Think about the last online purchase you made. How did you make your decision? Did you read a few product description bullet points and reviews? Did you cycle through a few product images?

The package arrives, and you open it — hmm… not quite what you expected… creating frustrating (and expensive) return experiences. What if you could try the product before you bought it online, just like in the offline world?

At Underscore VC we think the future of commerce includes digital buying experiences that extend beyond your digital screen. And unsurprisingly, experts estimate that the COVID-19 pandemic will accelerate the shift away from physical stores and towards digital shopping. That is why we are excited to announce our leading of a $2.2M Seed investment in 3XR, an innovative 3D and AR-ready custom content platform, founded by Wayfair alumni Mike Festa and Lauren Taylor.

What is 3D Commerce?

As shoppers, we want to “try” items in our homes, offices, or even on ourselves. A single, 2D image just doesn’t cut it. Fortunately, 3D commerce enables customers to try products before they buy them, filling the experience gap between physical and digital commerce, and helping customers make more informed buying decisions.

As an example, let’s say you were looking to buy a new lamp for your home office desk — which resource below is most helpful to you?

Increasing ability to make an informed buying decision

Today, 93% of consumers consider images essential in purchasing decisions. In 3-5 years, customers shopping online will expect a mixed reality experience, and as such, 3D assets will be mission critical for any ecommerce company to meet customer expectations. As it stands, 61% of shoppers today report they prefer to shop at stores that offer augmented reality over ones that don’t

There are an estimated 350 million products sold on Amazon, and we believe the future will dictate all of those products be accompanied by a 3D product model, so you can try it before you buy it. And Amazon is directly investing in this future, as are other market driving ecommerce platforms such as Shopify, which announced built in support for 3D models earlier this year. Now brands are starting to catch on.

Rebecca Minkoff has been using 3D models on their product pages since Fall of 2019 and they’ve found that visitors who interacted with a 3D model were 44% more likely to add a product to their cart and 27% more likely to place an order than visitors who didn’t. And when visitors viewed a product in AR, they became 65% more likely to make a purchase.

Houzz reported users are 11 times more likely to make a purchase when using the 3D AR tool, and found that customers who use a similar tool return their items 22% less than shoppers who did not use the tool.

The problem is – while we have the enabling infrastructure in place – there are not enough 3D models and that remains the biggest barrier in the growth of 3D-Commerce.

This is where 3XR comes in.

What is 3XR?

3XR empowers brands to enhance their online experience with engaging 3D content. They are delivering a first-of-its-kind one-stop-shop that provides a seamless interface for 3D content management, distribution and analytics. The vision for 3XR is to become the key player in the digital supply chain for 3D content used in eCommerce.

While others have built similar capabilities, 3XR is tapping into a global community of 3D modeling talent allowing them to deliver at a scale not previously possible.

Founded in 2019 by Wayfair alumni, the leadership team at 3XR has dedicated years of their careers to marrying eCommerce with visual content – one of the key factors driving Underscore’s excitement to back the company.

“From my experience building Wayfair’s robust AR technology and library, I knew there was a gap in the marketplace for accurate, consistent, cost-effective and scalable 3D imaging,” said Mike Festa. “I realized there was a strong opportunity to create an impactful solution for retailers — and I’m excited that our team, with more than a dozen years of collective experience, has already created an innovative platform that provides a seamless and comprehensive solution.”

Why We Invested in 3XR

Underscore is partnering with 3XR and leading their seed round for three key reasons:

  1. A Uniquely Qualified Founder: When investing at the earliest stage, we often look for unique domain expertise — which Mike Festa has in spades, Mike Festa is recognized as a leading expert in the fields of eCommerce and 3D content. His leadership on the Wayfair NEXT team directly increased conversion rates with AR rendering, resulting in significant market cap value creation, and he now wants to make that same capability available for the world’s retailers and brands looking to drive revenue online.
  2. Demonstrable ROI: For those readers who are entrepreneurs or investors in eCommerce, you know how valuable a 1% lift in conversion rate can be, let alone the value of a 1% reduction in returns. Infrequently, do you see a technology that can deliver over significant gains in both.
  3. Market Timing + Scalable Approach: Moreover, with 990M mobile phones 3D-ready and the appetite for 3D content increased by COVID-19, we expect the demand for 3D commerce to grow over the coming years. Mike, given his experience, has planned from the beginning how to meet that demand by building the only scalable way to deliver these models for their first customers, which include Nespresso and exercise companies Pro Stairs and Hydrow.

We believe investing in 3XR now will help accelerate the future of commerce, and bring a much-needed capability to the world’s leading brands and retailers looking to do business online.

In addition, the Underscore team has conviction that 3XR is positioning itself to become the leader in this emerging industry. We’re impressed by their business model, their promising profit margins, and their place in the current competitive landscape.

As the future of commerce continues to change – shaped in part by companies like 3XR – we are excited to work alongside our Core community to back the entrepreneurs helping companies and consumers prepare for this new landscape of eCommerce. If you’re an early-stage entrepreneur doing just that, we’d be pleased to meet you!

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