From Startup to Global Scale: Securing and Building the Company’s Culture Are Keys to Success of Tech Leaders

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The days when technology chiefs could focus simply on hardware and software are gone. For technology leaders, aligning IT with long-term strategy and attracting and nurturing a winning team has become key in a world where customer expectations are growing, and the pace of change continues to accelerate.

Today’s technology businesses need to think strategically at the local, national, and global level. Many companies run business online or mobile first and are getting creative and competitive advantages from collecting and analyzing consumer data. This provides both opportunities and challenges: on one hand, companies can get access to global customers fast, yet they are also facing competitors both at home and abroad, not to mention threat actors who could be located anywhere and can come at you with sophisticated attacks. It’s your talent against theirs – with your enterprise and your customers in the middle.

At TCV, we’ve been focused on talent and culture as critical success factors for more than 20 years. Many of our investments have turned on building or sustaining successful cultures and nurturing them with the right people. For this year’s invitation only CTO/CIO Summit we decided to look at talent and culture together with the challenges of globalizing and securing the enterprise. We brought together over 40 technology executives, including founders, product leaders, TCV partners, and — of course — CTOs and CIOs, in Half Moon Bay, CA, for an opportunity to build peer relationships, learn from shared experiences, and discuss top-of-mind issues facing these leaders. We also mixed up the “talent” for the event itself, drawing not only on working CTOs and CIOs but also career IT experts with consulting and investing experience across multiple industries.

For us, the most important part of the two-day event was gaining a deeper understanding of both the challenges and opportunities technology executives need to balance, including:

  • Winning the Talent Wars and Creating a Winning Culture
  • Building a Globally Distributed Organization
  • Privacy and Identity Initiatives and Securing the Enterprise
  • Our agenda centered around best practices in scaling a global organization. Other topics we discussed included how to integrate acquisitions and best practices in managing a global workforce.

Here are the highlights:

Over dinner, Zillow CTO Dave Beitel spoke about how technology has transformed the real estate industry. Dave joined Zillow in 2005 and has seen the company grow, both organically and with 13 acquisitions in the last 12 years. Dave explained the importance of creating a strong culture across multiple locations and laying out paths to career development to motivate teams as organizations scale. He also provided advice on a common challenge that many growing companies face, particularly how to integrate offshore teams and make them an extension of existing efforts rather than adjacent resources. He also discussed with the group how to achieve success in scale with multiple office locations and different cultural identities.

Tim McAdam led the next day’s first panel with Victoria Schillinger, VP of HR at Alarm.com; Caroline Horn, Partner at Andreessen Horowitz; Michael Morell, Managing Partner at Riviera Partners; and Jonathan Schoonmaker, SVP of HR at FinancialForce. Their topic: winning the talent wars against today’s tech giants. The practical tips flowed freely, starting with university recruiting. Pick a few schools and work them, including both Ivy League schools and state colleges. Build relationships with influential faculty. Introduce your brand to younger students, not just seniors. When they become interns, give them meat to work on, not crumbs – having an impact is what they value most. If they turn down an offer, wait 2-3 years and call again – they may not be having the impact they expected at that big company they chose. Retaining key talent has to be proactive. Sit people down and map out how they will develop themselves and increase their impact by staying with you. Give them management opportunities so they can imagine themselves as leaders. Don’t expect diversity to walk in the door — look for talented, highly motivated people who come from completely different fields such as law or the military. And finally, the 90 days after a new hire starts are more important than the 90 days spent hiring them. Set them up for quick wins, build in plenty of touch-points, and make sure they’re comfortable in the culture.

Ted Coons continued the conversation with a focus on talent and culture, talking with Kameron Kordestani, a partner at McKinsey & Company, and Otto Berkes, CTO of CA Technologies, about building a globally distributed company. Both speakers separated the “artifacts” of culture – posters, slogans, logos – from its essence: ways of working that make the organization succeed. People who embody those essentials should be made ambassadors to new acquisitions or newly built development centers, so that people new to your culture can experience it live. When new team members absorb it, they should be given broader responsibilities in the combined company – this leverages their talent and inspires their original team. Particularly after M&A, the acquired team needs to understand its role and contribution to the combined entity; this should happen quickly and positively. Pay for travel if you can; people in far-flung organizations form bonds faster when they meet in person. Both Otto and Kam warned against sticking too closely to integration playbooks, particularly when the acquired technology is new or different. Sometimes a talent-rich team should not be integrated rapidly. Don’t compromise on security or safety but take time to observe how they work before you impose on a new team – the last thing you want to do is spoil an acquisition by how you integrate it.

TCV EIR Jonathan Shottan, Manmeet Singh, Co-founder and CEO of Dataguise and Pablo Jensen, CTO of Sportradar pulled back the curtain on Europe’s General Data Protection Regulation (GDPR) and California’s new privacy laws. Simply put, GPDR is about What, Where and Why: What private data do you have? Where is private data stored? Why do you need to process that private data? Both the compliance challenge and market opportunity of the new regulations are huge and what unites them is the challenge of identifying the vulnerabilities. Many companies mistakenly believe they are compliant, because they encrypt and segregate various types of customer data physically or in the cloud; but when they bring data types together for analysis, they create “PII” – personally identifiable information. The new laws also require companies to delete data if customers demand it, but that’s likely to create havoc with legacy database applications built on relational technology. And how do you delete older data stored on physical media? Enter data masking, at production scale, to stand in for deletion and encryption. First movers — with enough IT spend on decoupling, segregating, and masking data — may even competitively enhance their brands as “more secure” than others.

After lunch, Ted Coons and Charles Beadnall, CTO of GoDaddy, delved into the transformation of GoDaddy’s culture, a process that started back in 2013. Engineers loved the company’s mission of providing small businesses with a home on the internet, but deterrents included fly-over geography, aging facilities and sensationalist marketing. With a new CEO – and marketing campaign – GoDaddy began recruiting heavily. The challenge was forming a new culture that welcomed both existing employees and a flood of new developers in ways that produced better products, faster. Charles employed a version of the 80/20 rule: if he could populate 20% of a department with more diverse people who modeled the right behaviors, they would tip over the rest. The company hired people based on referrals, recruited many female graduates from local universities and placed experienced diverse hires in senior IT roles. Charles also drew in Ph.D.s from MIT and spent time with teams around the globe to transform a culture while keeping the company focused on growth.

Matt Robinson led the day’s final session on securing the enterprise with Amir Ben-Efraim, co-founder and CEO of Menlo Security; Rob Fry, VP of Engineering at JASK; Robert West, Managing Director at Deloitte LLP; and Christian McCarrick, VP of Engineering at Auth0. Matt first asked the panel how CIOs and CTOs should differentiate among today’s legions of security providers. Recommendations included assessing your vulnerabilities so you’re asking the right questions, getting referrals from peers, and anticipating the inevitable consolidation among security providers. Not every company needs an industry giant – those companies were startups once, and today’s upstarts may have superior technology. The panel then discussed prioritizing among today’s proliferating threats. Getting governance in place is critical – if no one fully owns the security portfolio, priorities will be set for the wrong reasons. If the role falls to you as CTO or CIO, you must be (or become) a good storyteller to convey the threats to your company and build consensus on addressing them. It’s also vital to recognize that malware will get inside your systems, but it won’t be the end of the world if you’re prepared. Ultimately the biggest weakness of all security systems is the human element. Education and training are essential and need to be on the agenda regularly. In addition, Amir argued that companies should hold vendors to a higher standard, aiming to receive 100% efficacy to keep companies protected.

We are grateful for all the valuable insights our speakers shared with attendees and the TCV community we strive to create. We look forward to exploring new topics and connections during our next TCV event.

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The views and opinions expressed are those of the CTO/CIO Summit speakers and do not necessarily reflect those of TCMI, Inc. or its affiliates (“TCV”).  This summary is not an offer to sell or the solicitation of an offer to purchase an interest in any private fund managed or sponsored by TCV or any of the securities of any company discussed.  Not all companies discussed above are TCV portfolio companies.  Any TCV portfolio companies discussed above are not necessarily representative of all TCV investments, and no assumption should be made that the investments identified were or will be profitable. For a complete list of TCV investments, please visit www.tcv.com/all-companies/.  For additional important disclaimers regarding this document, please see “Informational Purposes Only” in the Terms of Use for TCV’s website, available at http://www.tcv.com/terms-of-use/.

 

Match Play: Lessons in Leadership

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On the heels of the final rounds of the 50th US Open Tennis Championship, TCV’s General Partner John Doran sat down with George Mulhern, former tennis pro and CEO of Cradlepoint to discuss lessons learned on and off the court. In addition to being CEO of Cradlepoint, a global leader in cloud solutions for 4G/5G-enabled networks, George has been instrumental in driving economic growth in the Northwest region as a venture capitalist. Throughout his 20+ year career, George has drawn on his experiences on the tennis court to succeed through the highs and lows of the ultra-competitive tech industry.

Key takeaways include:

  • How to develop a competitive mentality that keeps you focused
  • The right attitude for responding to adversity
  • Why the mindset of your company’s culture determines long-term success

***

John Doran: It’s not every day I get to talk with a fellow tennis player about what the game can teach tech founders and CEOs. How far did your tennis career take you?

George Mulhern: I went to college on a tennis scholarship and then played for a short time on the American Express Satellite tour, which is like the minor league of professional men’s tennis. That was far enough to know that I would have to make my living doing something else.

John Doran: What did tennis teach you about competing in the technology business?

George Mulhern: One of the most important competitive things you learn in tennis is to never give up when you are behind. You can turn around a match completely, like a major pivot in technology, if you keep your head and adjust your strategy and tactics. It truly is not over until it’s over. An equally valuable lesson, one you usually learn the hard way, is to never let up when you are ahead. If you lose momentum it is much tougher to get back on top, and you also give a big shot of confidence to your opponent. The same is true in business. You can never rest on your past successes. Every day is a new game and you have to approach it with the intention and intensity to win.

John Doran: Pro players often talk about knowing their competition and anticipating how a certain player will try to compete against them. Do you see parallels in your business life?

George Mulhern: My experience was that no matter how much you study your competition before a match, it is impossible to completely predict how they will behave. It is more important to have keen situational awareness, flexibility in your own game and the agility and willingness to rapidly adapt. Then you’re ready no matter what the opponent comes at you with.

John Doran: In tennis, top players often try to balance their strengths and stamina and stay in a match with a view to turning around the momentum. Has there ever been a time when you would conserve energy against an opponent in a long match?

George Mulhern: The context for those comments is that players today are achieving a level of conditioning that is unprecedented for tennis. They’re hitting harder and running more for every ball. So you can win a match by outlasting the other player, not just outplaying them. The same is true in technology. If you are investing enough time and effort into that level of conditioning, you don’t need to conserve your energy. Your competitor should run out of gas before you do. By conditioning I mean ensuring that you have, or are acquiring, the skills and capabilities your company needs to sustain success for as long as you stay in business.

John Doran: It’s often said that success in tennis is as much about the mental side of the game as it is about physical talent.  In your world now, as CEO, having a strong mental game is fairly pivotal as well. How do you keep your mental game sharp in the tech business?

George Mulhern: There are all kinds of distractions when you are playing competitive tennis: fans, competitors, weather, injuries, illness, even the last shot you missed. You need the mental toughness to put all those things aside and focus on what is most important, which is the point you are playing right now. It is the same in the tech business. The distractions are different – there is always the latest shiny object grabbing at your attention – but the challenge is the same. You have to stay focused on the key value drivers of your business.

John Doran: On the WTA tour, I understand that coaching is now allowed during matches at certain times, giving the coach a potentially bigger influence on the outcome of a match. Can you share any feedback that you took from your tennis coaches over the years that you still use today?

 George Mulhern: My college coach, whom I now think of more as “Yoda,” taught me it’s not about who has the best strokes or shots. It’s about a simple decision you have to make: (Yoda voice) “Winner, do you want to be?” If you do want to win, then the challenges of becoming a winner don’t feel like a sacrifice. They energize you. You are more than willing to put in the hours of practice and conditioning. You embrace the need to change something in your game if that’s necessary, and you summon the courage to fight until the last shot of the match even when you’re tired and it starts to feel hopeless.

John Doran: Applying the coaching metaphor to your business experience, what kind of performance feedback is most valuable?

George Mulhern: Direct and honest is the best. As you rise in an organization, more people will tell you how great you are. You have to find the folks that will tell you the things that aren’t so positive and nice to hear. As you move into higher levels of leadership you need to grow a thicker skin, but with some permeability so you can accept critical feedback and not over-personalize it. It’s just business. You use the feedback to improve and move on.

John Doran: One of the commonalties about this generation of top tennis players, especially in the men’s game, is the ability of the top players to continually improve and add to their games, allowing people such as Federer, Nadal, and Djokovic to stay on top for so long. In the business and technology world, how do you ensure you’re making the necessary improvements to your game to stay ahead of the competition?

George Mulhern: My first year of college tennis, it really hit home to me that I had to get better every day, because there are a whole bunch of other guys out there who certainly are. It is the same in technology. Every technology company’s culture has to instill a sense of urgency and willingness to embrace and adapt to change. Your existing competitors are striving to improve, new competitors are starting up, and they all want to take your market share. At Cradlepoint we say, “stay humble and hungry, or you will be.”

John Doran: Even the greatest tennis players of all time have lost big matches throughout their careers. What can business leaders learn from that? How do they recover?

George Mulhern: It’s one match. Learn from it, adapt where you need to, and get over it. People in your organization will take their cues from you and react the way you do, so don’t run around like your hair is on fire. Just go to work on finding the path to the next success.

John Doran: Did any of the great tennis players of the past inspire you in ways that affected your success in business?

George Mulhern: One of my life lessons came from a tennis idol of mine – Arthur Ashe. When he was asked what it takes to become a champion, he said “start where you are, use what you have, do what you can.”  Whenever I am faced with what seems like an insurmountable challenge or problem, I remember that quote.  If you just take that first step, the next step becomes clearer, and then so does the next.

John Doran: Thanks so much for your insights, George.

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TCV is an investor in Cradlepoint.

The views and opinions expressed in the transcript above are those of the speakers and do not necessarily reflect those of TCMI, Inc. or its affiliates (“TCV”). This transcript is not an offer to sell or the solicitation of an offer to purchase an interest in any private fund managed or sponsored by TCV or any of the securities of any company discussed. The TCV portfolio companies identified above, if any, are not necessarily representative of all TCV investments, and no assumption should be made that the investments identified were or will be profitable. For a complete list of TCV investments, please visit www.tcv.com/all-companies/. For additional important disclaimers regarding this document, please see “Informational Purposes Only” in the Terms of Use for TCV’s website, available at http://www.tcv.com/terms-of-use/

 

 

 

 

 

Developing Narrative to Compel Action and Drive Results

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nar·ra·tive

noun

  1. A spoken or written account of connected events; a story.

 What separates companies that move quickly towards a common goal from those that struggle to find unity? Why is it that some teams can routinely find a second, third, or fourth gear of execution? How do people who start with divergent objectives find common ground? Perhaps most importantly, why are some leaders successfully plug-and-play no matter what technical problem, cultural issue, or market challenge they are tasked with addressing?

In my last post on “Hiring for Leaders”, I talked about how you can both screen for and cultivate leadership qualities as your company scales. These qualities include taking positions, creating environments where multiple perspectives are acknowledged, and being adaptable. In this post I’ll build on that framework to discuss narrative – a critically important concept that is talked about often but still remains confusing for many people in business.

 

Why Is Narrative So Important?

During my time at Facebook and Pinterest, I noticed one element that drove successful outcomes: the connection between people and company objectives. This connection can take different forms: intuitively understanding the why of what people were tasked with, linking personal goals with company goals, creating less friction with other teams, and being resilient in the face of obstacles. The differentiator in all of this was the construction and delivery of a narrative.

Narrative creates the ability to connect people to your company and your company mission and drive collective action. The corollary to this deceptively simple statement is that narrative is not one thing – it’s not just a story. Narrative binds individuals to a living set of company attributes.

The following tenets are core to creating a compelling narrative.

 

Establish Clear Mission and Vision Statements

 You can think about the mission and vision as the why and the how. Both are critical to any organization, large or small, because they become the scaffolding for how teams construct their roadmaps and how leadership talks about them.

At Pinterest, the mission was to help people discover and do the things that they love. As our technology advanced and our customers engaged with it more fully, our vision of how Pinterest could change the world also changed. This taught me that while the vision of a future outcome may not stay the same, the mission – the why – should remain stable. It’s the foundation for how people and teams answer the “Why are we doing this?” questions that naturally arise. Changing the mission can create confusion about priorities.

Make sure every team creates a mission and vision statement for the work that they do. You may call it a scope doc, a PRD, MRD, or something else entirely. But if the mission doesn’t answer why people are working on something, and the vision doesn’t show how that work changes things for customers and the company, it’s difficult for people to understand why and how their work is helping the company achieve its objectives.

 

Develop Long-Term Roadmaps

A roadmap is a narrative about where you’re going and what happens along the way. Push your teams to create three-year roadmaps. Acknowledge that the value in the exercise is not the accuracy with which teams can predict the future, but rather the exercise itself.

Teams with a roadmap for the future end up moving faster because they have already envisioned a journey in the process of creating the roadmap. They’re not disoriented when the real road turns or twists, because they already foresaw and prepared for some of them – and anticipated that there might be a few surprises along the way. That in turn alleviates the level of oversight and explanation that leaders need to provide, because their teams are advancing within a larger, more longitudinal comfort zone.

In creating the roadmap, aim to resolve it to a vision statement. This should be a 1+1=3 exercise where individual functions intersect and combine to create an even more powerful outcome. The company vision should be a leading indicator of what teams should strive to accomplish.

A good way of thinking about this at the team level or even division level is to break out into thematic areas and assign varying levels of confidence in the work. Those confidence levels will decrease the further you get out into the future.

Even if the technology you envision doesn’t exist, writing down the roadmap is a helpful exercise to plotting out an initial path.

 

Measure Everything

Everything is measurable, but not everything can be measured in the same way. Create space for teams to define their metrics so that their output can be measured in ways that are meaningful. These metrics naturally generate narratives about how to meet or exceed them. They become a source of ongoing conversation within teams and between teams: Do we have the right metrics for meeting company objectives? Should we adjust them for technology or customer behavior? Do our metrics mesh with our mission and vision?

When these conversations take place, people feel naturally connected to the company and its goals. This process is so powerful that it’s essential to make sure that all the team-level metrics ladder up to company-level objectives. You don’t want people embracing their metrics (and their roadmap) and then arriving someplace the company did not want them to go.

You also need to ensure that team roadmaps do not collide and create conflict. If they do, reflect on each team independently and try to assess how it moves the company forward towards its top-level goals. If one team comes out on top, talk to the other team in the conflict about how they could adjust their roadmap and still achieve their goals and the company’s goals.

Know that there will always be trade-offs to make, and that your job as a leader is to create the narrative that keeps teams informed, aligned, and excited.

 

Create Cross-Functional Narrative Forums

Often as companies grow quickly, the first thing to go out the window is inter-team communication on strategy and goals. This can lead to misalignments, political posturing regarding resources, and management attrition. A great way to prevent this is to create regular forums for your leadership team to sit together and explain to one another what they are doing and why. You’re not asking them to justify their existence or run their numbers. You’re asking them to tell everyone else a narrative about their mission, vision and roadmap, and how the journey is progressing.

Smart leaders will bring a narrative that is tightly aligned with what they hear from their teams. It also gives the narrative “legs” for traveling across the entire enterprise – something that is otherwise rare.

Getting team-level narratives elevated to the leadership level, across functions, accomplishes a number of positive outcomes. First, it creates empathy among and within the leadership team about other team members’ goals, challenges and objectives. During resourcing conflicts, you want leadership team members to be able to advocate just as empathically for another team as they would for their own.

Second, it forces understanding. Anytime you have to tell a good story, you have to understand that story far better than the people you are delivering it to. The requirement to share your team’s story with other leaders forces you to master that narrative. Detailed work has to be distilled down to essentials. Technical complexity has to become clarity. Acronyms disappear, replaced by meaningful, memorable terms. Just the process of preparing a narrative about your team can help you spot work that is not truly aligned with company objectives.

Third, delivering cross-function narratives establishes trust at the inter-team level. Putting leaders in a position to explain to their teams why other teams are doing what they are, or why a trade-off decision went against them, establishes an authentic authority.

Story Time

The most successful teams have leaders that can weave a story using the foundations described above and connect it at various altitudes throughout the company. Driving board alignment around a strategic shift isn’t that different than getting your ops teams to the same place. It’s about creating shared understanding that drives people’s internal connection to the company’s goals.

Metrics, technologies and quantitative goals are important for any business to succeed. But without a narrative that makes people own them, they’re just components of a machine without a soul.

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Jonathan Shottan is an Executive-in-Residence at TCV.

The views and opinions expressed in the blog post above are that of the author and do not necessarily reflect those of TCMI, Inc. or its affiliates (“TCV”). This blog post is not an offer to sell or the solicitation of an offer to purchase an interest in any private fund managed or sponsored by TCV or any of the securities of any company discussed. The TCV portfolio companies identified above, if any, are not necessarily representative of all TCV investments, and no assumption should be made that the investments identified were or will be profitable. For a complete list of TCV investments, please visit www.tcv.com/all-companies/. For additional important disclaimers regarding this document, please see “Informational Purposes Only” in the Terms of Use for TCV’s website, available at http://www.tcv.com/terms-of-use/.

TourRadar, #1 Online Travel Agency for Multi-Day Tours, Announces US$50M Series C Funding Round Led by TCV

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VIENNA & TORONTO & BRISBANE, Australia — TourRadar, the largest OTA in the multi-day touring market, announced today a US$50m Series C, marking the largest tech funding in Austria in 2018. The round is led by TCV with existing investors Cherry Ventures, Endeit Capital, Hoxton Ventures and Speedinvest. TCV is one of the largest providers of capital to growth-stage private and public companies in the technology industry backing industry-leading companies including companies including Airbnb, Expedia, HomeAway, Netflix, SiteMinder, Spotify, and Zillow.

In connection with the funding, Erik Blachford, a venture partner at TCV and previously President and CEO of IAC Travel, has joined TourRadar’s supervisory board.

TourRadar intends to use the funding to expand its team globally and will invest in the technology platform to provide a personalized user experience for customers in new and existing source markets.

TourRadar markets multi-day tour and river cruising experiences from over 600 operators globally serving well-known and hundreds of specialty operators that otherwise rely on local agents. TourRadar supports operator partners through instant bookability, tour review functionality and campaigns including World Touring Day.

Founded in 2010, TourRadar has grown rapidly by providing consumers with easy access to the fast-growing multi-day tour category, with a total addressable market value estimated at $55 billion. Travelers of all ages are increasingly seeking authentic, off-the-beaten-path experiences when they travel, and TourRadar offers more than 25,000 tours in 200 countries on its platform.

TourRadar was founded by brothers Travis and Shawn Pittman, both native Australians. Travis, an engineer, is TourRadar’s Vienna-based CEO. Shawn, the company’s CFO, came from a successful career in investing. Both are avid travelers with many countries on their travel résumés, and a vision of connecting people to life-enriching travel experiences through multi-day touring.

“The experience and knowledge in the online travel sector that Erik Blachford and TCV bring to the table is exactly what we were looking for as we embark on this exciting next chapter at TourRadar,” said Travis Pittman, CEO and co-founder at TourRadar. “This stage will well and truly bring our vision to life and we’re excited to do this with their guidance.”

“Multi-day tours are the last frontier in online travel,” said Erik Blachford, a venture partner at TCV and former CEO at Expedia. “TourRadar has staked a claim, and I am looking forward to helping Travis and the team realize their vision.”

“We are thrilled to partner with Travis and the TourRadar team,” said John Doran, general partner at TCV. “We have been continually impressed with their unrivalled passion for travel and their vision to inspire the global travel community with the most convenient way to access the broadest choice of authentic multi-day tours across the world. We are delighted that Erik Blachford will join the board and look forward to supporting the entire team as they continue to build their business.”

For further information head to www.tourradar.com/press or contact:

About TourRadar

Based in Vienna (Austria) with service centers in Brisbane and Toronto, TourRadar is the world’s largest online travel agency for multi-day tours. For more information visit https://www.tourradar.com. In 2017, TourRadar was named one of the top three startups in Austria by Trend Magazine. TourRadar is looking for talent to join their team: https://www.tourradar.com/careers.

About TCV

Founded in 1995, TCV provides capital to growth-stage private and public companies in the technology industry. Since inception, TCV has invested over $10 billion in leading technology companies and has helped guide CEOs through more than 115 IPOs and strategic acquisitions. TCV’s investments include Airbnb, Altiris, AxiomSL, Dollar Shave Club, EmbanetCompass, EtQ, ExactTarget, Expedia, Facebook, Fandango, GoDaddy, HomeAway, LinkedIn, Netflix, OSIsoft, Rent the Runway, Sitecore, Splunk, Spotify, Varsity Tutors, and Zillow. TCV is headquartered in Menlo Park, California, with offices in New York and London. For more information about TCV, including a complete list of TCV investments, visit https://www.tcv.com/.

Contacts

TourRadar
Katie Stanwyck, +1-416-660-4659
katie@tourradar.com
or
TCV
Katja Gagen, +1 415-690-6689
kgagen@tcv.com

It’s Your Runway! Rent the Runway Is Redefining Your Closet Any or Everyday

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As an MBA student, Jennifer Hyman had a deceptively simple idea that she successfully built into a powerful logistics and technology company – proving the power of web-based sharing models before Airbnb, Uber, and others came on the scene. TCV Founding General Partner and Rent the Runway board member Rick Kimball recently had a chance to talk with her about the journey from her original vision to the launch of Rent the Runway and making the “closet in the cloud” a reality for women across the U.S. Topics covered include:

  • Establishing a new category that helped create the sharing economy
  • Convincing her board to fund an extension of the original concept
  • Why your closet might soon reside in the cloud

 

Rick Kimball: Jennifer, most people know Rent the Runway, but can you share with us how the company came about?

Jennifer Hyman: My sister was getting ready to attend a wedding. She wanted to wear something new and aspirational. So she went out and purchased an extravagant dress that she knew she would likely wear only once and put her into credit card debt. This was a light-bulb moment for me.

I thought about separating wearing from ownership. My sister wanted the experience of wearing something different and aspirational – and that had nothing to do with actually owning the garment. Once you separate wearing from owning, there is a huge opportunity to totally disrupt the way we think about getting dressed.

Rick Kimball: What were your first steps in realizing your idea?

Jennifer Hyman: The first step was realizing that an initial idea isn’t a business. In our case, the idea needed to be iterated both for its customer value proposition as well as its supplier value proposition. We spent the next six months doing a series of iterative minimum viable product tests to assess whether we were on to a good idea or whether it was appealing only to us. When we launched, we had 100,000 people sign up for Rent the Runway in the first week of our business. So demand was not going to be the challenge.

Rick Kimball: What were the challenges?

Jennifer Hyman: Our business model requires our customers to return every single item we ship out. No one in retail does that. Plenty of companies have some reverse logistics capability for product returns, but we were doing reverse logistics as our entire business model, for expensive luxury products. There was no technology you could buy when we launched. We had to hire a hundred engineers and build everything ourselves. We also had to become the world’s biggest dry cleaner, and we had to become a data science company to gather, analyze, and leverage the mountains of data we were gathering on every transaction. Sometimes I joke that if I had known we were going to have to do all this just to rent clothing, I would never have launched the company.

Rick Kimball: It seems that your timing was great, considering some of the social and economic trends that began around that time.

Jennifer Hyman: It was late 2008, with social media really taking off. Women started posting piles of photos of themselves on the internet. They needed more variety in their wardrobe, as they did not want to be seen in the same outfit twice. This drove a huge emergence of fast fashion and off-price retail as a category. People were buying clothes in places other than traditional department stores. And the world has continued to change so quickly around us as we’ve built Rent the Runway. All the tailwinds are moving in the right direction.

Rick Kimball: Right. As you grew the team and your company, what was your focus in terms of creating a culture for the company?

Jennifer Hyman: Total, passionate focus on the customer backed by data. What does she need? What does she want? What is she telling us with her choices? Our original value proposition was that she wants to look fabulous at a black-tie event, without breaking the bank for a dress she might not wear again for a long time. Customers embraced that concept and pretty soon many of our customers were renting from us three or four times a year. We were relentless about gathering data on every rental, so we required customers to give us some information about wearing the dress: did it fit, did she love wearing it, and so on. That drove our inventory strategy. Ultimately listening to the customer led to our subscription service, called Unlimited.

Rick Kimball: The TCV team loves Unlimited. What drove the concept of Unlimited, which, today represents a large part of your business.

Jennifer Hyman: We were hearing from customers that renting the runway is great for big events on the weekend, but what about the other five days a week? Can you rent me clothes I can wear at work?

This wasn’t a surprise to us. I had the vision of a “closet in the cloud” from the very beginning. But first we had to make renting a mainstream experience. For perspective, keep in mind that late 2008 was before Uber, Airbnb, and WeWork, and before Spotify came to the United States. The big successful sharing models we have now were still in the future. So we had to normalize the behavior of renting first. But it was already obvious to me that working women needed a new way to get dressed. More women are entering the corporate workforce today, and more women are staying in the workforce after having kids. Women are out in public as working women and entrepreneurs. Now consider that the traditional expectation is that women at work wear a different outfit every day. Beyond that expectation, women want to feel like their best self at work. It matters to their confidence and self-presentation to be well dressed and put together. With Rent the Runway, they can feel like the best version of themselves everyday which is empowering.

Rick Kimball: But dressing this way can be hugely expensive?

Jennifer Hyman: Exactly. In the typical corporate environment, women need a huge number of individual items in order to have a different, great-looking outfit every day. We can make her life not only a lot easier – she can do a lot less shopping – but also more affordable and effective. In fact, our Unlimited customers on average dress with us 150 days a year. That’s 60% of their business year. And we think we could get to an average of 200 days a year.

Rick Kimball: Does Unlimited offer casual clothes as well?

Jennifer Hyman: “Casual” is a big category that we like and have a great inventory for. Many companies have a dress policy known as “corporate casual,” so something you wear to work might also be appropriate for a brunch with friends on the weekend. We also offer clothes and accessories for off-work activities, such as patterned ski parkas and the right beach bag for your summer outfits.

Rick Kimball: How did you get Unlimited off the ground?

Jennifer Hyman: Surprisingly enough, one challenge was convincing my board of directors to raise and spend the money. We didn’t know if women would rent that many days a year, and people doubted that we could build a product to satisfy that demand. You have to remember that back then, massive subscription businesses were rare even for huge franchise companies. It took Netflix and Dropbox years to build a $100 million subscription business, and they were established brands with tens of millions of users. My argument was that with the data science capabilities we already had, we could manage a big increase in inventory without a big increase in risk. Also, the board members had seen some things come true that I had predicted way back when we were asking for our initial funding, such as the decline of department stores. So they, including TCV, trusted my vision and agreed to a beta test for twelve months, which was a success. We launched Unlimited in March of 2016 and it’s growing more than 150% a year.

Rick Kimball: A lot of people talk about big data and how to gain insights to drive better customer experiences. What are the key aspects of your data science strategy?

Jennifer Hyman: From day one we set up a rigorous data-centric culture in which the analytics team gathered suitcases full of data about our customers and our inventory. We also made sure that the data was transparent and usable to everyone in the organization. But it’s not just about numbers on a spreadsheet. We marry the quantitative data to qualitative data. If a customer says she didn’t wear something, we ask why. If she says she liked it but didn’t love it, we ask why. This is how we can constantly evolve our inventory toward higher customer satisfaction. Not only that, we can tell our brand partners what women think of their designs and their manufacturing. Before Rent the Runway, designers got this kind of feedback in little bits, anecdotally. We give them a steady stream of data, which they can use with their other partners. Everybody wins.

Rick Kimball: Describe your customers in more detail – it sounds like women only.

Jennifer Hyman: Men can wear the same three pairs of trousers and the same ten shirts all year and no one knows or cares. That’s why we are sticking with women for now. Our community includes 8.5 million of them, ranging from their teens up through their 60s. When we launched the business, Millennial customers were using us to rent the runway for a special event. Now our brand offering is 200X what it was at first, meaning we launched with clothes from 27 designers and now we have over 500 designers represented on the site. That means we cover a lot of different style types and can offer what you want no matter what your style is, or your age.

Rick Kimball: Is the customer age range the same for the special event dresses and the Unlimited service?

Jennifer Hyman: It is. The typical customer for upscale designer dresses is around 60 years old. So we’re introducing much younger customers to the fashion designers, which just delights both of them. It’s also giving the designers opportunities to create new work with more confidence and insight, because we bring them a large built-in customer base that includes feedback on how successful a garment is and could be. If you’re a young designer with aspirations, Rent the Runway has created a pathway to test your ideas and build your business that never existed before.

Rick Kimball: Do customers buy garments from those designers?

Jennifer Hyman: They do, but what Rent the Runway has really done is enable them to shop differently. Instead of buying a lot of separates, they rely on us for those. They invest in essentials, like a great-fitting pair of black pants that enables them to create millions of outfits. We are introducing our customer to brands she might not have been shopping before – without having to make expensive purchases.

Rick Kimball: You recently began opening brick-and-mortar stores. How does this fit into your strategic of building a comprehensive web-based reverse logistics platform?

Jennifer Hyman: Once we got to scale with a subscription service, we knew we had to achieve greater proximity to the customer. One dry cleaning facility in the middle of the country was not enough. A few warehouses of inventory were not enough. At the same time as we achieved numerical scale, we were scaling up qualitatively: women were trusting us as an essential utility and relying on us to get them dressed for work a majority of the time. So we opened retail stores where women can meet a stylist and try on different brands and pieces of clothing. This really enriches the data profile we have for them, and that makes it much easier for them to rent successfully for all their future occasions.

Rick Kimball: How have customers responded? How have you rounded out your team to deliver the best experiences online and in stores?

Jennifer Hyman: Customers have started to treat the stores as their physical closet. They can take any inventory they want off the shelf and walk out without swiping a credit card.

My vision for our business is that we are continuously disrupting ourselves, and our culture is built for that. We are in a primarily tech and logistics business, yet we are 70% female and 70% non-white. Our engineering team is 50% female. The leadership at Rent the Runway is 80% female. So we are defying the typical startup stereotypes. Come work at Rent the Runway to see the exception to the rule in action!

Rick Kimball: Such rapid growth involves a lot of learning on the job. Did you learn from what other companies were doing?

Jennifer Hyman: I wish that I had had more exposure to other companies in Silicon Valley. I’ve always been inspired by Netflix, but I didn’t know how Netflix was structured or how I could learn from them. I was sitting in New York as a 29-year-old woman with no experience in the tech industry, with no real connections to it and I had to figure this out by myself with my co-founder and our team.

Rick Kimball: This is something other female founders speak about. What’s your take?

Jennifer Hyman: There are some clear reasons why only 2% of venture capital dollars go to female founders. One huge disadvantage is that promising women are not mentored and lifted up early in their careers by others in the tech industry like men are. What you really need in the beginning of a company is tactical help, but if you are a woman, it is not always easy to meet the kind of people who can give you that. When you launch a company, you need someone who can pick up the phone and raise money. Someone who can refer you to talent. Someone who tells you how to set up your first HR system or write your first marketing plan. Those are the skills and help and tactical advice that female founders need. It’s not like we don’t have enough mentors. It’s that they are not mentoring enough women.

Rick Kimball: Speaking of investors and support, how did you get involved with TCV?

Jennifer Hyman: I got involved with TCV through the team, building a relationship with Rent the Runway over many years, and developing trust. And then simultaneously I was building a relationship with Barry McCarthy, the current CFO of Spotify and the former CFO of Netflix. I had a relationship with Barry and when I saw that he was also an advisor to TCV, I thought of it as the marriage of the financial support that we were going to receive as well as operational expertise and guidance.

Rick Kimball: How do you see Rent the Runway fitting into today’s economy and also the competitive landscape?

Jennifer Hyman: Well, I think that we are really the only ones who are trying to get you to buy less stuff. If you think about Amazon, Stitch Fix, Nordstrom, or Poshmark, a lot of what they’re doing is getting you to buy things in creative ways. But it is still buying and accumulating. It is a different value proposition to get you to not own and thus not buy things.

Rick Kimball: Looking out a few years, what excites you about the future of Rent the Runway?

Jennifer Hyman: I think I had a really big, bold vision at the beginning of Rent the Runway, but it’s not even comparable to how big and bold the vision is today. I am enthusiastic about the fact that this is only the beginning of transforming the modern woman’s relationship with her closet. We have to get dressed every single day, all over the world. We are focused on scaling our subscription service, making it even easier to access the “closet in the cloud” each and every day. There’s no reason why having this subscription to fashion shouldn’t become the dominant way that we experience clothing in the future.

Rick Kimball: Thanks, Jennifer, and we wish you and the team continued success.

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TCV is an investor in Rent the Runway and Rick Kimball serves on the board of directors of the company.

The views and opinions expressed in the transcript above are those of the speakers and do not necessarily reflect those of TCMI, Inc. or its affiliates (“TCV”). This transcript is not an offer to sell or the solicitation of an offer to purchase an interest in any private fund managed or sponsored by TCV or any of the securities of any company discussed. The TCV portfolio companies identified above, if any, are not necessarily representative of all TCV investments, and no assumption should be made that the investments identified were or will be profitable. For a complete list of TCV investments, please visit www.tcv.com/all-companies/. For additional important disclaimers regarding this document, please see “Informational Purposes Only” in the Terms of Use for TCV’s website, available at http://www.tcv.com/terms-of-use/