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Recently, the NFT trading platform OpenSea announced that it has received a $23 million financing led by a16z. AngelList co-founder Naval Ravikant and Coinbase former CTO Balaji Srinivasan participated in the investment, becoming one of the most popular players in the NFT market, which also means OpenSea Early investors received a generous return on capital.
On March 19, Nick Tomaino, the founder of 1confirmation, the lead investor of the OpenSea seed round, announced on his Twitter the investment notes of the decision to invest in OpenSea in April 2018, involving the scoring of the product, team and community of the project and the determination of its risk. Nowadays, it is quite forward-looking, so the chain catcher translated the article and made adjustments that did not affect willingness for readers' reference.
OpenSea is the leading decentralized NFT trading market that enables people to discover, buy and sell digital collectibles.
Digital collectibles are scarce representations of digital goods on the blockchain. In the past four months, due to the influence of the ERC721 token standard and global ETH liquidity, digital collectibles have developed rapidly. Cryptokitties was the first project that attracted people to exchange ideas about this concept, and since then, Cryptokitties variants (see Cryptohorse, Cryptocities, Cryptocelebrities) and other NFT-based games (see Etherbots, Ethercraft) have proliferated.
Most of these projects have dubious long-term prospects, but behind the explosion, we believe that meaningful things have happened in how people evaluate and utilize scarce digital goods. OpenSea is building a leading brand to provide discovery and buy/sell capabilities, and ultimately help bring digital collectibles to the masses.
1confirmation is leading the seed round of OpenSea financing. The following are our main assumptions for this investment:
1.) We are on the verge of the large-scale rise of non-homogeneous tokens (NFTs), and this category will be clearly fragmented. Cryptokitties is the first NFT-based project to gain attention (more than 95% of the current market share is Cryptokitties), but we have seen millions of interesting NFT-based projects in the world, and there is a strong need for aggregators to provide users Provide discovery and easy purchase/sale functions.
2.) The OpenSea team will continue to remain agile and take the lead in adding new NFTs and new features that the crypto community wants to the market, and build a strong brand around discovery and purchase/sale functions. The team is the first to launch the NFT market and has a certain market share and attractiveness in this emerging market (less than 4 months). Devin and Alex are highly motivated and have a good sense of the cryptocurrency community, so they must maintain this state among fierce competition and well-funded competitors.
3.) This is a very defensive long-term business model. The essence of NFT is that the barrier to entry is relatively low. The team will have to build a strong brand in order to win the attention and trust of consumers and developers, thereby gaining a strong network effect, and ultimately earning fee income in the long run.
Team (8/10):
OpenSea co-founders Devin Finzer (CEO) and Alex Atallah (CTO) have done a lot and proved to be agile and agile in the nascent and fast-growing market. They entered YC with different ideas, but when they saw the NFT market began to take shape, they quickly turned to OpenSea. They have been the forerunners in the market in terms of product features and adding new NFTs, and are still perfecting their own NFT-based games (see Ethmoji).
Devin is an engineer and founded a company called Claimdog (acquired by Creditkarma) and has also worked at Creditkarma and Pinterest. Former colleagues spoke highly of his professional ethics and wisdom. Alex is also an engineer and has worked in Palantir and several start-up companies. His former classmates and colleagues also spoke highly of his intelligence.
Products (8/10):
OpenSea now addresses a clear need for the crypto community: how to discover and buy/sell NFTs. In a category with a history of only 4 months, there is still a long way to go to improve the product, and there will be many different directions to use the product in the future, but the product has now solved the problem of a small but growing small group. The clear needs of many users (including myself).
Community (8/10):
The crowd interested in NFT is small, but it is growing, and OpenSea has begun to build a strong brand around them. We can do a lot of work to promote this development.
Token mechanism (not applicable):
This is an equity investment. Although the team can explore the perspective of NFT or tokens to obtain income (pre-sale of digital goods), the company will raise funds from equity rather than tokens, and the main business model may be fees rather than token appreciation.
Main risks:
●Competition: There are two other well-funded and experienced teams that also compete in the digital collectibles market, namely Cryptokitties (raised US$12 million from a16z and USV) and Rarebits (raised US$8 million from Spark) . Cryptokitties is not directly involved in the competition, but may be in the future, and may be competing for talent in the field. Rarebits is a directly competing project. Devin and Alex are highly motivated and quick to act. They are the first to enter the exchange market and are beating them by a significant advantage so far, but this situation may change.
●The defensive capabilities of the trading platform: Unlike Coinbase, which has a regulatory moat, the NFT trading platform has almost no defensive capabilities. There may be more competitors joining, and we need to figure out how to build a sustainable long-term moat.
Rarebits are highly motivated and agile. They are the first to enter the exchange market and are beating them by a significant advantage so far, but this situation may change.
Overview (team + product + community + token mechanism): 8
Overall, we believe that OpenSea will build the right product at the right time. If the team can execute and the category grows as we think, then the potential for the result is huge.
Although there are two other well-capitalized teams that will compete in talent, market share and potential customers, we believe that by maintaining flexibility and rapid action in this emerging market, OpenSea can build a strong consumer brand and defensible The moat eventually became the winner in this field.