8: From Idea to Opportunity III

Thursday, October 19, 2017

This is the last of three sessions where we discuss the differences between an idea and an opportunity.  This startup that has found initial success and now must determine how fast to grow. In January 2010, two months after a successful launch, the co-founders of Rent the Runway (RTR), a website that rented designer dresses, are debating whether to grow their startup at a measured pace and focus on improving operational effectiveness, or raise a new round of venture capital sooner than originally planned. Raising more venture capital would allow RTR to aggressively expand its inventory and customer acquisition efforts, in order serve a broader range of customer segments with a wider selection of products, including accessories and even maternity wear.

Quote of the Day:
We can complain because rose bushes have thorns, or rejoice because thorn bushes have roses." (Abraham Lincoln)

Guest: Jenn Hyman

Required Readings:
Study Questions:
  • Review the questions posed in Section 6.5  (Annotated Table of Contents) of the Technology Ventures textbook and the Term Project (OAP) section of this website.
  • Create a timeline of actions undertaken by Rent the Runway’s co-founders. Do you agree with the decision to pursue each action? Which actions were important in validating business model hypotheses and refining the concept? Can you suggest different actions that the co-founders should have taken?
  • As the case ends in January 2010, the co-founders are considering whether to:  (1) stick with their original plan to pursue operational improvements in 2010 before raising more capital in early 2011; or (2) accelerate fundraising in order to expand inventory and product range, enabling RTR to serve a broader set of customer segments and usage occasions. What would you do about this decision?
  • At that same time, identify the major risks in each of these categories: market, team, product, technology, business model.

Online Assignment: (Policy on Case Analyses.) - Group B teams only submit

As co-founders of Rent the Runway, assume you will raise additional capital now in early 2010. Using any of the models and methods introduced so far in E145 sessions and OAP milestones, describe the essential elements of a short pitch (say 3-5 minutes) that Jenn could use when first contacting potential investors. Be prepared to role-play this pitch in class.