(Bloomberg) -- Rent the Runway Inc. is close to raising new funding that would the fashion startup below its previous $1 billion valuation, according to people familiar with the matter, the latest company to offer a discount to private investors as the pandemic ravages retailers.
New York-based Rent the Runway is seeking at least $25 million in a funding round led by T. Rowe Price Group Inc., which would the startup at about $750 million, the people said, asking not to be identified because the matter is private. The company’s plans aren’t final and may still change, the people said.
A representative for Rent the Runway declined to comment on the funding round. T. Rowe Price declined to comment.
It makes sense that Rent the Runway and other fashion startups would see their valuations decline right now, Sequoia Taylor, managing partner at Spry Ventures, said.
“Their customer base is grappling with these new changes at a fast pace and I’d imagine outside clothing is the furthest thing from their minds,” Taylor said.
In the past two months, U.S. shoppers have prioritized groceries above all else. Specialty retailers that sell apparel and accessories were projected to lose $17 billion in sales in April, a 79% drop compared to the same month last year, according to data from Forrester Research. The market for personal luxury goods could contract by 20% to 35% this year, according to a Bain & Co. report.
Shoring up Funds
Started in 2009 by Jennifer Hyman and Jenny Fleiss as a way for women to rent dresses for occasions like weddings, Rent the Runway expanded to everyday wear through subscriptions that allow members to fill their wardrobes with outfits for the work week.
All of the company’s brick and mortar locations are currently closed as non-essential business remain shuttered in many U.S. states, according to its website. The company said it has also made layoffs, without specifying the amount.
Rent the Runway was plagued by service disruptions last year, ending up offering cash and refunds to customers who had orders canceled due to supply chain issues.
Startups around the world have been trying to shore up funds and cutting jobs to survive the current economic uncertainty. A technology startup serving the logistics industry, Samsara Networks Inc., saw its valuation shrink by almost $1 billion to $5.4 billion in a new funding round. Zeus Living Inc., a corporate-housing startup backed by Airbnb Inc., raised money at roughly half the valuation it commanded five months ago.
Luxury reseller Rebag also raised fresh funding earlier this month while its locations remains closed.
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