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A New Model for Female-Driven Start-ups

A recent study has shown successful start-ups with female officers have a greater likelihood of success. [1] However, this same study found that only 1.3% of privately held companies have a female founder, only 6.5% have a female CEO, and only 20% have one or more female C-level executives. [2] Furthermore, in 2011, fewer companies at the point of equity financing had female executives than in 2006. [3]

The study confirms that women in leadership roles at start-ups can have a material impact, yet that they are often underutilized. [4] While these numbers portray the current macro-level reality, there is a certain subset of products that have been conceived, produced, and brought to market by female entrepreneurs, all with resounding success. The early success of these companies founded by women are changing the market, providing return for their investors, and opening the door for more female entrepreneurs to seek financing for their projects.

Rent the Runway and Birchbox, both internet-based companies, were conceived when their founders recognized solutions for universal problems facing the modern woman. For Rent the Runway founders Jennifer Hyman and Jennifer Fleiss, it was how to solve the “closet full of clothes but nothing to wear” phenomenon. [5] Hyman and Fleiss developed a dress rental service best described as “Netflix” for dresses. [6] Renting a dress for a four-day period costs about 10 percent of the full retail price of the garment. [7] Their first funding was a $16 million investment by Bain Capital Ventures and Highland Capital in 2009. [8] In 2011, they received an addition $15 million from venture capital firm Kleiner Perkins Caufield & Byers. [9] By October 2012, Rent the Runway has close to 3 million members, the majority of whom are between 15 and 45 years old, and continue to grow. [10]

Birchbox was founded by Hayley Barna and Kaita Beauchamp in 2011. [11] They had observed a problem in brick and mortar beauty retail caused by a combination of a high volume of merchandise and limited customer guidance. For many, shopping for new products was overwhelming and inefficient. Further, when shopping online, it was even more difficult to experiment with new products because of the limitations product testing. [12] For a $10 per month subscription, Birchbox sends customers a curated mix of trial-size items to sample. Birchbox created a one-stop shop for subscribers: they can test, learn about, and ultimately purchase, products featured in the Birchbox through the online store and community. [13] This solution for consumers also manifested itself as a solution for beauty companies struggling to maximize the benefits of e-commerce. [14] Since their launch in 2011, Birchbox has been a darling for big beauty business and venture capitalists alike. [15] They were named a “Start-up to watch in 2012” by and so far have received financing from investors First Round and Accel Partners. [16] By October 2012, the subscriber list has reached almost 100,000 and they have launched a Birchbox Man subscription service. [17]

Birchbox and Rent the Runway are examples of start-ups that have created a unique service that solved a problem faced by many individuals. However, they were not the first companies with female founders to disrupt the market. The success of these companies can be attributed to the success of another female-founded company: Spanx.

Over the past ten years, Spanx has helped open the door for female entrepreneurs like Hyman, Fleiss, Barna, and Beauchamp. Sara Blakely created an entire new sector of women’s retail, shapewear, when she founded Spanx out of her apartment. The slimming undergarment was conceived in 1998 after Blakely struggled to find an undergarment that flattered white pants. Since its founding in 2000, Spanx has had an estimated 20% net on revenue (approximately $250 million), an international product reach, and enviable brand recognition (Spanx is to shapewear as Kleenex is to tissues). [18]

The company began with $5,000 of Blakely’s own money and no outside investment. [19] Spanx is now sold through 11,500 retailers and in 40 countries. [20] The company – and its sole owner – are now valued at $1 billion. [21]

Spanx demonstrated the immense buying power of women and their appetite for game-changing lifestyle products. Rent the Runway and Birchbox built on this model by tailoring their business to the Internet-centric lifestyle. This is accomplished by maximizing their social networking footprint to continue to engage with customers outside of the traditional consumer environment. This month, Rent the Runway launched “Our Runway”, a user-generated database of photos and reviews for all rental merchandise. [22] Customers can seek out similar styles or well-reviewed items from women with similar body types. [23] At Birchbox, as the company learns more about the customers’ tastes, future boxes are curated to fit these preferences. [24] Each company also writes a blog [25] and maintains active accounts on social networking sites like Facebook and Pinterest. [26] By expanding into online communities, the companies have created a dialogue between consumers and the company, increasing product exposure and strengthening brand loyalty.

Spanx’s runaway success has enabled other start-ups offering solutions to the modern lifestyle problems to be taken seriously in the predominantly male world of venture capital and financing. Companies like Rent the Runway and Birchbox capitalized on this opportunity and reaffirmed the bankability of this series of products. Venture capitalists should continue to take female entrepreneurs with an innovative product and strong business acumen seriously when deciding whether to invest in a seemingly frivolous lifestyle product.

It is estimated that women make approximately 85% of purchasing decisions in their households. [27] This number is growing as more women become primary wage earners in their households. [28] Furthermore, the median income of women without children, in their 20s, living in metropolitan areas, is greater than that of their male counterparts. In Atlanta, women make 121% of mens pay; in New York City, women earn 117% a man’s wages. [29]

These women are prime customers for women-focused startups. In the future, there will certainly be more female entrepreneurs creating novel yet game-changing products and services similar to Spanx, Rent the Runway, and Birchbox. As these types of companies grow in size and strength, hopefully it will help to balance the disparity between men and women in the executive halls in start-ups across industries.

[1] Michael Yglesias, Successful Startups Have More Women in Senior Positions, Moneybox, Slate (October 9, 2012, 10:45 AM), (defining the benchmark for a successful company as one that has held a public offering, has been acquired, or has begun to generate profit).

[2] Jessica Canning, Maryam Haque, Yimeng Wang, Women at the Wheel: Do Female Executives Drive Start-Up Success? 10 (2012).

[3] Id at 9.

[4] Yglesias, supra note 1.

[5] The Backstory , Rent the Runway (last visited Oct. 25, 2012).

[6] Jenna Wortham, A Netflix Model for Haute Couture, N.Y. Times, Nov. 9, 2009 at B1,

[7] Stephanie Clifford, High Fashion, No Airbrushing, N.Y. Times, Oct. 19, 2012 at B1, .

[8] Phil Wahba, Rent the Runway gets $15 million from KPCB, Reuters (May 23, 2011, 1:59 PM), .

[9] Id.

[10] Squawk on the Verge: How to Rent the Runway (CNBC television broadcast Oct. 22 2012).

[11] Start-ups to Watch in 2012 , Inc., (last visited Oct. 25, 2012).

[12] Allen Adamson, Birchbox, Like Apple and Amazon and Google, Is a Hit Because Its Founders Hit on the Right Question, Forbes (Sept. 12, 2012, 4:01 PM), .

[13] Id.

[14] Id.

[15] Olga Kharif, A Surprise in Every Birchbox, E-commerce, Bloomberg Business Week (Feb. 16, 2012), .

[16] Star-ups to Watch in 2012 , supra note 11.

[17] Caroline Waxer, Digital Style Start-ups Get Nimble at New York Fashion Week, On the Runway, N.Y. Times, (Sept. 4 2012, 7:17 PM), .

[18] Clare O’Connor, Undercover Billionaire: Sara Blakely Joins the Rich List Thanks to Spanx, Forbes, March 26, 2012, .

[19] Id.

[20] Id.

[21] Id.

[22] Clifford, supra note 7.

[23] Id.

[24] Kharif, supra note 14.

[25] RTR Insider,; Birchbox Blog,

[26] Rent the Runway , Facebook,; Birchbox, Pinterest,

[27] Belinda Luscombe, Woman Power: The Rise of the Sheconomy, Time Magazine, Nov. 22, 2010,,9171,2030913-1,00.html .

[28] Id . (citing a Bureau of Labor statistics study).

[29] Id. (citing research firm Reach Advisors analysis of the Census Bureau’s 2008 American Community Survey).

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Anne Shaughnessy

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