Rent the Runway is raising a new round of financing and is focusing on selling clothes, not just renting them, after the startup suffered a near-fatal blow from a coronavirus pandemic that has kept women home for most of the year.
The New York company raised roughly $100 million in new debt and equity financing this week, as it continues to work toward a public offering. This funding represented a continuation of a $25 million funding round this summer that valued Rent the Runway around $750 million, according to people familiar with the terms, lower than a prior valuation.
Rent the Runway launched in 2009 as an online clothing-rental service for special-occasion apparel and accessories. It shifted to monthly subscription plans and expanded its offerings to include workwear, children’s clothing, and more recently home goods. But coronavirus has changed America’s wardrobe habits. Fewer people need as many work outfits or dress up for events.
The company has long offered customers the option to buy items they rent, and it is expanding that service. Starting next week, Rent the Runway will allow its members to purchase any item on its site, whether or not they have rented it. More significantly, the option will become available to shoppers without a Rent the Runway subscription in the first half of 2021.
“The company was always moving in this direction, but there is no way we would have headed in this direction as quickly had it not been for Covid,” said co-founder and CEO Jenn Hyman. She said the goal is to boost revenue at a time when subscriptions are still below pre-pandemic levels.
