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Full transcript: Jennifer Hyman, CEO of Rent the Runway, is creating the Spotify of women’s clothes

Women are spending much more than men on business attire. And they don’t need to, says Hyman.

Jennifer Hyman attends Tribeca Disruptive Innovation Awards during the 2015 Tribeca Film Festival Slaven Vlasic / Getty Images for the 2015 Tribeca Film Festival

On a recent episode of Recode Decode, hosted by Kara Swisher, Rent the Runway CEO Jennifer Hyman talked about the difficulties of being a woman entrepreneur trying to raise money and the potential for RTR to expand to other aspects of commerce. In its short life, it has already grown from an online special-event dress rental company to a brick-and-mortar wardrobe subscription success. Yes, it’s profitable.

That link will take you to highlights of the discussion among Kara, Jennifer and Recode Senior Commerce Editor Jason Del Rey, or you can listen in the audio player above. Below, we’ve got a lightly edited transcript of the whole conversation.

If you like this, be sure to subscribe to Recode Decode on iTunes, Google Play Music, TuneIn and Stitcher.

Transcript by Celia Fogel.

Kara Swisher: Today in the red chair is Jennifer Hyman, the CEO and co-founder of Rent the Runway, which launched in 2009. The business started online but now operates brick-and-mortar stores in six cities across the country. Jennifer, welcome to Recode Decode.

Jennifer Hyman: Hi.

KS: Hi. And joining me for the interview with Jennifer is Recode’s senior commerce reporter, Jason Del Rey, who knows more about this topic than I do.

Jason Del Rey: Oh, I’m blushing. You can’t see it, but I am. [laughter]

KS: So we’re going to talk about a lot of things, but Jennifer, why don’t you first start by talking about... You’ve been around a long time, you’re an oldster in online commerce, really.

I don’t feel that way.

All right.

We just celebrated our seven-year anniversary, so we’re excited about that.

Okay, so why don’t you give people who might not know what you do a background. A lot of people do, but a lot of people don’t.

Yeah. At Rent the Runway, we rent designer clothes. We have a belief set that half of the closet over time is going to move into the cloud and a portion of what we wear every single day will be comprised of things that we don’t own forever. So all a rental means to me is that you don’t need it for the rest of your life and you can, as the customer, decide how long you want to use something for.

So when we launched seven years ago, we launched a business that was about renting dresses and accessories and handbags for the 28, on average, special occasions that women have per year. And the reason why we started in that one segment of the $1.7 trillion fashion industry was it was a very easy customer value proposition for people to understand. Women can look at their own closets and think about the events they have in their life — be it a wedding or their sixth bridesmaid dress — and understand that they’ve bought things, especially dresses, that they’ve only worn once.

So we thought if we were introducing a new behavior, which was normalizing this idea of wearing clothes that other people had worn before, which is kind of icky, we needed to do it around something that was really easy to understand. From the industry standpoint we needed to launch with dresses, because it was basically a negative-margin business for department stores, for traditional retailers.

JDR: Why is that?

Women have actually been renting the runway illegally for decades. The rate of return of dresses ranges from between 35 to 75 percent in retailers. The more high-end the retailer, the higher the return rate.

KS: All right, so rich people ...

Rich people steal more than poor people.

KS: [laughs] Yeah, exactly. So they buy them and then wear them once and then return them.

Yeah. The biggest return day of the year is January 2, because women have been renting the runway for New Year’s forever. So that was the first business that we launched, and that business gave us the venture capital funding and the team to be able to build out what we really do, which is all of the technology and logistics to power just-in-time reverse logistics of physical goods.

Meaning that a hundred percent of the dirty clothes that we get back in the morning, we can actually sort them, repair them, dry-clean them, assemble them and send them out to new customers that evening. So we have a zero-day turnaround of physical goods.

JDR: That’s a lot of dry cleaning, it sounds like.

We’re the largest dry cleaner in the world [laughs] which is a business I didn’t even think we’d be in. And that infrastructure has now allowed us to open up different ways for women to rent. This year alone, we launched a subscription to fashion called Unlimited, which is about people renting for their everyday lives, and that has been the most successful launch we’ve ever had. And then actually just two weeks ago we launched a new subscription product, which is about renting an outfit of the month.

JDR: So I’m very interested in this subscription idea, partially because you’ve been working on different iterations of it, I think, for several years. Is that fair or not fair?

Well, we had launched a product in beta for a year before we removed the shackles of the waitlist and actually launched it to the mass market. I knew that there would be a concept around having a subscription to fashion, just like we have a subscription to music via Spotify or to entertainment via Netflix. But I didn’t actually know what the consumer value proposition should be around a subscription to fashion.

What I knew is that it wouldn’t be like Spotify or Netflix, where the cost of content is so low that you’re paying $9.99 a month for access to every song that’s ever been produced and written on earth. So I needed to understand: What do people want to have on rotation in their lives every single day? We actually launched our subscription with something that was cheap for us to do, but customers didn’t really like it. It was a subscription to accessories and handbags. And basically customers were like, “This is superfluous in my life.”

JDR: So how did that work?

It was the same concept that we have: You pay a monthly fee, you receive three things at a time, you can have unlimited swaps throughout the month. But the product assortment was not actually additive to anyone’s life, because it didn’t allow them to substitute shopping for the subscription.

KS: Right, because this was extras.

It was extras. So we started going around to our own customer base and our own membership base — of which there’s six million women — and we learned that 90 percent of our customers work and what they really care about is having a subscription of clothing that they can wear to work. Because when they say a subscription to their everyday life, five out of seven days a week they’re going into an office.

And they have to feel confident when they go into work. They actually find it extremely expensive to dress in a business-casual function, so we also did research with the Lean In organization and we found out that around the year 2000, businesses around the country went business casual. And prior to the year 2000, men ...

JDR: Kara, how early did you go business casual? [laughter]

KS: When I was 12. I’m still wearing the same exact clothes.

Well, you obviously give us all something to aspire to.

Prior to 2000, men and women spent the same amount of their take-home income on dressing for work. It’s around 2.5 percent. And then after this kind of cultural revolution changed, where you can now go into McKinsey and not be in a business suit as a woman, women started spending between 7.5 and 10 percent of their take-home income.

KS: So a lot more to look not as businessy. Because it’s not as uniform, essentially.

It’s not as uniform, you need more variety, you need more quantity. So all of this time that women have been attacked for vanity — like they’re spending more on clothes because it’s about some superficial requirement — it’s actually not.

KS: So when you’re talking about this unlimited idea which is — it’s not exactly like Netflix, but is a little bit like Netflix when you used to borrow [DVDs] from them, because it’s physical goods — do you ever imagine a time where you don’t need to buy any clothes? That you just rent them, because there are a lot ... I was thinking — again, I’m not the person that you should think about, I literally have had the same clothes for decades, like the exact same clothes. I don’t shop a lot. But if you’re someone that has that need that you’re talking about, of shifting your clothes constantly at work, do you imagine a time ... just like Uber, you wouldn’t have imagined a time you didn’t need a car that much, but now you really don’t in a lot of ways. There’s lots of iterations of this.

Well, I actually think transportation is an amazing category to think about. So it was 80 years ago that we were given the opportunity to lease a car for the first time. And over 50 years ago we were given the opportunity, via Avis and Hertz, to take a business trip and rent a car for a few days. Zipcar launched over 20 years ago, and Uber launched seven years ago.

Now at the same time, in transportation, you’ve had taxis that have been around for, I think, upwards of 80 years. You have planes, you have trains, etc. And what’s interesting about the transportation market is that you’re often dabbling in multiple categories. So the same person who might own a car is still using Uber, is still using a taxi, still might go to Avis on a business trip and rent a car. And maybe they’re shifting the distribution with which they consume all of these products, but it’s not either/or.

Same thing in clothing. So we’re still in the world of 80 years ago where everything you own, even though you’ve had the same clothes forever, everything you’ve ever had to purchase you have to own it for the rest of your life. And all that Rent the Runway has really done is, we’ve opened up the technology and logistics to make it possible to have the customer decide how long she needs an article of clothing for.

What I really want to power is what’s happened over the last 80 years in the transportation industry. Uber is dealing with the last five minutes of the ride. And that is what you can potentially call our on-demand business.

JDR: Have you started with the unlimited business with customers who have a lot of disposable income, who I often think of as the Whole Foods shopper? Or who are the women that have been signing up?

Sixty percent of the customers to Unlimited, which costs $139 a month and is giving you three items at a time, so women on average are receiving around $40,000 to $50,000 worth of apparel per year for $1,600. The woman who’s signing up on average has a household income of $100K and up. If you look at 18-to-42-year-olds in the U.S. who have that household income, it’s about a 15 million person market.

So it’s certainly not a mass-market product at this point in time, at $139 a month. But I thought it was extremely important given where we were and are in our trajectory: We’ve attained profitability this year, and we wanted to launch a new product that also was profitable and gross-margin positive, and you can always reduce prices over time, but companies have found it very very difficult to ...

KS: It’s hard to go up.

… raise prices, so we started at probably the most expensive price we’ll ever have. My goal is that when every year our logistics get better and better, our COGs reduces, so that hopefully we can offer this same value, over time, at $99 a month, which would really open us up to around 80 million households in the U.S.

KS: Right. So right now let’s talk a little bit about the economics of this. This is a subscription service that’s now at $140, right? And then you do the regular rentals, which depend on price and various things like that. Those are the two main revenue drivers for you, correct?


KS: And we’ll get to your retail stores in the next segment, because you’re just here in San Francisco doing that. You’ve raised how much money?

We’ve raised $130 million.

KS: So it’s a lot of money with lots of great investors. You have a real range of investors. What is the goal for you, when you think about what you’re doing? Because there are a lot of businesses that are similar to you. You can even say that Dollar Shave Club is a little like it, you know what I mean? All these businesses often end up selling or run into big trouble. Like Nasty Gal, or something like that. What is your goal, from your perspective as a CEO?

I have no desire to sell Rent the Runway. I have a 50-year vision for Rent the Runway, at least, to change consumer behavior and actually put the closet in the cloud. 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.

So even taking music as an example, we look at the last seven or eight years of Spotify in the U.S. and their 10-year growth trajectory since they launched. However, I was quote-unquote “stealing” music from Napster in college 25 years ago. So we’ve had the ability to think about music and to consume it differently for a very long time.

KS: But people don’t think of clothes that way.

People don’t think of clothes that way.

KS: Why is that?

Because no one had really built out the logistics to make that possible. In fact, the entire dynamic of the industry is based around getting people to consume more even though you don’t need it.

JDR: The fast-fashion rise.

Not even just the fast-fashion rise. Look at traditional retail. Traditional retail clears the floor every three months. Why did they clear the floor? They’re telling consumers that trends are changing and you need to buy something new. Well, we’ve debunked that myth on Rent the Runway. We have styles on our site that have been on the site for over seven years. Maybe not the same unit, because we’ve had to buy back into things, but we’ve proven that a great top is a great top. A great dress is a great dress.

What consumers actually care about is something being new to them, not necessarily being new to the market. So this idea that every three months a store should discard everything they have, put it on sale, and get you to come back in and buy something new, is highly irrational. The average American is buying 64 new articles of clothing per year.

JDR: Kara?

Every single year. That’s average.

KS: Yeah, maybe one.

So you might buy one, but someone else is buying 200.

KS: Yeah, but underwear, I did need those.

So when we get back we’re going to talk about that, what happens to retail. Because this is collapsing a lot of industries; what happens when consumption goes down? I was just reading Marie Kondo’s latest piece about happiness and finding joy in your stuff, which I really appreciate. So we want to talk about that.

We also want to talk about your forays into retail itself, because you’re talking about retail and changing the face of retail and more — with Jenn Hyman from Rent the Runway.


KS: We’re here with Jennifer Hyman, the co-founder and CEO of Rent the Runway, an incredibly successful clothes rental service. Aimed at women, largely.

A hundred percent.

KS: A hundred percent aimed at women.

JDR: I’m waiting for the jeans rental service. [laughter]

KS: I know. And Jason Del Rey, our senior commerce editor at Recode. We’re talking about where retail is going. And you were just talking about essentially wanting people to buy less stuff from retailers. So what does that do to the market, when you’re thinking about that?

Among women who are 40 and under, 50 percent of your spend per year on clothing is going towards fast-fashion or off-price. It’s basically going towards things that you’re actually only wearing two or three times. So I think rental, in the easiest component, is just a substitution for the 50 percent of your closet that you’re only wearing two or three times. And rental is offering that at a much lower price, so either you save that money or you might use it on other things in your life, like paying for school or food or other things that important to you.

You could also use that money to reinvest in the other side of your closet — into things that you might have that last you for 10 years or for 15 years. So it’s about rethinking how you build a wardrobe and how you get dressed around smarter choices.

I’m not about having a whole uniform that every day is: You’re wearing the same black turtleneck and jeans, and you develop that sort of uniform. I actually think that self-expression comes, sometimes, from what you wear, and having the freedom to be able to wear whatever you want for whatever mood you want to wear it, but to not feel frivolous that all of those things that help you self-express have to be things that you’re committing to forever.

JDR: So you obviously think, talking about retail, that there are some synergies between your business and big retailers. I think you’re in town this week for a new pop-up store — or correct me if it’s not pop-up.

A permanent store.

JDR: Permanent store inside of a Neiman Marcus department store.

Yes. Yeah, we’re rolling out Rent the Runway stores in Neiman Marcuses around the country.

JDR: So explain why that makes sense.

Well, No. 1, we have six million customers at Rent the Runway right now who are, on average, 29 years old. Whereas Neiman Marcus’ average age is 51. And that average age ...

KS: That’s a big difference.

That’s a big difference.

JDR: And it’s not getting younger.

Not getting younger. My customers, for the most part, actually don’t go into physical retail stores. And they don’t want to. They work, they don’t have time. And the precious time they do have, they want to spend it in other ways. So we’ve built a store that’s actually based around the concept of not having to necessarily have people come into the store.

KS: All right, but they go to the store.

Well, if ...

KS: They do for a thing. They go for being helped, correct?

You can go and book a personal styling appointment with a stylist at Rent the Runway and, in 45 minutes, try on every outfit you need to wear for that entire year. But in that 45 minutes we expect you to come in once a year. Maybe twice a year. We’ve actually built technology that’s very similar to what I would call Prime Now, where you can in real time, now, in San Francisco, see all the inventory that’s available in the store, and in one click choose to have it couriered to you, to your office or your home. So for me, a store is kind of like a distribution center that’s in the center of a city that provides convenience to my customer. Now why in Neiman Marcus? Well, when you’re going to that last-minute event ...

KS: Yeah, why not just have it anywhere?

You could, and we’re opening up our own flagship stores around the country as well. We just launched our flagship in New York yesterday, actually.

KS: So Neiman Marcus wants you to bring people into the stores. You’re saying that they don’t, you’re going to courier to them, they want them to walk up those flights of stairs. You’re on the fifth floor, right? So they want them to walk through the store and see it. That’s the goal for Neiman Marcus.

Yes. So we’ve found that there are thousands of people that will come into our stores every single week. They’ll come in to pick up their order, they’ll come in to drop off their order, they’ll come for a personal styling appointment. But there is an even bigger segment of people in the market who will never come into a Rent the Runway store, but they’ll utilize the fact that we have inventory real-time in that market.

So the traffic that’s coming in is actually very interesting to Neiman Marcus, because why do they come into Rent the Runway to pick up their order? They’re actually coming in because most of those people are using our on-demand event business. They’re renting for a holiday party or a wedding in which the stakes are high and they actually want to try on what they’ve rented in a dressing room in the store, make sure it fits, have the contingency plan there that if it doesn’t fit they can swap for anything else in the store, and it’s the perfect customer for Neiman Marcus because that’s a woman who’s going to an event. She’s ready to spend on cosmetics, on shoes, on other things.

KS: They’re hoping to catch them as they’re going up the escalator.

And we’ve actually proven over the last two weeks that a huge percentage of the people that are coming in to pick up and drop off their orders are actually buying something else at Neiman Marcus because it’s convenient for them to do so.

KS: But they’re not expecting people to change their buying habits. Your users are never changing their buying habits again.

My users right now are shopping primarily at fast fashion. So they’re shopping at Zara and H&M and I’m already trying to get them to change their buying habits away from Zara and H&M into basically a competitive — Rent the Runway in my opinion is a competitive product to H&M, but it’s at the same fast fashion price point — but the real designer product. So we’re hoping that by the nature of having women fall in love with designer product that’s higher quality at a younger age, that when they do choose to buy the one black cashmere sweater or the great pair of shoes, they will at least have experienced some of these brands before and make that decision, and Neiman Marcus will be in their consideration set.

JDR: So I want to talk for a minute about what your investors think of the idea of brick and mortar. Because we see in the venture capital world around e-commerce and retail, trends come in, trends come out. So sometimes having inventory is a good thing, sometimes it’s not. Sometimes opening stores is a very bad thing. More recently we’ve seen physical locations for digital-first companies become a thing again. So what was that conversation like with your board and investor group about the opportunity, and maybe the challenges as well?

It was essentially the same as every other investment we’ve ever made, which is: What’s the ROI and prove it to me first. And you better beta this and do it as cheaply as possible initially, prove that there’s a real business here, prove what it’s going to be. Is this going to be a revenue driver for you? Cost saver?

JDR: Awareness ...

Is it about brand awareness? And I couldn’t answer those questions intelligently when we first launched a pop-up in our office two-and-a-half years ago. And then, over time, we evolved that beta test — which has always been the strategy of Rent the Runway, where we go from one beta test to the next, we learn something else.

So we went from actually having a kind of store within our office in New York to then opening up a free space that we got at Henri Bendel’s, which was a department store that was essentially closing down on 5th Avenue and 57th Street. They gave us free rent, so we’re like, okay, we’ll take that space.

JDR: Free is usually better than not free.

[laughs] Yeah, free is great. Then we got a really, really cheap space on 18th Street, which was 1,300 square feet, so we kept on evolving the concept. And with each of these iterations we learned some new things.

We had always thought that we’re going to convert new customers into Rent the Runway by having physical retail, A) because they can see that the product itself doesn’t look used, it looks brand new, it looks high quality, and there are segments of women that we’ve found, especially women who are 40+, who find it to be more comforting to try Rent the Runway for the first time in a physical location as opposed to on mobile or online. Whereas the 17-year-old who’s Snapping every single second ...

KS: Is used to it.

... she’s used to it. She will definitely try us on mobile first. So that was the original concept. I really would not have been able to predict all the cost savings that the store gives us because of the percentage of the market that wants to pick up their order in-store, that wants to drop off their order in-store. The amount of customers ...

JDR: So it saves you on delivery.

Saves a huge amount on shipping. It also saves a huge amount of leakage. So we’re still in the business of renting clothes. There are times when you will rent from Rent the Runway and the outfit won’t fit, or you just don’t like the way it looks on you. Now, in the 30 miles around New York City or around San Francisco or around Chicago, if you ever have a fit issue, I could actually courier you more units from the store. So what would have been refund is now cash to my bottom line, because I can save the x percent of experiences that would have failed.

KS: It’s almost like Amazon’s warehouses nearby.

We actually took the model ... So for many years, Barry McCarthy, who was the CFO of Netflix, sat on our board. And he taught us that with Netflix, when they were in the physical DVD business, having hubs of distribution that were close to the customer actually reduced churn. It increased customer satisfaction because they were always able to get you something quickly, and if you didn’t like what you got, you can always get something new within a day.

So to me, opening up retail stores is the exact same strategy: It’s having hubs of distribution close to the customer. I’m just also going to monetize them on the top line as well.

KS: Your customer, you said, is 29. A woman.

Yeah, 29 is the median age.

KS: Is the median age. And what do they mostly buy? Is it still a party business, or event business, or ... I can’t imagine them renting T-shirts and stuff like that, that’s sort of a core part of a wardrobe, for example.

We don’t rent any T-shirts.

KS: [laughs] No, exactly. You know what I mean?

JDR: You’re out of luck, Kara.

KS: I’m out of luck. But what is super popular, and what trends do you see happening?

We launched our subscription product out of wait-list mode in March and it’s going to comprise over 25 percent of company revenue this year. That business is really about everyday clothing to wear to work. So it’s dresses that are appropriate for work, blazers, coats, tops, pants, skirts. But things that feel more casual.

Our events business is still 75 percent of our business. Now my expectation is, within the next four to five years, it’s going to flip. Subscription is going to be 60 to 75 percent of the business and events will be 25 percent of the business while still growing. You know, women of all ages still have weddings and holiday parties and New Year’s Eve and Valentine’s Day that they’re celebrating, it’s just that the events business is primarily about a Saturday night, where a subscription is about every other day of the week.

JDR: And what do your profit margins look like when that flip happens? You talk about, I think, being break-even now?

Yeah. [laughs]

JDR: Is that real break-even or, like, Silicon Valley break-even?

No, it’s real. It’s real.

JDR: So which business is more profitable? Or should they look the same in terms of profitability over time?

Well, if you talk about it, it depends on whether it’s from an inventory margin standpoint or you’re looking at it from a customer lifetime value standpoint. Clearly, we’re making much high customer lifetime value on the subscriber. Because not only is she renting and subscribing for $139 a month, it normalizes the behavior of rental to her very quickly because she’s using product from us every day.

She tends to also consume from our on-demand business as well, so, like, if she happens to be a subscriber and her sister is getting married, and she wants to reserve a specific dress for her sister’s wedding, she’ll use on-demand. And what our on-demand customer delivers in five years, our subscriber delivers twice that in six months. So from that standpoint, that’s awesome. However, just from the sheer gross margins, inventory margins, of the business, the on-demand business right now is a higher-margin product because we’ve had seven years to iterate it.

JDR: Got it.

KS: Got it. Well, we’re here with Jennifer Hyman, the co-founder and CEO of Rent the Runway, a very dynamic online retailer ... Well, not retailer, I guess renter.


KS: Online renter, or something. Cloud ... clothes in the closet, clouds in the closet?

Yeah, maybe. Hey, I’d like to be called a SaaS company at some point.

KS: All right, you’re a SaaS. I will call you a SaaS company. [laughter]

JDR: We will not give you those multiples.

KS: When we get back, we’re going to talk a little bit about what it’s like to be an entrepreneur, especially being a woman entrepreneur in today’s Silicon Valley tech era, even though you operate out of New York.


I’m here with Jennifer Hyman, CEO and co-founder of Rent the Runway, an online clothes rental service for women. I’m also joined by Jason Del Rey, Recode’s senior commerce editor.

So you have two segments of your business, and then — are there any others that you hope to get in, more of a community-building or anything like that? And then I want to talk about being ... you’re one of the few women CEOs of tech companies. But first, do you imagine other businesses for yourself? You in physical retail, you in ... you know, you do your events business, your subscription business, anything else?

The way that I think about it is not actually separate businesses, it’s just offering customers different frequencies with which they are able to rent. And so if you think about a business like Blue Apron, I can choose to subscribe two nights a week, three nights a week, four nights a week, etc.

KS: The cooking service.

With Rent the Runway, we started off where it was very much like, “You can rent for a Saturday night! And here’s the specific four-day rental that you can have.” With Unlimited, we’re offering the complete opposite end of the spectrum to say you can take as much as you want for as long as you want, and we’re probably going to give you choices in between. So we’ll give you a program that’s an outfit of the month, an outfit of the week. If you want two outfits a week.

KS: Or getting to know you, what you might like.

Yeah, so I think that what we’re trying to move to actually, in 2017, is asking our customer, “What’s your lifestyle like? What are you spending today on clothing? What’s going on for you this year?” And making a recommendation to you that’s of highest value to you, of which of our products you should be using.

I’m not trying to direct everyone into the most expensive product, because not everyone should have a subscription to fashion and have rented clothes in their life every single day, it doesn’t make sense. For instance, for me right now — I’m six months pregnant — thank God for my subscription to fashion, because I’m literally changing size every single week and I actually need to flip out those things.

KS: Yes, indeed. And you don’t want to keep them.

[laughs] Yeah, it’s saved me [a lot of money]. God knows how much I would have spent in maternity clothes otherwise. There’s going to be a time in March, God willing, that I actually have a child, and I’m probably not going to leave my house [laughs] for a few months.

KS: I have clothes for you for that.

I’m not going to have to rent anything during that period. So I’m going to pause my subscription at that point in time and will figure out what I need for when I come back to work.

KS: Okay. So let’s talk a little bit about being an entrepreneur, and specifically a female entrepreneur. Aileen Lee — one of your investors — is pressing me to ask you this question. She said, “She may not talk about it, but you should get her to talk about it.”


KS: So you’re going to talk about it.


KS: So ...

What, exactly?

KS: What are the challenges from your perspective and experiences? When you first pitched it, I think you had some issues with VCs.

Yeah, we definitely did. I think that one of the first things you hear ... First of all, we’re the only women that most of our investors have ever invested in, which is ...

KS: Sad and pathetic.

Sad and bizarre. And what we often heard when we were going around and pitching in the early days — and even in recent rounds, which is even more surprising — was, “Well, let me ask my wife about this.”

KS and JDR: Oh ...

Which is the kiss of death.

JDR: As the one guy in the room ... yeah, not smart.

Because I do not want you to ask your billionaire wife about whether she’s going to rent clothes. She’s not my target demo.

KS: What do you say to that? It would be impossible to raise money, I’d be like, “You’re an idiot. You are an actual idiot.”

Well, we found out that we had to preempt that conversation, so we started using video in these investor presentations — prior to even going through the pitch — where we would show who the customer was and let her speak for herself about why she was renting and what the experience was.

The larger issue, though, is not that. The larger issue is you’re given 60 to 90 minutes with a partnership group. And this a partnership group of people, every single day, that wear khakis and a blue button-down shirt to work, and they cannot think why having variety in their wardrobe is something that hundreds of millions of women around the world are doing. And they don’t understand that this is ... I have to prove to them the data that’s already out there. So I’m spending over 50 percent of my pitch actually on things that, when I speak to a woman, it takes me five minutes.

KS: Aha, right, yeah.

So as opposed to going into the hardcore economics of the business, which is what I actually want to be talking about ...

KS: You’re hand-holding old white men who can’t dress.

I’m trying to hand-hold people through the fact that there’s demand for what we’re doing. And I think that’s the larger problem in raising money against Rent the Runway, or in raising money against a Stitch Fix or a Birch Box or a Class Pass. And it’s about your given limited time to do that.

There were also some more interesting things that happened in our earlier rounds with investors who we did not take money from, where I had an investor approach me after what I thought was a fabulous pitch — we’d received four or five term sheets in that round already — and he took my hand in his after the pitch and he said, “This is just adorable. You must be so excited, you’re going to have all of these amazing dresses to wear all the time, it’s going to be so fun for you.”

KS: [laughs] What?!

And this is someone who ...

JDR: Can we name names on this one?

KS: She can tell us later.

You know what? I will write a book at some point and I will name his name.

KS: What did you say? See, that’s where I start to hit people.

I think at that moment, that was for our Series A, so it was like two months after we launched the company ...

KS: So you couldn’t be rude.

It was more that I was in a state of shock. I just didn’t understand whether it was a joke or not. We’d already, in our first two months after launch, had 200,000 people sign up for this service and had unbelievable metrics and we at least deserved the respect of [understanding that] we weren’t doing this so that we could wear frilly dresses every single day.

KS: Right. [laughs] You get to dress up!

I didn’t know if it was going to be successful or not [laughs] but ...

KS: You get to dress up and put on big lady shoes!

[laughs] That’s not why I started Rent the Runway. So, I think that that’s a challenge. I think that one thing that people don’t talk about, we often talk about, okay, it’s difficult for women to raise money. There’s data on that. Only 4 percent of VC dollars are going to women. And it’s often in early rounds. So it’s very difficult to raise your A, your B, your C, your $60 million round into the company. That’s for sure.

We often talk about, especially on this show, that men can come in with a more loose idea of where they’re going in the future and raise billions of dollars against changing the transportation industry or changing the hospitality industry. I actually do have that 50-year vision for how I want to power rental on the internet.

KS: Yeah, clothes is a big deal.

Clothes is the third-largest industry on earth. It’s a $1.7 trillion industry because it’s one of the things we have to do every day, but I’m not given as much credibility as a woman to have a Powerpoint and a dream and get [funded].

KS: It’s more, “Prove it to me, honey.”

I need to show the numbers.

KS: “Prove it to me, show me.”

It’s like I have to come in with 15 spreadsheets and, “Here’s exactly what we’ve done to get that funding.”

Okay, here’s the interesting part. There’s 1,200 people that work at Rent the Runway.

KS: And mostly in New York?

New York and New Jersey, because New Jersey is where our DFC is.

JDR: Yeah, how many of those are corporate versus the big New Jersey facility?

We’re now divided up into corporate, retail, logistics, and we actually have a lot of executives in our New Jersey facility, but let’s just say that we have 600 people who are working in our logistics facility.

KS: Okay, so here’s the thing ...

The thing is that I find that what’s the most difficult is building a culture, recruiting a team of people that genuinely want to work for a female boss. That building followership and inspiration around female leadership is something that is quite difficult to do because as women and men, we’re not primed and taught to feel that women are as inspirational as men.

KS: Yeah, this election, I just noticed that happened.

The election and ... I think about some of the most inspirational moments that we learn about growing up. We learn about MLK’s “I Have a Dream” speech. Take that same speech and put it in the voice of a woman.

KS: You’re right.

Would it be as inspirational? Would it have as much gravitas to it? We’re taught that a certain type of voice, a certain type of posturing, or cadence, is something that you should follow. And I know, we were at dinner last week, I have been obsessed with this election, and have thought about, okay, what does it mean about female leadership in general?

I did this very rote, non-scientific study on Twitter where I took women who had actually achieved great success. So I looked at female Fortune 100 CEOs versus male Fortune 100 CEOs, female venture capitalists versus male venture capitalists. I looked at how many Twitter followers do these people have and who’s following them. And I found across the board, no matter what the industry was, for women who had achieved that same level of success as a man, they were being followed by far less people, and most of their followers were women. Whereas men were being followed by both men and women and by more people. So I have found that I have to work much harder as a female CEO to lead the company.

KS: What are your tools? What do you do to do that? I just yell a lot. [JH laughs] No, I don’t.

JDL: Yes, you do. [laughter]

I think it’s been a constant evolution and learning process for me as to how do I learn how to lead in the best way possible while the train is moving at 1,000 miles an hour.

KS: Give a tip. There’s a lot of entrepreneurs listening.

One thing that I’ve done, that potentially I’ve had to do as a female entrepreneur, is that I have been unbelievably transparent with my team as it relates to financials and metrics. And not only transparent on “here’s how we’re doing,” but we’ve had sessions against the ROI of every single strategy that we have at the company.

Now, on one hand, that’s because I want everyone to be educated about what we’re doing, so that great ideas can come from anywhere and that people could actually be entrepreneurial in their jobs. On the other hand, I want this diverse team of people that we have to know that we’re making really smart, really strategic, very financially driven decisions in every single area of our business. And maybe that’s a little bit of me knowing, or me assuming, that I’m not going to always be given 100 percent benefit of the doubt on that. So rather, I preempt it and just show you, here’s all the numbers behind everything that we’re doing.

KS: So you’re more transparent, rather than being secretive or keeping things to yourself.

We’re super transparent. We have thousands of different data reports that anyone in the company can access at any point in time.

I think also just making myself as accessible as possible to everyone in the company. With a company of 1,200 people, I am very present in meetings, with people that are of every level in the company. And I think that that’s important as well, for people to get to know me on a personal level because in a sense, to see a female boss when most people have never had one before, people have very different reactions to it. Sometimes it’s actually scary to people, that for a woman to achieve this level of leadership, it must mean that she’s a bitch, right? It must mean that she’s tough or that she’s mean.

So the way that I inspire the most loyalty in my team is for them to actually just see me more casually. For me to have lunch with members of my team, for them to see me with my family, with my fiancee, to see kind of the real me. Because the expectation is very different than the reality sometimes.

JDR: There was a period of time, like in many young companies as you’re growing, where some of the executive team turned over and you brought on new people and there was some coverage of what the perceived culture and your leadership style was and how that may have contributed to those departures. And I know you had a strong opinion on how perhaps this coverage would have been different if it was a man leading the company. Am I remembering that correctly?

Yeah, you’re remembering exactly correctly. You know, there was a point in 2015 where I saw my business accelerating. And that’s often perceived to be a great thing. And I knew that I wanted to take this company to IPO and I wanted to deliver a multibillion dollar outcome for all of my investors. And I looked around me and I had had a lot of members of my team who had been with me for many many years, some of which were not scaling to get us to the next level. And I made a decision with the board to change.

KS: Yup, it’s a tough decision.

And to make very difficult changes on the executive team. And I flipped out basically 50 percent of my executive team in 2015, hired new folks who all came in last year. And 2016, as just evidenced, is our highest growth year in history, we’re profitable. We launched two subscription products, retail, etc.

KS: Which I think is hard for any leader to do, and especially when you get that reaction. I know the feeling, I know the feeling.

It’s extremely hard, but what was interesting was, I was just making the same business decision [that] anyone else in my position actually has to make. It’s either that I’m not qualified to be the CEO of this company because I’m not able to make the tough decisions, or I’m going to make the tough decisions and guide the company toward the highest level of success that it possibly can.

I think that the reaction towards actually a woman firing someone — which, by the way, I’m not great at firing people, like it actually was unbelievably painful and upsetting to do so. But seeing a female CEO who you expect to be nurturing and loving and warm — and most of the time at work I am all of those things — to see me then fire someone, it’s such a mind ...

KS: Fuck. You can say that.

… altering, yes. It’s such a mind-fuck, right? Because you’re thinking, “Wait, this person gave me a hug yesterday. She must be someone totally different than what I thought.”

JDR: “I don’t know her.”

Yeah, “I don’t feel like I know her anymore.”

KS: It is an interesting thing. It’s the same thing around compensation and other issues. I have noticed, managing men and women, that men ask for more. They just simply do. And I have to tell you, sometimes when I behave in the style of the man, I tend to do better. Like in terms of embracing some of the more aggressive tendencies.

Well, I think that had I been super tough for the extent of my business, it would have felt more natural that I was going to let people go when I did.

KS: “We had no idea …”

But because people did feel so comfortable, they felt like Rent the Runway was a family, they didn’t feel like when Reed Hastings says publicly, “Netflix isn’t a family, it’s a sports team, you can get cut anytime.” I’ve never said that about Rent the Runway. We try to create this really loving culture where people feel welcomed, and I think that’s actually very authentic to myself and my team.

But at the same time, we’re still a business, and we have to make tough decisions. Now, the learning process for me from this was to just talk more openly with the company about why we were making the decisions that we were making, leaning into the chaos that it did create.

I had a philosophy, as well, of, “I’m going to let people go before I’ve hired new people,” because I think the worst thing in the world is to go behind someone’s back and recruit someone in in this sneaky way without actually doing what is both the hard thing but the right thing to do, just to have a conversation with some and say …

KS: You can’t make it, which often happens in smaller startups.

And by the way, thank you for everything that you’ve contributed to this organization. And let me also serve as a reference for you and help you in this next phase of your career.

KS: Aw, you’re nicer than most people. All right, we’re going to finish up with one last question I ask everybody. What do you think [is] the one mistake you’ve made in the years you’ve been running this, that you would take back or that you learned from or that you could tell an entrepreneur, “Don’t do this, maybe do this”? A lot of people have given different answers, and I’m just curious what you think. Something that you went, “Ah, I really shouldn’t have done that, and here’s what I did to change it.”

I wish that I had demanded of my board to understand what excellence really was when it came to the people that should be on my C-level team around me. As a first-time founder and a first-time entrepreneur, not only do I not know how to be a CEO, but I have no idea what a CFO is or what a COO should do, and especially what’s the difference between a mediocre, good and great CEO and CFO. And what my investors did do is they would often introduce me to people that were so outside the realm of anyone that’d I’d ever be able to recruit. So you know, they would introduce …

JDR: Too experienced? Or too high profile?

Way too high profile. I remember meeting Reed Hastings and really thinking that I was like ... it was like meeting LeBron James as like a middle school basketball player. Like this guy’s inspirational, but how is this going to help me in my five million dollar business that I have right now? [laughter] You know? I needed to meet people who were aspirational enough, they were two or three steps ahead of me, but they weren’t 300 steps ahead of me. And to see how those teams really functioned and who I should be hiring, and helping me calibrate talent for different levels of the company.

Because I think that, for me, the strategy behind Rent the Runway and the actual work has been the easiest part of growing a business. It’s building a team and building a culture which is 95 percent of the difficult work, and the learning that comes from [that]. Prior to Rent the Runway, the biggest team I’d ever managed was like 10 people. And it was all in one function of sales.

KS: Where was that?

That team was actually at a startup called, where I was selling advertising on the internet in the early days. But I had no idea what I was doing, so the mistake is that I didn’t demand that my investors really do that for me, and I think that I thought too much about meeting the big names in the industry that, again, are super inspirational, but tactically they weren’t going to show me how I should be changing my own hiring tactics on a day-to-day basis.

KS: That’s an excellent one. Jennifer, this has been a fantastic podcast, we really appreciate it. And you’ve said a lot of things that are really thoughtful about where ... I think you’re going to be running a very big company someday. [laughs]

Thank you.

KS: Or this one. Once you’re done with this one or whatever ...

I’m not going to be done with this one, this is it for me. It’s Rent the Runway or bust! [laughter]

JDR: Okay, we have it recorded.

KS: We have it recorded.

Rent the Runway or bust.

KS: Anyway, thank you so much for coming by and come by another time, it’s really been terrific.

Thank you for having me.

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