Sene is raising capital via preferred equity and is valued at $12 million. Sene brought in $1.14 million in revenue for the most recent fiscal year, making for a 10x revenue-to-valuation multiple in this round. This multiple is higher than the industry average for apparel and fashion, which ranges from 2x to 4x. However, a $12 million valuation is very favorable when compared to other growth stage startups that are raising capital online. Overall, Sene’s valuation is decent at this time.

Globally, the market for custom clothes was $1.9 billion in 2020. North America makes up about 45% of this market and has a market share of around $500 million. From 2020 to 2027, the market is expected to grow at a rate of 3.37% annually. Custom clothing is a niche market with a small growth rate despite the fashion market as a whole being so large. Tailored clothing is often seen as expensive and time consuming, making it not an option for many American consumers. As attention turns to sustainability and companies like Sene make tailored clothing more accessible, this market may expand.

At this time, Sene has rolled out a fairly limited product line. Denim is the current focus, and the domestic denim market sits around $19 billion. Most consumers purchase products in person, and popular brands include big names such as Levi Strauss & Co. and The Gap. Sene’s addressable market may be smaller since it doesn’t offer in-person fittings, but it might be able to develop a select niche within the overall denim market.

In sum, Sene’s market potential is limited. The growth rate is low for both the custom clothing and denim markets. The market for custom clothing is relatively small, but this likely reflects a lack of accessibility — the exact problem that Sene hopes to address.

Co-founder and CEO Ray Li is a first-time entrepreneur with experience as senior strategist at Interbrand and as a consultant at Deloitte. He holds a degree in industrial and labor relations from Cornell University. Co-founder and President Mark Zheng previously served as the senior valuation associate at HealthCare Appraisers. He studied economics and Chinese language at the University of Michigan.

Notable investors and advisors for Sene include Steve Asbell, who has experience as the executive vice president of 20th Century Fox, and Anjali Lewis, former CMO at Alexander Wang and founder of The Curious Bird. To date, Sene has six total employees covering marketing and product. Should the company expand, more personnel will be needed to fill out key roles in sales, legal, and marketing, among other gaps. Expanding the team is especially important given both founders’ lack of industry experience and seeing as both are first-time entrepreneurs. This risk is mitigated by the strong advisory board, but talent will need to be brought in-house as management grows the company.

Sene’s founders are not inherently equipped with fashion industry knowledge. However, strong management backgrounds may help to mitigate this concern. The founding pair appears to understand their lack of direct industry experience and has surrounded themselves with a strong advisory board. Thus, the key team and board compensate for what the founders may be missing in industry knowledge. 

Sene is setting itself apart in the apparel industry by offering custom-made clothing. Other custom jean companies like Hockerty allow for cut and design modification but focus less on a tailored fit. Many of Sene’s custom-fit jeans and suits have several hundred reviews with average ratings above four stars. The company’s 12% refund rate is also indicative of customer satisfaction and is far better than the industry average of around 30% to 40%. Sene’s garments are produced in six days and take around two weeks to ship. Production speeds are slower than products that are not custom fitted but faster than the alternative of receiving an online-ordered garment and taking it in for tailoring. Sene also has a unique 60-day remake policy if a product does not meet expectations.

From a price perspective, Sene’s products are relatively on par with the rest of the market. Jeans start around $149, and custom suits are priced around $595. For tailored clothing, this pricing is reasonable, though a bit higher than purchasing a garment that is not tailored. For example, Lucky Brand Jeans run from around $60 to $120. Getting the jeans tailored would probably add an additional $10 to $50 in addition to the time and energy it takes to get the fit customized in person. Overall, Sene has strong product quality differentiation, though it competes with a number of large incumbents with established customer bases. 

At this time, Sene does not hold any patents for its technology. The company’s use of a quiz to determine customer size is not unique in the industry. Other apparel and wearable companies like EyeBuyDirect have incorporated virtual try-on features for their glasses. This technology supports the trend of moving historically in person shopping experiences online, however, the technology in both cases does not appear to be overly complicated. What keeps Sene differentiated is its degree of customization, as well as the remake policy.

Sene brought in $1.14 million in revenue for 2020, up from $689,000 in 2019. While this revenue increase is encouraging, the company’s net loss also increased from 2019 to 2020. For 2021 leading products, the Sene team projects 70% product margins. Generally, profit margins for retail clothing are under 15%. If the company can actually achieve 70% margins, it would be quite impressive and should help improve its financial health.

Including a past pre-seed round also on SeedInvest, Sene management has raised $786,000 in capital to date. With additional funding from this round, Sene plans to roll out new products in 2022 including denim shorts made of recycled fabric and a denim jacket. Marketing efforts include partnerships with influencers like Peloton instructor Emma Lovewell who has more than 520,000 followers on Instagram. While performance has been strong from a revenue and product perspective, the company does have a steep burn rate of $18,800 monthly. As of mid-November 2021, the company had $680,000 in cash balances — approximately 36 months of runway. Until it can achieve profitability, Sene clearly needs further funding to continue operating. However, the company’s revenue growth and potential for high margins in a notoriously low margin industry is promising.

Overall, the risk associated with an investment in Sene is relatively low. The founders are fully dedicated to the company, and the product is viable and has been commercialized.  The main area of concern is the company’s elevated financial risk. Sene has a monthly burn rate of $18,800. That burn rate is not sustainable in comparison to the company’s revenue and cash on hand. The elevated financial risk comes from a weak cash position and limited runway, which could cause further issues down the line should the company not successfully raise more capital. A limited runway could also limit product expansion, hindering the aggressive growth projections for the year to come. 

Sene launched a Regulation Crowdfunding round on SeedInvest beginning in November 2019. The raise closed a little more than a month after it launched with commitments totalling $282,185. In that funding round, Sene was valued at $5 million with $327,000 in revenue for the fiscal year in question. The raise was also rated a Deal to Watch. 

Since then, Sene’s valuation has increased to $12 million, a reasonable jump given that revenue has more than tripled.  Sene also grew its team from two to six, and revenue is up to more than $1 million for 2020. Burn rate was a concern in the last raise, and it remains as a risk for the company. Sene still needs to improve its operating efficiency as it scales. However, product growth has been strong, as Sene has successfully launched jackets since its last raise. It plans to move into athleisure, denim jackets, and denim shorts in the coming year. Since its last round, the company has also expanded marketing strategies to include strategic influencer partnerships. 

Sene exists in a crowded space full of competition with existing customer bases. There is no shortage of options when it comes to jeans and workwear. Additionally, the company holds no intellectual property rights, making defensibility a concern. Perhaps of greatest concern, however, is the company’s financials. Sene is burning more than $18,800 on a monthly basis. Its cash position is relatively weak, with just $680,000 in cash balances as of mid-November 2021. Should the company fail to raise additional capital, its burn rate could hinder aggressive expansion plans for 2022.

Finally, Sene’s founders are inexperienced, and the team is lean. Neither founder has much experience in the fashion industry or as entrepreneurs. This lack of expertise is in part mitigated by the impressive advisory board, but it is something investors should be aware of. In order to meet the product goals set out for the coming year, the founders will need to address legal, marketing, and sales gaps in the team.

Above all, Sene’s mission is laudable. Fashion waste has a huge environmental impact and often goes unnoticed. This mission alone could attract customers and investors down the road. The product is differentiated in its quality, turnaround time, and refund rates. Margins are far higher than industry standards. The $12 million valuation is reasonable. With more than $1 million in revenue for the most recent fiscal year, the revenue-to-valuation multiple is appropriate. Additionally, Sene is raising on preferred equity, giving investors additional protections and lowering risk. Management has a clear vision for product expansion and has proven existing products by way of steady revenue increase and strong reviews. 

Finally, there is some recent movement in the space when it comes to exiting. Custom apparel company Stitch Fix went public in 2017. While the initial public offering was somewhat underwhelming for Stitch Fix investors, the precedent bodes well for Sene. There is proof in the market of a similar concept, and Stitch Fix acquired another customer clothing company before it went public. Sene has the potential for either a merger and acquisition or to go public itself if it grows successfully.

Sene is entering the apparel market with a zero-inventory model powered by custom-fit fashion basics. Sene has replaced tailors with data science by allowing customers to generate their custom fit through its SmartFit Quiz. The clothes are then cut, assembled, and delivered in two to three weeks. Currently, the company offers tailor-made suits and jeans with plans to expand into athleisure. Sene has generated more than $4.3 million in total revenue since launching and reported 17% month-over-month average growth in 2021. 

Sene’s current financial position is weak. Management is quickly burning cash, and failure to raise capital could have serious consequences on growth plans. The team is lean — just six full-time employees, including both founders. Neither founder has direct industry or entrepreneurial experience. Should the company continue to scale, more in-house fashion expertise will be critical. Sene also has no intellectual property in a market that is riddled with competition.

On the other hand, Sene has an admirable mission of reducing the environmental impact of fashion. Each product has strong reviews and is highly differentiated from a quality standpoint. Sene also has low refund rates and a 60-day remake policy. Customers are clearly satisfied with Sene’s existing products, and management has plans to expand product lines in the coming year. Margins for the existing products are projected to be around 70%, versus traditional margins for retail clothing that are often under 15%. Sene’s $12 million valuation in this round is reasonable, considering the $1.1 million in revenue from 2020. Finally, the preferred equity offering gives investors additional protections and lowers risk associated with the terms of the deal. For these reasons, Sene has been rated a Deal to Watch by the KingsCrowd investment team.

For questions regarding the KingsCrowd analyst report or ratings for this company, please reach out to support@kingscrowd.com. 

Analysis written by Olivia Strobl, December 2, 2021.