Why Rent the Runway’s CEO believes its $357 million IPO is a ‘step forward’ for female founders

It’s common for CEOs of highly-valued, venture-backed startups to downplay their IPOs as “just a financing event.” But Rent the Runway’s Jennifer Hyman isn’t trying to play it cool.

“It’s not just a financing round for us,” Hyman, Rent the Runway’s cofounder and CEO, told Fortune on Wednesday, as her clothing-rental company’s shares started trading on the Nasdaq. “Today actually provides us with all of the capital that we need to grow, to reach profitability, and to significantly deliver our business.”

Rent the Runway raised $357 million in its public-market debut on Tuesday, pricing 17 million shares at $21 each, at the top end of its expected range. Shares started trading on Wednesday at $23 each, 9% above its IPO price, before falling back to close around $19. The 12-year-old company, which Hyman cofounded with Jenny Fleiss, had raised a total of about $441 million in private equity funding before its IPO—a tidy sum, but one that pales in comparison to the billions some male-led startups have accumulated.

“Women lack capital … and I hope that our IPO is a step forward for all women-led companies,” says Hyman, who has been outspoken about the lack of venture funding—and the heightened scrutiny—facing female founders.

“This is an extremely disruptive business—and it’s a capital intensive business. We need warehouses, we need clothing, we need technology, we need data,” Hyman says. “If you think about other capital-intensive businesses that have disrupted industries—like Spotify, like Netflix, like Uber—those businesses in advance of their IPO raised billions, if not tens of billions of dollars. And what it gave those businesses was the ability to actually not only dream big, but execute big and scale and have permanence even before their IPO.”

“So that is what I want for women: The opportunity to have these huge ideas and visions and the capital to actually see it through,” she added. “That is what we achieved with our IPO today. But thousands more women should have that opportunity.”

Only 2.2% of venture capital goes to all-female founding teams, according to PitchBook, and a smaller percentage of those teams actually succeed in taking their startups public. Just about 1% of all IPOs over the past six years belonged to female-founded and female-led companies, according to All Raise, while only about two dozen women have ever presided over the IPOs of companies they founded.

Rent the Runway is facing more challenges than a systemic bias in venture funding. The pandemic has been enormously difficult for the fashion industry writ large and for Hyman’s company in particular, as customer demand for workwear and special-occasion outfits evaporated into the sweatpants-clad work-from-home ether. The company shuttered its physical stores and laid off staff in 2020, and has seen revenue continue to shrink this year: It lost $84.7 million on $80.2 million in revenue during the first six months of its fiscal 2021, compared to a year-ago loss of $88 million on $88.5 million in revenue during the same period.

Subscriptions, however, are starting to pick up again. During the six months ending on July 31, Rent the Runway earned 83% of revenue so far from subscribers, who pay monthly base fees of $89 to $199 to borrow, wear, and return items of clothing. The company lost more than half of its active subscribers in 2020, but ended September with 111,732 active subscribers—up 104% from nine months earlier.

Now Hyman is planning to spend some of her company’s new capital on a fresh marketing strategy, to help broaden and diversify Rent the Runway’s subscriber base. Potential customers still think of Rent the Runway “as a special-event rental business,” rather than what the company calls its “closet in a cloud” service, Hyman says. “We’re going to be changing the way we spend our marketing dollars, towards a subscription-first approach,” and devoting more of its marketing dollars to overall brand awareness.

Last year, before the Delta variant postponed many companies’ return-to-work plans, Hyman told Fortune that she was excited for the second half of 2021, which she predicted would be “the best moment in time for the fashion industry that I’ve seen in my career.”

But even after the pandemic’s resurgence this summer, “our customers fundamentally did not have to return to the office to return to Rent the Runway,” says Hyman, adding that “90% of our customers continue to work from home and we’re paying basically back up to 2019 levels.”

“Even in a world where people are still living and working from home, and we’re not back to normal, the desire for self expression has never been higher. And the desire to use fashion to fuel that self expression has never been higher,” she adds. “I think that fashion that is bold and colorful and editorial is going to be more popular than than ever before—and that’s great for Rent the Runway.”

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