.
The company plans to expand into more product categories, establish a second distribution facility in Dallas and open a new 8,000-square-foot store in San Francisco. Hyman said the additions would enable West Coast customers to have “an equivalent experience” to customers on the East Coast.
She also said the company was aiming to improve its subscription service by potentially increasing the number of items customers can rent at one time and expanding a budding network of drop-off locations, including at WeWork spaces. Merchandise is scanned at these drop-off locations, making customers immediately able to rent more items.
Rent the Runway, which received its first investment in May 2009, sought to build relationships with investors in this fundraising round who would support the company if it decided to go public. “We’re readying the company for all options,” Hyman said.
Tech investors have been paying close attention to retail companies that were built online, from secondhand apparel startups like The RealReal and Poshmark to Stitch Fix, a mail-order clothing service. While there are plenty of cautionary tales, like the short-lived boom in flash sale sites, Stitch Fix has seen its stock soar since it went public in 2017. The RealReal and Poshmark remain private.