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.
As part of the new deal, Temasek has received an observer seat on the Rent the Runway Board of Directors.