Rent the Runway has secured a $200 million loan from Temasek, a Singapore-based investment firm, to help fuel its growing subscription business, refinance debt and expand operations.
While Rent the Runway is primarily known as a dress and formal gown rental service, the company launched the ‘RTR Unlimited’ subscription service in 2016. The initial cost to consumers was $159 per month, but in October 2017 the company introduced a less expensive version of the subscription service, giving users unlimited rentals for $89 per month. This two-tiered subscription model has grown 150% year-over-year since its rolloutand represents 50% of the company’s overall revenue, according to the company.
Rent the Runway sought a credit loan rather than a traditional venture capital investment for three reasons, CFO Scarlett O’Sullivan told TechCrunch. With the loan, Rent the Runway could:
- Access more financing down the line, giving flexibility to grow the business;
- Improve the terms of its previous credit facility; and
- Avoid diluting the stake of current shareholders.
The loan comes five months after Alibaba co-founders Jack Ma and Joe Tsai invested $20 million in Rent the Runway through an asset management firm. Before this latest deal, Rent the Runway had raised more than $200 million in funding from investors such as Bain Capital, KPCB, Highland Capital and TCV.
As part of the new deal, Temasek has received an observer seat on the Rent the Runway Board of Directors.