ScopeNEXT GENERATION #3 | Marubeni Ventures

Discovering “White Space” by Investing in Promising Startups

By William Sposato

The world of e-commerce has changed the way we shop by offering a multitude of choices, but it has also removed the personal contact that helped to drive shopping decisions and created the broader shopping experience.

For one Silicon Valley start-up, the answer was not to go back to the past but to use the technology in a new way. Shop LIT Live takes the personal experience of visiting a store and puts it on-line. The technique is to tap into the world of social media influencers, who are increasingly the go-to expert sources for guidance in styles and trends. Central to the approach is to have the events live and interactive, with explanations of various brands and products, as well as questions from the consumers taking part.

“In this new format we see something that allows both influencers and consumers to learn more about each other and especially for consumers to learn more about products prior to making purchasing decisions,” says Toby Zhang, founder of Shop LIT Live. “Influencers are an important element to our business model. They are authentic voices in the community to help represent brands.”

It’s not just for influencers with an established following. Reflecting the open nature of the Internet, the platform is available to new content providers, influencers and company representatives. “You just need an eye for the latest trends, a passion for products and storytelling, and an engaging, friendly presence,” the company says on its website.

Shop LIT Live has proven to be an immediate success and demonstrates the need to move quickly today to fill a consumer need. The San Francisco-based company was founded in March 2020 and went online just six months later. It already provides a platform for more than 200 brands, both big and small, with programs hosted by more than 100 influencers.

Investing in this new arena also requires an ability to spot trends and move quickly. To tap into the growth areas of the future, Marubeni Ventures was launched with a small team of people and a big mandate: To seek out innovative start-ups that have the chance to grow and that can also benefit from the global reach that Marubeni is uniquely able to provide.

The Investment Method that Leverages Marubeni’s Strength

"Marubeni Ventures was established in March 2019 to promote the explosive growth of the entire Marubeni Group by investing in start-up companies that are one step ahead of the times," Hiroki Eda, managing director of the company.

Competition to find the most promising start-ups in Silicon Valley is fierce, with a business model that is built for speed. To help accommodate the need to move quickly, Marubeni Ventures has its own approvals process, with investment decisions taking just two to three months from the initial contact with a promising target.

“There was a lot of work in developing our processes to make sure they are compatible with Silicon Valley,” notes Mark Sher, a director of Silicon Valley Branch.

Aside from Shop LIT Live, the team has also backed GrubMarket, an online fresh produce marketplace. The stable of companies is not restricted to the United States. D-ID is an Israeli group that protects privacy in image data while Japan’s Floadia develops specialized flash memory that helps to power artificial intelligence in IoT devices.

Even in an online world, personal relationships have proven to be a key success factor for the Marubeni Ventures unit in seeking out the best investments. In the era of COVID, they found that some parts of their work could move more quickly but the chance to see an operation face-to-face is still a critical element to understanding what a group does and how well it functions. In the case of Shop LIT Live, Zhang had known the Marubeni team even before he thought of the concept for the firm. This made Marubeni an obvious choice for him when he came to look for investors.

The Shop LIT Live model is already proving to be a success. Zhang notes that the live events at the core of the platform produce an impressive rate of actual purchases. While most online sources see sales from 1% to 1.5% of those who come to the site, the influencer events on Shop LIT Live lead to purchases by 10% to 15% of participants, an impressive 10-fold success rate. But this was just a part of the appeal for Marubeni Ventures.

“What caught our attention the most is that it is a fusion of many global trends. You have social media and e-commerce, and here you see a merging of the two. People can follow influencers and at the same time find ways to connect with a product at a deeper level,” said Tristan Jennings, a Senior Venture Associate in Silicon Valley Branch.

From Jennings’s point of view, the live concept also brings back an important element of shopping that has been lost in the more impersonal world of e-commerce. “What Shop LIT Live provides is a personalized experience as if you were visiting the store itself,” he said. Within this, the influencer takes on the role of someone in the store whose opinion you trust and who provides guidance, not just a transaction, he added.

A key element in the Marubeni Ventures concept is to provide much more than capital funding, it is also to give advice and to leverage the company’s global network. Given its historical focus on business-to-business and big projects, it’s something of a new name among netizens.

“Some people in Silicon Valley can be surprised at the size and scope of Marubeni,” said Sher. “But they come to understand the value that we can bring. The Marubeni global network, a wide range of industries, a wide range of group companies and a willingness to explore new things are all positives for us here,” he added.

For Shop LIT Live, the benefits have been clear. Marubeni provides support on aspects of the business ranging from talent recruitment to becoming an international brand. “As we continue to grow and have ambitious goals to grow beyond our current markets, we look forward to the deep partnership with Marubeni to help us get there, to open those doors for us down the line,” said Zhang.

Focusing on “White Space” to Create New Value

Within the Marubeni Group of more than 45,000 employees globally, the start-ups are modest in scale. But management expects that to change with the companies of Marubeni Ventures targeted to play a key role in the group’s growth plan for 2030. This next-generation business development, augmented by sustained growth in existing businesses, is central to the company’s long-term goals.

For Marubeni, the chance to help an enterprise succeed goes beyond profitability and business considerations.

“By fusing the knowledge gained through global investment activities with the various settings that the Marubeni Group has cultivated, new business areas that have never existed will be created, and as a result, the world will improve,” commented Marubeni Ventures’ Eda.

(All information contained in this article is based on interviews conducted in March 2021.)