By LAURA LOREK
Reporter with Silicon Hills News
Today, the New York-based company has more than five million members and 500 employees. And to scale their venture, Fleiss and Hyman have raised $114 million in venture capital from Bain Capital Ventures, Kleiner Perkins Caufield & Byers, Conde Nast and other high profile investors, according to its CrunchBase profile.
“You need to dream and think big to get your company going,” Fleiss told a crowd of mostly women Friday at a Project Entrepreneur Summit in Austin.
In the U.S. the clothing market, which is the largest in the world, has a market value of about $331 billion. The key to building a big business is to get just a tiny slice of a huge market, that’s still a billion dollar business, Fleiss said. Those huge, scalable businesses are what VCs are looking to finance, she said.
Fleiss gave the keynote address at the free event, held in the ballroom at the Omni Hotel in downtown Austin. Rent the Runway and UBS partnered to put on Project Entrepreneur, a venture competition and free educational program designed to give women the mentorship, tools and resources they need to build high-growth, high impact businesses. The summit is the second of three national events taking place. The first was held in New York and another takes place on Nov. 14th in Washington, D.C.
The four-hour summit featured female executives from Dell, Bumble, Doobop and Urban Co-Lab conducting workshops on a variety of topics. The sessions included “the basics of running a tech company,” by Whitney Wolfe, co-founder of Tinder, founder and CEO of Bumble and “How to Build a Brand with Purpose” by Jennifer “JJ” Davis, executive director of global communications for Dell.
“Women start companies at a rate 1.5 times the national average but account for less than 10 percent of founders at high-growth firms; while the passion and talent clearly exists, barriers stand in the way of women maximizing the economic significance of their efforts,” according to Project Entrepreneur. And that’s something the project is seeking to change. For its venture competition, Project Entrepreneur will award three winning teams a cash prize of $10,000 each and a spot in a five-week accelerator program hosted at Rent the Runway in New York. Entrepreneurs can enter the competition now through Jan. 8th. In April, 200 finalists will gather in New York City and the winners will be announced.
At Friday’s event, Lori Feinsilver, head of community affairs for Americas UBS, interviewed Fleiss about Rent the Runway.
Rent the Runway is a company with the mission to “democratize luxury” and deliver women a “Cinderella experience,” said Fleiss.
The company lets women rent high-fashion designer dresses in sizes ranging from 0 to 22, accessories and handbags for a fraction of the price. It’s free to sign up. Then members select a dress they would like to rent. Their credit card is charged when the dress is shipped. Customers can rent the dress for four days or eight days. At the end of the term, they put the dress in a pre-paid mailing envelope and Rent the Runway takes care of dry cleaning.
The big idea Fleiss and Hyman had was to turn retail clothes buying into a rental business to deliver “aspirational experiences” to its customers. Rent the Runway also has brick and mortar stores in New York, Washington, D.C., Chicago and Las Vegas.
Fleiss advised the entrepreneurs in the crowd to find a partner they feel comfortable with when they are seeking venture capital.
Investors are a big part of a startup’s team, life and company, she said. She speaks to her investors on a weekly basis.
She also recalled the challenge of explaining to male VCs in their 50s and 60s why a dress rental service met a need in the marketplace for women.
“It was very challenging explaining why women need possibly hundreds of different dresses to wear,” Fleiss said.
Rent the Runway’s customers get to wear designer clothes and that makes them feel like they can take on the world, Fleiss said.
“That’s what fashion does for women,” she said.
Instead of telling VCs about the need, they decided to demonstrate it firsthand by running some trials with customers. They invited VCs to those trials too to watch the women interact with Rent the Runway’s merchandise firsthand. They also filmed them.
For the first trials in Boston, Fleiss and Hyman bought a bunch of designer dresses in their own sizes.
“In case things didn’t work out we’d have some great dresses,” Fleiss said.
They also borrowed dresses from friends.
In one case, they saw a women put on a Tory Burch gold sequined celebrity dress. The woman twirled around in the mirror and said “wow I look hot.” That was the light bulb moment for Fleiss and Hyman. They knew they were really “renting a Cinderella experience.”
“Customers can tell you a lot,” Fleiss said.
One of her customers wanted Rent the Runway to rent ball gowns. And now ball gowns are 30 percent of its business, Fleiss said.
During the question and answer session from the audience, a woman asked Fleiss how Rent the Runway differentiates itself from Bag, Borrow and Steal, one of its competitors.
“We are a service, rather than a product that is cheaper,” Fleiss said. Bag, Borrow and Steal is a value proposition and it “loses some of its specialness in that way,” she said. Bag, Borrow and Steal also didn’t make relationships with designers. Rent the Runway did, she said.