As an experiment, I’m starting a series of posts covering companies I find interesting in Japan.

The first company I’m covering is a company called MonotaRO, a B2B marketplace that sells factory materials and parts such as bolts, joints, machinery parts, etc. to companies in the auto maintenance & repair, construction, and manufacturing industry. MonotaRO is listed on the Tokyo Stock Exchange with more than a $3.5B market cap.

There are 10M products on the marketplace and have 338 full-time employees and 973 part-time employees.

2016 revenue for their Japan operations ended with $584M (+20.7% y/y), operating income was $85.2M (+32.8% y/y), and net income of $57.7M (+40.5% y/y).

They have been showing a pretty healthy growth adding 430,857 new user accounts since December of 2015 and now has a total of 2,207,427 accounts on the platform.

Below are some graphs on their revenue breakdown. Most of their customers come from the manufacturing industry and 55% of their customers have 6~30 employees.

The graph below shows the cohorts of their customers by year and how much of their purchasing has increased over time. As you can see, customers increase their purchases every year.

An interesting thing about this company is how they were able to increase their gross profit margin over time. One of the reasons they were able to achieve this is the launch of their private brands or private-labeled items. These are items manufactured (most likely by contract manufacturer) under MonotaRO’s brand. MonotaRO has over 300,000 items such as bolts, masking tapes, hand sanitizers, etc. under their brand.
In 2015, they have reported that 23% of their total revenue come from their private brands.

MonotaRO is after a market that is estimated to be more than $50B in Japan. With their strong business fundamentals and dominant position in the market, their growth should continue for a long time.

Richard Schneider

SumAll

CiaoHo

Over that past decade there have been many innovations to the online marketplace model. These innovations have made online marketplaces more transparent, safe, and efficient for users to buy and sell goods and services. But before talking about what happens next, it’s worth noting the major innovations that have brought us here.

Seller Feedback
In 1997 eBay introduced the “seller feedback” feature, allowing customers to review sellers. For the first time, ratings and reviews were available publicly, forcing sellers to be honest. It is now standard practice for marketplaces to implement reviews on both the buyer and sellers in order to ensure honesty and trust.

Payment
With the introduction of online payments and money transfer services such as PayPal, people can efficiently transfer money for goods and services. This, along with escrow, prevented a great deal of potential marketplace fraud.

Supply-Side Innovation
Driven by the introduction of smartphones, what I’ve deemed Supply-Side Innovation has occurred. With global accessibility and powerful mobile devices in many people’s hands, managing the supply of labor, services, and goods is easier than ever. This has enabled countless on-demand companies, from the likes of Uber to Instacart, to emerge.

The Next Marketplace Innovation
What’s coming next in the marketplace? I’m foreseeing the increase in assisted discovery of products and services enabled by the application of complex algorithms and A.I. There are already early applications of this with Magic and M by Facebook. Uber also uses an assisted search when finding you the most conveniently-located driver.

You can expect to see assisted search thrive where there are many parameters to search and filter – such as housing, talent, professional services, and travel.

There’s no doubt that we will continue to see more innovation and the continued evolution of marketplaces, starting with the increased efficiency in how we find and obtain goods and services. This is only the beginning of a more honest, secure, intuitive, and convenient marketplace.

Jessica Lucia

Validating your startup idea, is a process that you want to complete in the shortest-possible time. The longer it takes, the harder it is to keep yourself and your team motivated. It also gets harder for you to make it to the next phase.

Here are a few tips to help you validate your startup idea efficiently:

Define your idea in terms of one problem for one person: It is much harder to validate a concept or idea aimed at multiple demographic groups and multiple issues. Targeting one type of customer clarifies who to approach first and what to look for.

Learn about the problem and existing solutions as much as possible: Once you have identified your target customer, start interviewing people who fit the profile, but focus on learning more about the problem and existing solutions. Don’t talk yet about your own idea, product, or solution. Ask when they have experienced the problem, what actions they took, and whether there is an existing solution.

Recalculate and re-plan: As you learn more about your users or as you launch your beta product, you will start gaining more insights. Every time you acquire new facts about your market and users, or new metrics from your beta product, recalculate and re-plan. Make sure your market is big, and your business model is sustainable.

Aim to reach $100 million revenue in three to five years: It is important that your business demonstrates healthy growth and reaches a good size, especially if you plan to raise capital from venture capitalists.

Plan to grow for 20 years: You want to be in a market where you can see growth for at least another 20 years. The larger your vision, the longer it will take to achieve it.

Pay close attention to user retention: After you launch your product, pay close attention to frequency and repeat usage, the two most important factors in validating your business model. When these are higher, you can get away with low AOV (average over value); but if they are lower, you will need to have high margins and/or high AOV.

Ask yourself three important questions when validating your startup idea: Will people use my product? Is there a big-enough market? Is the business model sustainable? The tips presented above can help you identify your answers efficiently. You want a resounding “Yes” in response to all three.

Nathan Rupert Follow

For many first-time startup founders, one common trap is thinking that being “busy” and making “progress” are the same thing. It is somewhat comforting when you are busy. You are in motion and you are on a consistent and fast-paced tempo of completing things on your to-do list. It makes you feel like you are doing “work.”

However, it is very important for startup founders to be efficient with their time. Founders are consistently constrained by resources so they need to make the most of what they have learned and quickly plan their next actions. Reflecting for a few hours per week can help founders to absorb the lessons and the experiences in a shorter time and help them to use their time more efficiently. Below are the points founders should cover when reflecting.

Planned to be done and actually done: What did you plan to have done this week? What were the goals you set for this week? Were you able to complete them? Were you able to meet your goals? If you haven’t been able to accomplish them, then what is the reason and what needs to be changed so that you meet your goals? This is important for analyzing if you have been efficient with your time, if you are able to complete the big things you need to get done, and if any changes are necessary in the way you work.

Your condition: Do you have energy? How is your health? Being an entrepreneur is like being a professional athlete. Maintaining your mental and physical health is a big part of your responsibilities. Add sleeping and exercising to your plan, and also the occasional vacation to prevent a major burnout.

Recalculation: As you learn more about your users, your market, and your business, make adjustments to your growth plan, business plan, and milestones so that you have a more up-to-date and clearer idea of the future of your business.

Winning: Define what it means to be in a “winning state.” What milestones and what accomplishments do you and your company need to achieve that state, and plan the actions to get you there. This will ensure that you don’t become trapped in just operating and managing your company, and actually take the actions necessary for becoming a winner.

What went well, want didn’t: Reflect on the things you’ve tried that worked and what didn’t work. Analyze down to the “why” and use that lesson for your next actions. It is important to take time to understand and absorb the successes and mistakes resulting from your actions.

Revisiting your vision: It is good to revisit the vision you have set for your company. Make sure that the company is heading in the right direction and that you, as a founder, are making bold decisions to ensure that you are on the path.

To be an effective entrepreneur, it is important to spend time on reflecting, which will allow you to get the most from your experiences and lessons and let you think thoroughly about the next steps. The time to reflect can be a few hours during the weekend, or 15 to 30 minutes every morning, whichever is more suitable for you and your schedule.

easylocum

Startup ideas can emerge in various ways—a personal pain point, a unique insight one has acquired from life experiences, or just spotting opportunities from market trends. One effective way to look for opportunities is to use a top-down market analysis approach starting from a red ocean and then redefining it into a blue ocean.

Below are three ways to redefine the market from red to blue.

Technical Breakthrough: Pure technology breakthroughs that enable a 10-times greater difference in experience can create a blue ocean. Google is a classic example of competing in an already competitive search engine market, but Google’s algorithm gave them a huge advantage and redefined their business into a blue ocean. If a company is able to do anything 10 times faster, better, or more efficiently than existing players, then there is a possible blue ocean market up for capture.

Vertical Specialization: When a specific segment or platform is saturated, one can find opportunities to capture the market through redefining it vertically. Craigslist is being unbundled by companies like Airbnb, Uber, Starhub, and many more.
Value can be created and experience enhanced through specialization as well—99Designs is a specialized online crowdsourcing site for design, Handy specializes in on-demand tasks for cleaning, and so on.

Paradigm and Platform: Mobile was a big platform shift that enabled a lot of great companies to form (Instagram, Uber, Instacart, Snapchat, etc). With a more ubiquitous platform, creating a better experience than existing solutions becomes possible.

The top-down approach from red to blue is one way to find opportunities and white spaces in the market. However, it merely helps you find a starting point. From there, it will take rigorous thinking to figure out the validity and execution—a great team must band together to create defensibility and sustainability in the business.

Yasmeen

I’m sure that a lot of people can attribute some of their successes to serendipity. Why are there some days where you feel like you just have more luck than others? I believe increasing serendipity all comes down to three simple things.

Be curious, pay attention, and live in a neutral state.

You should pay attention to the things that are happening right at this very moment in front of you and around you. You shouldn’t be afraid to explore any thoughts or ideas that you may encounter in this moment. Be curious, learn more, and explore.

In order to increase serendipity, you should also be in a neutral state of mind. If you’re overwhelmed or too narrowly focused on a specific goal or task, you may miss the opportunities happening around you.

Let’s try a simple example. Say you’re trying to get to a restaurant. If you’re in a hurry or too preoccupied, you will not notice all the things that you walk by on your way to your destination. By living in a neutral state with curiosity and attention, you would have noticed the nice stores and other restaurants along the way.

Serendipity can happen anywhere at any time; be curious, pay attention, and avoid getting tunnel vision.

Fortune Live Media

When investing early stage, a big question we always ask ourselves is “will the founders be able to achieve product/market fit?”
We look for five basic elements when speaking with founders. Startups with a strong dose of these five elements have a higher likelihood of achieving product/market fit.

Thinking Clearly – For a startup founder, the cycle of analyzing, thinking, and executing never ends. But especially for pre-product/market fit, you have to go through the cycle many times, as fast as you can, and as efficiently as you can. We look for founders who show that they are capable of rigorous thinking and can articulate the thoughts in their head with clarity.

Learning Machines – Brad Feld mentioned that he invests in learning machines, and as founders you consistently have to learn new skills and acquire new information every day. Founders need to learn to do product management, marketing, hiring, customer development, and many more business skills. This knowledge and skill set needs to be picked up very quickly or you will run out of time.

Courage – Ben Horowitz emphasizes courage strongly, one of the things he looks for in founders. As startup founders you are faced with many situations where courage is required: courage to make hard decisions, courage to follow your gut feelings, courage to think big, and courage to face rejection. With courage, I think decisions can be made and actions taken more quickly, both important for building great startups.

Passion – Running a startup is a marathon. It takes a lot of passion to keep going and to think long term. We look for passion, a highly contagious passion that can attract many supporters and employees.

Resilience – As startup founders you will be faced with a lot of discouraging moments. Your potential customers might reject you; things might not work when you’re building a product; or your co-founders might even leave. We look for founders who can quickly get back on their feet after discouraging moments and use that as fuel to accelerate even faster.

As Marc Andreessen said, “They [startups] fail because they never get to product/market fit.” It is crucial for startups to focus on achieving product market/market fit; as early investors, we look for founders with the five elements that correlate with that early success.

tokyoform

There has been a lot of debate about diversity in the startup ecosystem. I believe diversity is necessary and great for companies, for VCs, and for the ecosystem as a whole. Diverse mindsets and diverse perspectives will generate more innovation in diverse areas.

However, should founders who are just getting started be worrying about having more diversity in their own startup? My answer is no. In fact, I am anti-diversity for newly formed startups.

The reason is simple. As a new startup trying to get something going, speed is everything. You want to reduce any friction in communication and optimize for making quicker decisions. Being too diverse may result in losing the edge needed to succeed as a startup.

For founders who are just getting started, I usually recommend finding cofounders who are similar to you. Not necessarily in appearance, but similar in terms of values—those who share the same convictions and work at the same tempo as you do. That way, your team is built to move fast.