Japanese unicorn Mercari targets $1b IPO, VCs set for exits

The company said it would sell approximately 40.7 million shares for JPY2,200-2,700 apiece, according to a filing. The offering comprises 18.2 million new shares – plus an allowance for an overallotment option of 2.84 million shares – and 22.5 million shares held by existing investors.

Should the offering price at the top end of the range, Mercari would achieve a valuation of JPY365.4 billion. In addition, Global Brain, East Ventures, Itochu Technology Ventures, GMO Venture Partners, World Innovation Lab (WiL), and Globis would receive around JPY33.7 billion from share sales. Strategic investors such as advertising player United and Mitsui & Co. are also set to make partial exits.

Founded in 2013 by Shintaro Yamada, formerly Japan general manager for Zynga, Mercari positions itself as C2C only and mobile only. Vendors take pictures of the items they want to put up for sale and list them on the platform within two minutes. They then receive a barcode, attach it to their package, and drop it off at Yamato, Mercari's logistics partner, or Japan Post.

While most vendors on eBay and Yahoo Auction are small business sellers who attract buyers looking for the cheapest possible price, Mercari monitors its vendors to ensure they are individual sellers. The intention is to create a "flea market" environment populated by consumers who are primarily there for the joy of shopping. The stickiness of the app allows Mercari to charge a 10% commission per transaction. Its monthly gross merchandise value (GMV) was about JPY10 billion in 2016.

Japan’s online second-hand goods market is worth JPY1.9 trillion a year, excluding automobiles, according to Ministry of Economy, Trade & Industry data cited in Mercari’s prospectus. Of this, C2C business accounts for JPY651 billion, with JPY305.2 billion transacted through free apps like Mercari. The company’s app had been downloaded 55.4 million times as of June 2017.

Mercari has also sought to expand into other markets, launching a US operation in 2014. Its app has been downloaded 28.2 million times in the country. The company didn’t take a commission on US transactions with a view to building up a local following, but that policy changed last year.

Overall sales revenue came to JPY22 billion for the 12 months ended June 2017, up from JPY12.3 billion the previous year. Over the same period, the company’s net loss widened from JPY348 million to JPY4.2 billion, largely due to increased advertising and marketing expenditure.

Globis currently holds a 6% stake in Mercari, followed by Global Brain on 5.6%, WiL on 4.28%, East Ventures on 3.75%, and Itochu Technology Ventures on 1.96%. GMO Venture Partners has 0.84%, although its parent company GMO Payment Gateway also has an interest in the business.

East Ventures provided JPY50 million in seed funding to Mercari in 2013, with Global Brain, Globis, Itochu, and GMO Venture all taking part in a JPY1.45 billion round a year later. Towards the end of 2014, Mercari raised JPY2.36 billion in Series C funding, with WiL coming in as a new investor, while Global Brain, Globis, GMO Venture, and East Ventures re-upped.

Mitsui then co-led a JPY8.4 billion Series D in 2016 that took the company’s valuation past $1 billion. Development Bank of Japan and Sumitomo Mitsui Trust Bank's Japan co-investment program also contributed capital as did several existing investors.

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• Topics
• North Asia
• IPO
• Technology
• Consumer
• Japan
• TMT
• World Innovation Lab (WiL)
• Global Brain Corporation
• Globis Capital Partners
• East Ventures