Alternative Fashion

📈 Trend / market theme — a space Kyle tracks from his Entity Ideas notebook (Trends section).

Idea capture (from Roam)

• Thrilling
• Vinted
• Choosy
• Swedish leggings company
• https://www.linkedin.com/in/christinehunsicker/
• Rent the Runway
• https://www.inc.com/anna-meyer/urban-outfitters-nuuly-clothing-rental-business.html
• Rent the Runway Note
• PH, SS and I had follow-up meeting with Rent the Runway (DS joined first meeting in Coatue offices). Company has transitioned model from renting clothing on-demand to a monthly subscription (i.e. “closet in the cloud”). For $159 per month, women get to choose an unlimited number of pieces of clothing on rotation with free shipping to/from RTR and dry cleaning. While this is an interesting idea and plays to a lot of consumer trends we’re interested in (rise of subscription services, shift towards “disposable” clothing), the business model is challenging (very op and capital intensive since they buy inventory and operate massive dry-cleaning warehouses). 116K active subscribers (+60% Y/Y), $250M revenue (+56% Y/Y), 19% GM, ($150M) FCF burn. We’re planning to pass unless anyone objects
  • What They Do. Designer clothing rental subscription platform. Enable individuals to get access to designer clothing at a more affordable price through subscription ($1.9k/yr).
  • TAM & Trends: Riding consumer tailwinds as people shift from “ownership to access” across music, media and CEO thinks clothing is next ($264B US Women’s apparel TAM)
  • Value Proposition: Consumers get clothing worth 20x their subscription price each year and engage with RTR rental on avg. 13 days a month
  • CAC & Retention: 90% organic & referral acquisition (but HUGE inventory expense to get sufficient supply liquidity to attract & retain users). 12-month retention mid 20s which is mediocre
  • Key Metrics.
    • Cumulative Customers. 2.3M to date
    • Active Customers (Sep-19). 116k (60% YoY), 30% of active subscribers are based in NYC
    • Revenue. $250M (+56% Y/Y)
    • Gross Margin. 19% => lot of this is based on their relatively generous depreciation schedule
    • Burn. $150M/yr
    • Capex. 60% of revenue today on 1) Inventory (45%) and 2) Dry Cleaning warehouses (15%)
  • Pass Rationale: Slowing growth + challenged, low-margin business model (have burned nearly $375M in cash to get to $250M in revenue)
    • Management is a B – very PR focused but not as savvy on core metrics / business
  • Past Fundraising. $521M raised to date from Franklin Templeton, KPCB, and TCV. Latest round was led by Franklin Templeton ($125M @ $1B post) in Mar-19