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Billion Dollar Unicorns: Japan’s Mercari Joins the Club

Posted on Tuesday, May 24th 2016

According to an AT Kearney report, global e-commerce sales are expected to grow from $840 million in 2014 to $1.5 trillion in 2018. US, China, UK, and Japan are some of the most attractive e-commerce markets due to their size, consumer behavior, and infrastructure. These factors have also helped Japan’s Mercari to make it to the Billion Dollar Unicorn Club.

Mercari’s Early Journey

Tokyo-based Mercari was founded in 2013 by Shintoro Yamada, Tommy Tomishima, and Ryo Ishizuka, who were serial entrepreneurs in the gaming industry with experience in leading gaming companies such as Zynga and RockYou. After his gaming startup Unoh was acquired by Zynga, Yamada travelled all over the world for a year on a shoestring budget. He observed that even people in the poorest villages had mobile phones and he started thinking about creating a platform that would allow them to exchange money, things, or services using their smartphones.

Yamada got together with Tomishima and Ishizuka to found Mercari Inc., a mobile e-commerce site that enables people to easily buy and sell second-hand merchandise using their smartphones, or in other words a “flea market” app. Mercari’s edge is that it has been designed specifically for mobile phones and has a much better user experience on the mobile. It lets individuals easily browse through items for sale or post their own items for sale. People sell everything from clothes and electronics to small collectible like baseball tickets. It has about 100 people in its customer service team in Japan, the US, and the Philippines who keep an eye on listings and ensure that none of the listings are from business merchants pretending to be individual sellers.

Mercari’s Financials

Today, the company claims that its app has surpassed 25 million downloads in Japan. Its app has been available in the US since September 2014 and has seen about 7 million downloads in the US. It follows a similar strategy in the US, positioning itself as a “flea market” app. It has partnered with USPS and FedEx for shipment and uses Braintree as a payment vendor. It has transacted more than $88 million (10 billion yen) in deals through its platform. Mercari earns its revenue by charging a commission of 10% of each sale.

Mercari is a venture funded company. It raised $500,000 in July 2013 in a seed round from East Ventures. A month later, it raised an additional $3 million from United, which valued Mercari at about $20 million. Overall, it has raised $111 million or about 12.16 billion yen. Its latest round of funding was for 8.4 billion or about $75 million at a valuation of over $1 billion.

Its investors include Mitsui & Co, Development Bank of Japan Inc., Sumitomo Mitsui Trust Investment , Globis Capital Partners, World Innovation Lab, Global Brain Corporation, United, GMO Venture Partners, Itochu Technology Ventures, and East Ventures.

The new capital will be used to grow Mercari’s services in Japan and expand in the US and the European Union. In addition, it will use the funds to develop new business at Souzou, a subsidiary of Mercari, as well as strengthen the team for mergers and acquisitions, and invest in other businesses. Mercari will face several competitors in the US including eBay, Amazon, and even unicorpse Etsy as well as Rakuten and Alibaba, which have failed to make an impact in the US. It should tread carefully.

More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. Unicorns will also be discussed with some special guests during our 1M/1M Roundtable programs over the next few weeks. To be a part of the conversation, please register here.  The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.

This segment is a part in the series : Billion Dollar Unicorns


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