In the increasingly crowded and risky fashion market, clothing rental startup Le Tote is betting on a woman's eclectic sense of style.
On Thursday, the San Francisco-based company said it reached $15 million in a Series B funding round led by AITV. The new capital brings its total amount raised to $30 million.
Co-founded in 2012 by reformed investment bankers Brett Northart and Rakesh Tondon, Le Tote bills itself as a personalized, on-demand fashion service (or the "Pandora" of fashion, as Northart describes it). Customers can rent out three items of clothing and two accessories, at any given time -- for a fixed cost of $49 per month.
Each box is carefully curated by the Le Tote team, which bases suggestions on roughly 40 data points (i.e., a customer's preferences for color and prints, according to a style profile that they fill out online). If she doesn't want to receive those items, she has 24 hours to make changes to the order. She also gets the option of purchasing items.
With the new capital, Le Tote plans to continue building out its executive team, and to expand the business to include "other segments" of women's fashion. Last month, it launched a maternity clothing service -- which costs $59 per month -- and Northart hints that men's clothing may soon be in the works.
As with most early-stage companies, the first two years were spent planning out the logistics. "We were figuring out what people wanted and where the service was going directionally. In 2014, we built out the infrastructure for the company," said Northart.
Fashion technology, it's worth noting, is a rapidly growing sector, and companies typically require a ton of operational cash. Stitch Fix, founded in 2011, offers an effectively similar service as Le Tote, renting out five items to subscribers for a $20 styling fee per order. Price points average at $55 per item, and users can choose to then purchase those items (the styling fee is included in the purchase).
Just last year, Rent the Runway launched its own unlimited subscription service in beta, which it built out significantly in 2015. For $129 each month, a RTR customer gets three items, which they later return. Stitch Fix and RTR have raised $46 million and $126 million, respectively.
Northart insists that Le Tote is more personalized, and has higher quality items than its competitors: "The problem we're tackling is different. It costs a lot of money to turn over your closet. We'll get you better quality pieces, new items to wear once or twice."
Such companies are hungry for more capital, especially in their efforts to scale. Le Tote, much like RTR and Stitch Fix, deals with a variety of complex logistical factors, including dry-cleaning and a tight shipping turn-around. It has also developed partnerships with 80 high-profile brands, including Free People and French Connection.
In recognizing the challenges that lie ahead for Le Tote as it expands, Northart has brought on new executives from old-guard fashion behemoths, including a VP of Operations, Vijay Khare, who was previously the senior director of global supply chain at Levi Strauss & Co. Ruth Hartman has also joined Le Tote as chief merchandising officer, and previously, she was the general merchandise manager at Macy's. Although Northart wouldn't share exact revenues with Inc., he expects they will be "well into the double-digit millions." Le Tote's sales are growing by 500 percent year over year.
Northart admits he's had to make some tough decisions this year. That included letting go of some early employees to make room for the "adult supervision," as he calls the new executive team. For the most part, however, the startup has been hiring like crazy. It currently staffs 150 total workers (compared to just about 50 this time last year).
"You live and die by your team," says Northart. "Early on, the strategy was just to get doers in the role. There was very little strategic thinking because your road map is laid out in front of you. As you grow, you have to add that knowledge-base."
Of course, internal shake-ups can often affect a company's culture. RTR, which similarly let go of about 2 percent of its staff this year -- including 7 top executives -- is now facing criticism from former employees, three of whom likened the culture to the 2004 film Mean Girls in a series of anonymous interviews with Fortune.
Northart takes the criticism with a grain of salt. "It's really tough when you're building a company. It's easy for people to stand on the outside, and it's way tougher to try to build something out of nothing," he says.
"Amazon is consistently one of the most successful companies in the public market, and they wouldn't have been able to achieve the things they have without great people. Sometimes, you do have to make those tough decisions," he added, referring to a recent New York Times article, which sharply criticized how the e-commerce giant routinely treats employees.
At Le Tote, in spite of an admittedly intense work pace, Northart says that he makes every effort to support his team, and maintain the intimate cultural feel of the early days. "We're transparent. We treat everyone like owners, because they are," he says.