Markai raises $4M from Pear VC, Sea Capital and others to buy Chinese e-commerce brands

China has attracted yet another e-commerce roll-up to enter its gargantuan e-commerce market. Markai, founded by two Stanford business school grads, has joined the fray to buy out Chinese brands seeking global consumers.

So-called brand roll-ups, or e-commerce aggregators, have cropped up in Europe and the U.S. over the past few years. Usually venture-backed, they acquire small e-commerce sellers and try to scale them with a greater pool of capital, supply chain resources, and operational know-how. China not only has a long history of export manufacturing but is also home to most of the world’s Amazon sellers. Naturally, it’s the ideal sourcing destination for Markai and its like.

Other brand aggregators that have recently landed in China include Boston-based Thrasio as well as Berlin Brands Group and Razor, which are both from Germany.

China is just Markai’s starting point, as the startup plans to hunt down brands from all across Asia and bring them to a global audience.

To fund its acquisition activities, Markai recently closed a $4 million seed round led by Pear VC, an early investor in DoorDash and Gusto. The company also raised several millions of dollars in debt but declined to disclose the amount.

Another notable seed investor in Markai’s seed round is Sea Capital, the new venture investment arm of Southeast Asia’s internet conglomerate Sea Group. Sea is the parent company of household names in the region, including e-commerce site Shopee and online games company Garena.

Signia Venture Partners, Western Technology Investment, Graph Ventures and other “prominent” angels across the U.S. and Asia also participated in the round, said Markai.

Markai’s co-founders Chenyu Ren and Tim Spencer, who were roommates at Stanford, both hailed from the corporate world. But their real passion, they told TechCrunch via a video chat, is “empowering small and medium businesses in emerging markets.”

Ren’s sense of mission to empower the underdogs is rooted in his childhood during which he saw his father, a small business owner, struggled to secure financing in China. Spencer’s drive, on the other hand, came from his privilege. Thanks to his parents’ work in the airline industry, Spencer traveled extensively early on but was reminded by his parents “one’s opportunities in life are primarily a function of the circumstances of one’s birth.”

“We want to help the small guys go against the big guys,” said Spencer. “We are taking the scrappiest sellers in China and giving them the best Silicon Valley tech.”

E-commerce makeover

For years, Chinese merchants on Amazon were doing fine with their old formula. A small team of SEO experts and supply chain old-hands, steered by a well-connected boss, could rake in millions of dollars in monthly sales. But Amazon’s recent crackdown on blackhat tactics like fake reviews led to the purging of hundreds of Chinese sellers. The ones who survive sense an urgency to reform and play by Amazon’s ever-tightening rules.

Many sellers feel that they can no longer compete on price; branding and operational efficiency are increasingly important to long-term success. They realize these are gaps that Western brand aggregators with a focus on data and methodologies could fill.

“Sellers in the U.S. and China have the exact opposite problems,” Spencer suggested. “U.S. brands often have great brands and reviews but they don’t know what they are doing on the supply chain side. That’s why aggregators have value for them.”

“Chinese sellers are great at supply chains and pricing but not so in marketing and branding, so we are coming in to clean things up,” he added.

Markai believes its roll-up approach in China is unique. Besides deal-sourcing employees, it has also hired a supply chain crew in China led by Ren. Having an on-the-ground team that can knock on factory doors is critical in an industry built on trust and relationships, said Ren, who grew up in a small manufacturing compound in central China.

In the U.S., Spencer spearheads a data team that analyzes marketplaces as well as direct-to-consumer brands. That consumer insight, in turn, will determine what its factory partners make in China and what channels to sell on.

Like many e-commerce operators these days, Markai looks to Shein for inspiration. The rising fast-fashion brand has impressed the retail industry with its demand-based model. With large swathes of real-time consumer data, Shein is able to forecast demand; thanks to its network of small and nimble suppliers in southern China, it can churn out new products faster than Zara.

Markai declined to share its acquisition progress in China. It has a team of ten now and aims to reach fifteen by next February. Despite the rush of foreign brand aggregators into China, the founders believe there’s ample room for multiple players.

“Most of the brands we met in China don’t even know selling their business is an option,” said Spencer.

This article was originally published on TechCrunch.com. Read More on their website.

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