Looking good is not easy.
Rent the Runway, a web start-up that lets women rent designer clothing at affordable prices, tries to make it a lot less difficult.
Now, the company will have more resources to make that happen. On Friday, the company plans to announce it has raised $60 million in venture capital, which will value the start-up from $500 to $600 million. The new round brings to $116 million the amount the company has raised during its five-year life span.
But investors are bullish on the company’s prospects, particularly its new subscription-based, Netflix-like business model. It allows women to have a stream of designer clothing items — from the likes of Balenciaga and Badgley Mischka — mailed directly to their homes for $50 a month, with new items arriving when an old item is sent back. Customers can also rent items à la carte, like a $1,600 Vera Wang dress, for a fraction of the price it would cost to purchase it.
“What we do in the realm of high fashion is open up the total addressable market to millions of women who haven’t been able to afford it before,” said Jennifer Hyman, co-founder of the company.
Part of the company’s early years — it has been around since 2009 — were spent convincing women that they could have a high-end fashion experience while still shopping online. While buying clothes on the Internet is commonplace today, a high-end mail-order-only clothing business can be difficult, as customers may not find the exact fit or look that they want simply by shopping for them online.
Ms. Hyman says her company had no difficulty in persuading women to shop for top designers on the web. She would not disclose revenue numbers, but said her company had shipped more volume in 2014 than in the previous four years combined. New customers and new orders have both increased by about 120 percent from 2013 to 2014.
The company’s executive leadership team is 80 percent women — a rarity in the male-dominated world of Internet start-ups. Beth Kaplan, Rent the Runway’s president, led General Nutrition Centers to an initial public offering before coming to the company. Camille Fournier, Rent the Runway’s chief technology officer, helped to increase the company’s engineering team from eight people to about 60.
Part of the new capital will be used to open a distribution center on the West Coast; the company earlier this year opened a 140,000 square-foot warehouse in Secaucus, N.J.
The money will also finance something relatively novel for a web start-up: more stores. Rent the Runway has brick-and-mortar stores in New York and Washington, D.C., and plans to add stores in 15 new markets.
The somewhat backward approach to online retail is also being explored by others, like Warby Parker, the eyewear company, and Harry’s, a men’s shaving start-up. But investors like Technology Crossover Ventures, which led Rent the Runway’s current round of financing, have faith in Rent the Runway because of the company’s ambition to expand its physical footprint, along with its subscription-based business model.
“What we mostly love are businesses with demonstrations of recurrence,” said Daniel O’Keefe, a general partner at Technology Crossover Ventures. “It might be a subscription, or it might be a brand where people are engaging with that brand more and more over time.”
“The kind of social engagement we’re seeing here — with people posting photos of themselves in Rent the Runway outfits all over social channels — that’s incredibly rare,” he said.