Crypto marketplace OpenSea raises $23 million to be the ‘Amazon of NFTs’

March 18, 2021, 3:00 PM UTC

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When CryptoKitties roared onto the scene in 2017, most people regarded the collectible digital cats, which were tied to and encapsulated the zany hype around a cryptocurrency called Ethereum, as a joke—a cute joke, but a joke, nonetheless.

But when Devin Finzer encountered the spiffy felines that year, he had a different reaction: Cryptocurrency could be about more than just finance, he realized. Not that Finzer was against finance. He had, just a year prior, sold a money-claiming startup to Credit Karma, the financial score-checking app, after all.

CryptoKitties “raised some eyebrows,” recalls Finzer, a Brown computer science grad who has done programming stints across the tech industry, including at Google, Flipboard, and Pinterest. But for him, the pixelated pussycats raised something else: business opportunity. “CryptoKitties was the first crypto app to target more of a mainstream user as opposed to a trader or someone really interested in speculative use cases,” Finzer says.

CryptoKitties’ surging popularity gave Finzer an idea. He wagered “that we could create an Amazon or eBay for all of these new non-fungible tokens,” also known as NFTs, a type of digital content that gets recorded on the digital databases underpinning virtual currencies, such as Bitcoin and Ethereum.* So Finzer joined up with a friend, Alex Atallah, a Stanford alum who had worked as a software engineer at Apple and Palantir, enrolled in the Y Combinator startup accelerator program, and founded, a blockchain-based marketplace for goods.

Sailing the open sea

Fast-forward three years (and a prolonged Bitcoin slump) later and NFTs—the progeny of the CryptoKitties crazeare resurgent. Artwork by a creator called Beeple is fetching $70 million, a flying Pop-Tarts rainbow cat is netting $600,000, and millions of dollars’ worth of digital content is trading hands every day on OpenSea.

The growth rate is astounding. In February alone, $95 million in digital merchandise was sold on the marketplace, up from $8 million in January, Finzer says. Total sales gushed, unexpectedly, 100-fold compared with six months ago, as the site competes for market share with rivals such as Mintable, Nifty Gateway, and Rarible.

In a ringing endorsement that the NFT economy is here to stay, traditional investors—not just NFT collectors—are pouring money into OpenSea. The startup has raised $23 million in a new round of venture capital funding led by A16z Crypto, the cryptocurrency-obsessed arm of the Silicon Valley venture capital firm Andreessen Horowitz. Other cryptocurrency-focused investors are also participating in the round, including AngelList cofounder Naval Ravikant; Coinbase’s former tech chief Balaji Srinivasan; Linda Xie of Scalar Capital; Andrew Steinwold of the NFT-focused fund Sfermion; and Ryan Selkis of crypto market-tracker Messari. (Cryptocurrency blog The Block recently reported that a deal was in the works.)

“We just think there is a huge market. I mean, look at Apple last year. People purchased $61 billion of digital content” on the App Store, says Kathryn Haun, the Andreessen partner who led the deal. One popular video game, Epic Games’ Fortnite, made an estimated $2.4 billion in revenue on character cosmetics alone in 2018.

“We don’t think it’s silly or faddish at all,” Haun says, referring to the NFT craze. If the present mania subsides, that would likely be only temporary, she continues, noting that she prizes a piece she bought from a Spanish artist. “We recognize there could be cycles. We’re crypto investors, so we’re very comfortable with that, and we’re very used to it. We’re in this for the long haul.”

Swimming in uncharted waters

OpenSea is attracting interest outside the cryptocurrency industry, too.

The startup is receiving backing from a who’s who in tech. Investors range from Pinterest CEO Ben Silbermann to Reddit cofounder Alexis Ohanian to Belinda Johnson, Airbnb’s former chief operating officer, to Ron Conway, founder of SV Angel. Mark Cuban, the billionaire entrepreneur and Dallas Mavericks owner, and Tim Ferriss, the podcaster and author of The 4-Hour Workweek, are contributing to the round too.

OpenSea has worked with Shawn Mendes, the singer-songwriter, to sell virtual avatar “genies” of himself, and it has partnered with Rob Gronkowski, the tight end Tampa Bay Buccaneers football star, on collectible “Gronk” trading cards. The site sells everything from digital real estate in a virtual world called Decentraland to domain names for Ethereum wallets. (Dfinzer.eth points to one of Finzer’s personal wallets.)

“We really wanted to bring on a lot of folks who combine the crypto world with the sort of artist and creative world, because that’s where we see NFTs really blossoming,” Finzer says. Despite believing NFTs presented a mass-market opportunity, even Finzer was taken aback by the dizzying uptick in activity in recent weeks. “We definitely didn’t expect things to go so broad and so big so fast,” he says.

“NFTs make this space just so much more accessible,” Finzer adds.

*Fungibility is a key attribute of money, which ensures that any $1 bill or Bitcoin is, generally, substitutable for any other $1 bill or Bitcoin. Non-fungibility refers, on the other hand, to the uniqueness that prevents a rare baseball card from being considered equivalent to a run-of-the-mill Magic: The Gathering card, or an expired movie theater pass from equaling the value of a ticket to the next Super Bowl. Non-fungible tokens are, then, representations of goods of the latter sort that have been recorded on a blockchain, thereby attesting to their provenance.

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