Rent the Runway, a company that lends out designer clothing to customers for work and special occasions, was affected by the pandemic. With special occasions — really, all occasions — on hold, the company’s business tanked in 2020.
But on Wednesday, the fashion-lending brand began publicly trading on Wall Street at $23 per share, with with a staggering $1.7 billion valuation.
The company did even better than expected, capping off the meteoric rise of co-founder Jennifer Hyman, 41 — whose 5.1 per cent ownership stake is now worth about $48.9 million.
Rent the Runway went public on Wall Street Wednesday at $23 per Share, an increase from the $21 IPO price
CEO Jennifer Hyman’s 5.1% stake in the company is now worth approximately $48.9million
The 41-year-old woman (right) co-founded the company with Jennifer Carter Fleiss, a Harvard Business School Classmate. Jennifer left in 2018. Jennifer still owns 1%.
This debut marks a remarkable turnaround from the chaos of last spring.
Additional funding had led Rent the Runway to be valued at $1 billion in 2019, and pre-pandemic, their $159-per-mont subscription service was booming, growing faster that 100 per cent per year.
However, customers fled as soon as the US started to shut down in March.
Subscribers who made up 75% of the business had their accounts canceled or paused. Forbes reported that only 30% had active accounts in May.
The company experienced pay cuts and furloughs as well as layoffs. All of its brick and mortar stores were closed. During a round in funding in the fall, the company was valued at $750 million.
According to Yahoo, their total revenue for the 2020 fiscal year declined 38.7 per cent to $157.5 million, compared to $256.9 million the year before.
Rent the Runway underwent some product changes. Hyman revamped their subscription and opened up the sale of used clothing to all customers.
The company originally planned to sell 15 million shares between $18-$21, but ended up selling 17,000,000 at $21 each Tuesday.
Wednesday’s trading opened to the general public and was at $23 per Share, 9 percent higher than its IPO price.
‘I’m so proud of this milestone day,’ Hyman said. ‘We’ve gone from a single dress and a single situation to building a full closet in the cloud that women can access for every occasion’
As vaccination rates rose this year, more people felt comfortable going outside again. Rent the Runway’s bottomline grew as well, culminating in its IPO last week.
The company had marketed 15 million shares for between $18 and $21, but ended up selling 17 million for $21 each on Tuesday.
On Wednesday, trading opened to the public at $23 per share. This is 9 percent above the IPO price.
‘I’m so proud of this milestone day,’ Hyman told the New York Times. ‘We’ve gone from a single dress and a single situation to building a full closet in the cloud that women can access for every occasion.’
Hyman had previously said she would know it was ‘time the IPO for when Rent the Runway will have the best success’ — and she seems to hav efound the right moment.
Rent the Runway was founded by Hyman in November 2019 with Jennifer Carter Fleiss, her co-founder. Jennifer and Hyman met in 2007 as MBA students at Harvard Business School.
The co-founders opened a pop-up shop in Harvard in April 2019, where students could rent dresses. They launched their website on November 10, 2019.
Hyman launched Rent the Runway in November 2019 with co-founder Jennifer Carter Fleiss, whom she’s met two years earlier when they were both MBA students Harvard Business School 2007
The idea was born during Thanksgiving break 2008. Hyman’s sister, Becky, had spent $2,000 on a dress to wear to a wedding — which put her in credit card debt — and it occured to Hyman that it would be smarter if women could rent designer clothes rather than buy them.
‘I never said, “Oh, this is a brilliant idea, this is going to be a billion dollar company, we have to do this,”‘ Hyman admitted to the Muse. ‘My reaction was: I had an idea, I thought it was interesting, Jenny thought it was interesting, we thought it was fun, and we thought, let’s figure out if this is a great idea.’
A month later, the women cold-emailed Diane von Furstenberg and set up a meeting. The designer was skeptical, according to their website, but she gave them advice.
In April 2019, the co-founders hosted a pop up shop at Harvard, where students could rent clothes.
It was a success. The co-founders were able to raise funding from Kleiner Perkins and Bain Capital Ventures. They launched their website on November 10, 2001 and opened their business to the public.
The business grew, adding accessories and plus-size clothing to their inventory. They had more than 15,000 dresses by 120 designers by 2011.
An increasing number of investors are bringing in more money year after year.
The business grew and expanded stock to include Accessories and plus-size clothing. They had more than 15,000 dresses by 2011 from 120 designers.
An increasing number of investors saw money coming in year after year.
The company opened its first brick-and-mortar store in New York City in October 2014.
As Hyman’s personal life changed, the company continued to grow. In 2013, the then-32-year-old was set to marry former Starwood Hotel executive Peter Mack in a ‘close to one million-dollar’ ceremony at a horse ranch in Aspen, Colorado.
She called off the 200-person nuptials three days before.
“I wanted to share the very sad and devastating news that I’ve decided to postpone/call off my wedding this weekend in Aspen,’ she wrote in a message to guests, which was leaked to the New York Post.
Hyman was set to marry former Starwood Hotel executive Peter Mack in a ‘close to one million-dollar’ ceremony at a horse ranch in Aspen, Colorado in 2013
Three days before the nuptials, she called off her 200-person wedding
‘I know you have each made huge commitments of your time and money to come… this weekend, changed summer plans, made vacations out of it and I am so sorry — for everything.
“I feel terrible that I had to make this last-minute decision. I hope each of you can understand me and support me through this difficult time in my personal life.
She said there were ‘a number of very important reasons’ why she made the decision, which she would share ‘personally’ in good time.
‘I am extremely saddened by this situation and it’s been incredibly hard for me to get to this point. She added that she believes it was the right thing to do.
The drama continued on the job front. Fortune claims that in 2015 there was an “exodus” of employees. Former employees compared the situation to Mean Girls.
The company opened its first brick-and-mortar store in New York City in October 2014. It would then open many more.
In a span of 10 months, a chief operating officer and a Chief Financial Officer, a Chief Marketing Officer, a Chief Creative Officer, a Chief Technology Officer, a Chief People officer, and a Head of Partnerships all left.
One former employee stated that the culture is unpredictable and erratic. It was something everyone knew about, and discussed amongst themselves. However, it was never acknowledged. It’s not like HR had any complaints. People were afraid. There wasn’t even an HR.
Another employee stated that there were often screaming matches between exectutives.
An ex-employee stated that they don’t feel it’s a supportive environment for women. It felt like high school. It was very cliquey.
Another mentioned ‘disillusionment,’ and a lack of professionalism, while another ex-employee said: “Everyone who leaves there has PTSD.”
Forbes asked Hyman to respond. She said that she believed the company was the “opposite” of Mean Girls. There is an openness. People feel very comfortable with me personally. They can reach me during my office hours.
She also claimed that similar statements wouldn’t be made about a male founder for a company.
In 2015, there was a ‘exodus of employees’. Former employees compared it to Mean Girls.
Despite the murmurings, the company continued its growth, with more than 100,000 pieces of clothing, jewelry and accessories from about 100 designers in 2016.
Rumblings aside, the company continued to grow, with 100,000-plus pieces of clothing, jewelry, and accessories by about 100 designers in 2016.
That year, they launched a monthly subscription service — which put expected revenue for the year at $121 million.
In 2017, co-founder Fleiss left the company, holding onto a 1 per cent stake and leaving Hyman in charge.
Things took an upturn after that, and in 2018, she and fiancé Benjamin Stauffer, a film and television editor, welcomed a baby girl named Aurora.
Soon after, the couple — who met on Hinge — married in a ‘super down-to-earth’ wedding at Gurney’s in Montauk, New York.
According to Vogue, Hyman wore a Marchesa dress for the event, which had over 100 guests.
In 2018, she and her fiancé, film and television editor Benjamin Stauffer, welcomed a baby girl named Aurora. They were married shortly after.
Another high came in 2019, following a round of investing that raised $125 million from Franklin Templeton, Bain Capital, and T. Rowe Price — and elevated Rent the Runway to ‘unicorn’ status with a $1 billion valuation.
Then, the pandemic hit and shaken things up. Hyman laid off a third her staff, furloughed another 37%, and reduced salaries for everyone else for three months.
Their valuation was downgraded to $800 million in April 2020 after a $100 investment which helped them through the economic downturn.
The company, which had previously posted 133,572 active subscribers and $256.9 million in revenue in 2019, was down to just 54,797 active subscribers and $157.5 million in revenue.
‘They took a huge hit because if you don’t need to leave your domicile to wear an outfit at a wedding or a prom or a graduation, you’re going to dress in comfortable clothing,’ Shawn Grain Carter, an associate professor of fashion business management at the Fashion Institute of Technology, told the New York Times.
However, Hyman’s business and her employees saw a positive change in 2021.
The pandemic struck and changed everything. Hyman laid off one-third of her staff, furloughed 37 percent more, and reduced salaries for everyone else for three months.
But Hyman and her employees were able to see a quick turnaround in business in 2021.
She said, “The recovery is happening much sooner and is much steeper that we ever imagined,”
Gwyneth Patrow joined the company’s board in May despite never having used it.
Forbes spoke out in June that she believes the recovery is occurring much sooner and is steeper then we ever imagined. “Nobody wants to wear what they wore in 2020.”
Revenue increated 39.4 per cent from April 30, 2021 to July 31, 2021, and subscribers (including those with accounts on pause) were back up to 143,464 — even higher than they were in 2019.
Gwyneth Patrow joined the company’s board in May despite never having used it.
‘What’s fascinating is that, in my own way, I’ve been renting the runway for years,’ she told the New York Times. ‘Borrowing clothes from designers for a single moment at a premiere, or an awards ceremony and then giving them back afterward. It seems like everyone is doing it. But I’ve got my welcome code in my inbox, so I’ll soon be trying it out.’
As for the future, Hyman said she expects to branch out into other categories, and is open to goods, to shoes, ‘luxury,’ and kids — but she never expects to abandon her company.
‘I have no desire to sell Rent the Runway,’ she said on the podcast Recode Decode in 2017. Rent the Runway is my vision for the next 50 years. I want to change consumer behavior and put the closet in the clouds.
‘And I think that it actually takes a long time to change consumer behavior, to get us from a place where we’re buying closets filled with things that we don’t use, to a world where you’re being smarter about how you get dressed.’