Entrepreneurs

3 success tips from Rent the Runway's CEO—who built a nearly $1 billion company

Jennifer Hyman, CEO and co-founder of Rent the Runway.
Source: Rent the Runway
Jennifer Hyman, CEO and co-founder of Rent the Runway.

After observing her younger sister risk credit card debt just to flaunt a new gown at a wedding, Jenn Hyman, co-founder of Rent the Runway, had a "lightbulb moment."

It was the early 2000s, and with the rise of social media 20- and 30-something women like her sister were frequently posting photos of their outfits online. While women were seeking more variety in their wardrobes to show off on Facebook (Instagram wasn't a thing yet), their budgets seemed to limit their shopping options to fast fashion or "off-price" stores (think T.J. Maxx), according to Hyman.

"The only places you could buy a quantity of items was at places that were selling them at a very cheap price," Hyman, 36, tells NPR's Guy Raz in a recent episode of "How I Built This."

"I had this thesis that we had entered the experience economy," she continues. "People were getting married later and starting to value experiences like travel over owning things." And that's what they wanted to spend their money on. But they still wanted to look good to share these experiences on social media.

So Hyman wanted to create a service that allowed women to rent a dress for an occasion, rather than have to own the dress at full price. It would be shipped to the customer's home and when she was done wearing it, she could send it back.

The idea percolated as Hyman worked at various jobs — she started a successful wedding registry at Starwood Hotels & Resorts, worked at then-start-up Weddingchannel.com, did a stint at global talent management company IMG. Then in 2007, Hyman enrolled in Harvard Business school.

There she met Jennifer Fleiss, who helped her bring her vision to life. The pair started the luxury fashion and accessories rental company Rent the Runway as a side project in 2008.

"When you don't have to buy something, it allows you to try news things," Hyman told Raz. "[Rent the Runway] is like the Willy Wonka of fashion. You can have whatever you want, whenever you want it," whether for a job interview, a party or a wedding.

Today, the nearly $1 billion company has 8 million customers and has exceeded $100 million in revenue to become profitable last year, according to Recode. Rent the Runway employs more than 1,200 people working mostly in technology. Fleiss left Rent the Runway this spring.

Hyman's path to success hasn't always been easy. When fundraising for Rent the Runway, many male investors didn't understand the company. Hyman has also spoken about the sexual harassment she's faced as a woman in the tech industry. And she's faced public criticism of her management style, notably after a series of executive departures in 2015.

There have also been highlights, of course.The company is continuing to expand and launched same-day delivery in New York City this summer, after the roll out of an unlimited subscription service in 2016. The company opened its first store in New York City late last year.

Here are three things to learn from Hyman about building a business:

1. Test your market

To figure out whether their idea would scale, as MBA students Hyman and Fleiss hosted a pop-up shop on Harvard's undergraduate campus. They bought 100 dresses at Bloomingdale's with their own savings, hoping to find out whether women would actually rent dresses, what brands they wanted and how their company could recollect, launder and redistribute the rentals.

The pop-up was a hit and it gave Hyman insight into the company's potential customers. "I saw the emotional effect," Hyman tells Raz, recalling students confidently playing dress-up in a campus square. "This can be a business that isn't just about offering her [women] a rational or smart choice, but it can also be a business delivering something emotional to her, making her feel beautiful every single day."

2. It's always worth it to ask

The Rent the Runway founders set the bar high and cold-emailed fashion designer Diane von Furstenberg, seeking advice. "We didn't have a structured [business] idea. We were iterating the idea by pitching it," Hyman says.

Von Furstenberg responded. So the pair drove from Boston to meet the designer at her New York office. They initially hoped to work with von Furstenberg on a rental service specific to her brand. Though she ultimately declined, Hyman and Fleiss gained valuable information for their business: designers like von Furstenberg were looking for ways to attract younger women. In addition, von Furstenberg connected them with other contacts.

That gave them the confidence to move forward in a consumer-facing direction and to approach others in the industry, says Hyman.

3. Don't fear criticism

Hyman described Rent the Runway's transition from new start-up to more sophisticated company as "entering our teen or adolescent years." During that period, Hyman came under fire in a 2015 Fortune magazine story, in which ex-employees compared Rent the Runway's culture to the 2004 "Mean Girls" movie. That same year, a Vanity Fair piece speculated that Rent the Runway inspired the novel "The Knockoff," which the magazine says was co-authored by a former employee, calling it "the summer's b----iest beach read." A representative from Rent the Runway disputes that the co-author, Lucy Sykes, was a former employee.

"It was the most difficult experience of my life," Hyman tells Raz. After years in business, she says, she still held the title of CEO, but the company she led had grown from a dozen to hundreds of employees. While developing the company's unlimited subscription service, Hyman was making tough decisions, including firing people, she says, and that made some people unhappy.

But the negative press coverage "led to the biggest outpouring of support I've ever had," she says on "How I Built This." "It led to more courage around my own decision making, because I led the company into the best place it's ever been."

Hyman knows it won't be the last time she's in the line of fire. "The next time it comes out, it's just not going to have the same impact, on me."

This story has been corrected to reflect the correct valuation of Rent the Runway and updated to include a response from the company.

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