Deal to Watch: Stylish, Affordable Fashion for Modest Dressers

Key Stats:

Summary

The Urban Modesty team has been selected as a “Deal to Watch” by KingsCrowd. This distinction is reserved for deals selected into the top 10%-20% of our due diligence funnel. If you have questions regarding our deal diligence and selection methodology, please reach out to hello@kingscrowd.com.

Problem

The global fashion and apparel industry is worth over $2 trillion dollars, but a huge proportion of those clothes are unwearable to the roughly 900 million Muslim women in the world, about 1.7 million of which live in the United States. 

Muslim women commonly wear a hijab (head covering) and modest clothing with wrist-length sleeves, ankle-length skirts or pants, and loose-fitting garments. Few leading fashion brands cater to these modest clothing preferences, leaving Muslim women to hunt for modest finds from multiple stores and alter mainstream clothes to fit their needs. 

While leading retailers are beginning to realize the potential of the Muslim market, their modest fashion lines are often rejected by Muslim consumers. Muslim women report feeling as though modest fashion lines from major designers are plain and unfashionable, and often prefer lines created by Muslim designers who can properly blend fashion and modesty. 

Muslims are the world’s fastest-growing religious group, and Muslim fashion makes up a $254 billion industry. Muslim consumers are eager for a modest fashion brand that delivers on style while adhering to their religious standards.

Solution

Urban Modesty is a modest fashion brand led by Muslim CEO and Creative Director Sherihan Moustafa. Moustafa develops proprietary fashion designs and sells them direct-to-consumer on the Urban Modesty website, generating over $1.2 million in sales since launch in 2014. 

Urban Modesty offers a variety of dresses, abayas (long, cloak-like garments), skirts, and sweaters for women who prefer modest fashion. Urban Modesty designs are also available in maternity, plus size, and teen. The fashion company also offers a variety of hijabs to complete a modest outfit. Designs range from $20-$30 hijabs to $80-$90 dresses, perfect for a budget-conscious consumer.

The Team

Urban Modesty is led by CEO and Creative Director Sherihan Moustafa, a “user entrepreneur” who herself wears modest clothing. Moustafa holds a bachelor’s degree in economics from the City University of New York and graduated from the Kauffman Center of Entrepreneurship’s FastTrac program. 

Ahmed Megahed is Urban Modesty’s Chief Marketing Officer and oversees the company’s digital marketing efforts, including search ads, social ads, and website conversion. Megahed was also Urban Modesty’s first investor.

Growth Plan

Urban Modesty plans to use the proceeds from this fundraise to invest in inventory expansion, developing new styles, and stocking additional inventory to better respond to customer demand. Urban Modesty is also exploring opening a retail store location in an area central to the company’s target audience. Lastly, Urban Modesty plans to devote a third of raised capital toward increased digital marketing budgets on platforms like Facebook and Instagram.

Why We Like it

• Undeniable market potential: Muslim women command billions in shopping power, and the population of Muslims only continues to grow. Leading fashion designers have signalled that they too recognize the potential of modest fashion but continue to underdeliver on style. Muslim women are seeking a fashion solution outside of traditional retailers, and a Muslim-owned and high-fashion brand like Urban Modesty is well-positioned to command market share.

• Existing profitability and future revenue potential: Urban Modesty has sold over $1.2 million in modest fashion since launching in 2014, and the company was profitable in 2017 and 2018 (2019 financials are not available for review). The company forecasts generating $600,000 in sales in 2020 for a net income of $115,000, and it forecasts aggressive growth for the next several years (up to $7.2 million in sales in 2024) while remaining profitable. Urban Modesty has unlocked a growth formula that doesn’t compromise profitability, which is a positive signal for potential investors.

Rating

Urban Modesty capitalizes on a rapidly-expanding segment of fashion and occupies a unique niche as a Muslim-focused fashion brand founded and led by a Muslim woman. 

The modest fashion segment is undeniably expanding, as evidenced not only by leading designers’ investment in hijab-centered product lines but also in the recent Series A fundraise of Haute Hijab, a luxury hijab retailer. Haute Hijab announced a $2.3M Series A round in February 2019 with participation from several well-regarded venture capitalists. While Haute Hijab poses a potential threat to Urban Modesty, the modest fashion category is likely large enough to accommodate multiple players. Haute Hijab’s recent financing is an important signal of the strength of the category. 

Urban Modesty is already operating in the black, which makes steady, sustainable growth a viable alternative to aggressive expansion and short-term exit. The company would have to grow significantly to become an attractive target for acquisition, but it is reasonable to imagine that a mainstream fashion retailer looking to expand its modest fashion offerings would be willing to consider a purchase. 

Urban Modesty is offering an authentic, stylish modest fashion option to the growing number of Muslim women in the United States (and eventually the world). Given that the company has proven its ability to scale steadily via targeted digital marketing and fresh, unique designs, Urban Modesty is a Deal to Watch.