Tech investors are pumping millions into NFT startups while digital collectibles are booming
An illustration of NFT based art.
Gremlin | E + | Getty Images
Venture capitalists are writing big checks for startups in the booming NFT space.
NFTs, or non-fungible tokens, have grown in popularity this year along with a surge in the values of cryptocurrencies like bitcoin and ethers. It’s a type of digital asset that can be used to track ownership of a unique virtual object – such as a work of art or sports trading cards – using blockchain technology.
Last year, the total value of NFT transactions quadrupled to $ 250 million, according to Nonfungible.com, while total NFT sales exceeded $ 220 million in the past month alone.
The trend has not gone unnoticed by investors who have invested $ 90 million in NFT and digital collector companies by 2021. This is based on data Pitchbook reported to CNBC. That’s almost three times the $ 35 million NFT startups raised in the last year.
The biggest deal was for Sorare, a blockchain-based fantasy football game that raised around $ 50 million in February from VC heavyweights like Benchmark and Accel, as well as soccer star Rio Ferdinand.
“It’s one of the most exciting developments we’ve seen in cryptography in years,” Andrei Brasoveanu, General Partner at Accel, told CNBC. “It is one of those developments that is attractive to the mass market and could potentially have an impact on a world outside of the crypto niche.”
Largest NFT VC deals to date in 2021
|Name of the company||Deal size ($ M)|
|So rare||$ 48.40|
|Open sea||$ 23.00|
|Boson Protocol||$ 9.57|
The second largest investment this year was OpenSea, an NFT marketplace, which raised $ 23 million last week in a round led by Andreessen Horowitz.
The space is expected to attract millions more in venture capital funding. Blockchain company Dapper Labs is reportedly aiming for a cash injection of $ 250 million, valued at $ 2 billion. The company has received a huge boost from demand for its NBA Top Shot digital collectibles platform, which was developed in partnership with the US Basketball League.
Roham Gharegozlou, CEO and founder of Dapper Labs, called the report “an unfounded rumor” when CNBC asked for comment. Coatue, a hedge fund company reported to be leading the way, declined to comment.
It’s easy to see why some startup investors have been tempted by the NFT space. The market is growing rapidly and some digital collectibles are selling for millions of dollars. This happened alongside a rally in cryptocurrencies like Bitcoin and Ether, with the latter widely used for trading NFTs.
Last week, Jack Dorsey, CEO of Twitter, sold the first tweet for over $ 2.9 billion on the Valuables platform of the blockchain company Cent. Meanwhile, Christie’s auction house held an auction for a virtual work by artist Beeple, which eventually sold for $ 69 million.
Nevertheless, the NFT area was received with skepticism by some developers and investors. Critics view it as just another crypto fad that eventually becomes irrelevant, and there are also concerns about possible market manipulation, much like in the traditional art world. Environmentalists, meanwhile, are alarmed about the energy needed to fuel the NFT market.