The Business of Rentable Fashion | CEO of Rent The Runway Jennifer Hyman

So we're gonna go completely down and dirty today on fundraising and how to position yourself to actually get your startup off the ground. Just for some background, because there's a lot of men here who are not my customers, how many of you guys have heard of Rent the Runway? Men only? No, everyone. Okay, that's good. Okay, so just like a little bit of background about what we do. I believe that within the next 5 to 10 years, every woman in this country, and later every woman in the world, will have a subscription to fashion, just like we all have subscriptions to music via Spotify or to entertainment via Netflix. And the reason for this is that 50% of your closet is is comprised of things that are worn 3 times or less. So there's a huge amount of waste, and the average American buys 64 new articles of clothing every single year. So we keep on buying, buying, buying. We don't really sell that much, and we don't use many of the things that we buy. So the idea is that when we buy, we typically buy things that rationally make sense to own. So people own a lot of black things in their closets or a lot of, you know, sweaters that they can wear for years and years. And the idea of Rent the Runway is if you had a subscription to fashion, it's all risk-free. You could try new brands, you could try new styles, you can have fun with fashion, which is really the intention of this $1.7 trillion global industry. We have 2 businesses today. The first business is an à la carte rental business. So you can come to the site as a woman, you can rent any article of clothing. So we rent everything from dresses to tops to skirts to jewelry to handbags, any article of clothing or combination for any event in your life. So if I wanted to rent clothing for today, I could reserve that clothing a few weeks beforehand or same day and get it delivered to me in 2 sizes. And then we also have a subscription business where you pay $99 a month You have a subscription to fashion. It's basically a copycat of Netflix 1998, just subbing clothes for DVDs. And I've— I launched the company 5 years ago. We've raised $120 million. And we are one of very few female-founded, female-led companies that have raised over $100 million in the United States right now. So I can talk to you about Going into VCs with— I have 5 venture capitalists, and with 4 out of 5 of them, my co-founder and I are the only women they've ever invested in in the history of their firms, which is not a great statement on society right now, but we're trying to change that. And we therefore had a lot of obstacles when we were raising money. Given that there are just gonna be barriers in front of you if you don't fit within the pattern of who a VC would typically invest in. So just kind of to take it back to the beginning, because that's the stage that you're at, of how did we raise our initial seed funding and how I would approach this if I were you. So just on background, I have zero experience in fashion, technology, or logistics. And my company is a fashion technology logistics company. So there's really no reason why I should have been the founder and the CEO of Rent the Runway. What I do have is I have a deep understanding of the customer. A deep ability to understand new trends, to think about brand, to think about marketing, and I'm a great inspirer of people. I love being around people, and I love building teams. So the idea for Rent the Runway came out of a personal experience that I had with my sister where I saw that she had put herself into credit card debt after buying a dress. that she knew she was only going to wear once. And this was when I was standing in front of her closet, which was filled with dresses that she had only worn once. And her response to me was, I bought this dress because I've been photographed in all these other dresses. They're dead to me. The photographs are up on Instagram. I need to wear something new. And I really had understood from her comment that she didn't care anymore about ownership of this dress. What she cared about was the photograph that she would have after the event that became part of her personal brand, that would show the world how she looked for that event. And then kind of very tactically, she couldn't repeat her outfits anymore, because if you put a photograph up on Instagram of your outfit and 1,000 of your friends see it, you can't exactly repeat that the next day with another group of friends. So I really realized at that moment in time that we had entered the experience experience economy. And that this was a really, really big idea and that women were going to feel comfortable renting clothing. Like the world was ready for this. The problem I had is like I had to raise a lot of money to get started because in order to get started in a— in order to start Rent the Runway, I actually needed to spend hundreds of thousands of dollars on inventory because I had to have a deep enough assortment and breadth of assortment across multiple sizes in order to really test out whether this was going to be a great concept. So what we did is we worked backwards. We thought about, okay, if we want to raise money 6 months from now, there are going to be 2 main questions about our business. There are going to be questions about the demand side and the supply side of the business. The main question on the demand side is going to be, will women rent dresses, is the primary question. And then secondarily, once they rent dresses, Will they destroy them? How many times can you rent them? What will they pay? What do they want to rent? The larger question at the time was, will anyone sell you inventory, especially if you are taking their currencies and inventory and renting it at the exact same time that it's in physical retail stores? So my co-founder and I charted a course where we knew that by the time we pitched VCs, we had to eliminate some of the risk associated with all of those questions. So I'm sure you guys have heard about a minimum viable product approach to building a startup. So in this case, we used a minimum viable product approach to answer the supply side and demand side questions. So what I mean is, on the demand side, we wanted to figure out, okay, is this idea worth anything? Will women rent dresses? We went to Bloomingdale's. We bought 120 dresses in our sizes just in case this whole thing didn't work. We then decided that we were going to run a pop-up shop, and we set up shop at Harvard College, which is where I went undergrad. The reason why we set up shop there was because I understood the social dynamics of the campus, and I therefore understood the customer. And we invited 3 groups of women to this pop-up experience, and we saw that women will in fact rent dresses. But most importantly, what we saw is that why they were renting and why they were excited about this was the emotional high of putting on something that was from a designer brand that they wouldn't have otherwise been able to afford, that actually made them feel beautiful and empowered. And there was a story where we had this silver sequin Tory Burch dress at the time, which was popular, and it was hanging on a rack. And 2 girls walked into our pop-up shop. They saw this dress from across the room. They ran over to the dress. They literally stripped in front of 200 other people. One of the girls put on the dress, and suddenly she twirled around. She turned to her friend, and she's like, I look— Sexy. So hot. And I turned to my co-founder at that moment, and I said, that's our company. Our company is making a woman feel like she can take on the day, like she owns the room, making her feel beautiful, and that we were going to create a brand that was about empowering women to feel awesome.