LEGO

Exclusive: 'Netflix for Legos' startup Pley raises $6.75 million

March 20, 2014: 9:00 AM ET

The sharing economy comes to toys.

Pley12

FORTUNE – Pley, a startup which rents Lego sets to kids through monthly subscriptions, has raised $6.7 million in funding from Allegro Venture Partners, alongside Floodgate, Correlation Ventures, Maven Ventures and Western Technology Investments. (The company also changed its name from Pleygo to Pley.)

The company launched in 2012 under the premise that the easiest way to teach kids to share might be through the sharing economy. Netflix (NFLX) pioneered the model of renting items through the mail. Now countless startups have taken up the torch, launching "Netflix for ______" concepts. "Ownership is old school," says Pley co-founder Ranan Lachman. "The really smart consumers only own something … for the exact amount of time they need it."

Thus, we have Rent the Runway, (Netflix for designer dresses), Le Tote (Netflix for women's clothing), Oyster, Scribd and Entitle (Netflix for books), Mindsy (Netflix for learning), Freshneck (Netflix for neckties), Lacquerous (Netflix for nail polish), Jetworthy (Netflix for jewelry) and of course, Zipcar (Netflix for cars).

There are several other "Netflix for toys" companies, too: Spark Box Toys offers a box of surprise toys for between $24 to $35 a month. Another, called Toygaroo, was featured on the ABC show Shark Tank but its site is no longer live and the company appears to have filed for bankruptcy. Two "Netflix for baby clothes" companies, Plum Gear and Chillbaby, have also shut down.

Pley and its investors are betting the company will outlast competitors with its special twist on the Netflix model, which allows kids to choose the sets they receive in a "pleylist," and offers price points of $15, $25 and $39 per month. The company even counts former Netflix COO Tom Dillon among its board of directors. (It does not, however, have any Lego representatives on board.)

The company started with Legos because they're one of the most popular and expensive toys in the world. (The company had $4.5 billion in revenue in 2013; a set can cost between $40 and $400.) It just so happens they're also very complicated to rent out. There are many tiny pieces to keep track of, and they must be sanitized and cleaned between each rental. But that was strategic: by solving the hardest problems first, Pley has created a barrier to entry. "Let's crack the toughest toy to rent and any one we do after that will be easier," Lachman says.

RELATED: How Lego got hot... again

Pley has designed a system which quickly sanitizes the pieces and weighs them within one hundredth of a gram to determine if any are missing. The Pley warehouse can turn around a set for its next renter within 2.5 minutes, co-founder Lachman says.

A Pleygo employee sorts out Lego sets.

A Pley employee sorts out Lego sets.

The company is already off to a strong start: Prior to taking on any outside funding, the Pley shipped 75,000 Lego sets around the country to more than 15,000 families.

And as for Lego? How does the toy company feel about a potentially disruptive startup undercutting its sales? "They are aware of us," co-founder Elina Furman says. "They're absolutely fine with the fact that we are out here doing what we do." Pley conducted a survey among its subscribers; 40% said their kids showed an increased brand awareness of Lego after subscribing and 26% said they actually bought more Lego sets after subscribing.

The venture capital funds will help Pley build out an East coast warehouse, expand to Europe, and double its team of 23 in the next year. Pley will expand into other kinds of toys as well, with a focus on educational toys at higher price points. In addition to teaching kids to share their toys, Pley aims to encourage kids to play constructively and creatively away from a screen, Furman says.

(Note: An earlier version of this story referred to the company by its prior name, Pleygo, but it has changed its name to "Pley.")

  • Companies are on the hunt for superfans

    Firms from LEGO to Sephora are co-opting their most ardent fans for their own purposes.

    By Kurt Wagner, reporter

    FORTUNE -- On Sephora's Beauty Talk community, an online forum for fans of the company's makeup and skincare products, katie1724 is a "Hall of Famer." With more than 4,400 hearts (the community's equivalent of the Facebook 'like'), she posts and comments five to 10 times per day. It's routine for katie1724 to MORE

    May 30, 2013 2:24 PM ET
Current Issue
  • Give the gift of Fortune
  • Get the Fortune app
  • Subscribe
Powered by WordPress.com VIP.