On January 4, OpenSea, the world’s largest NFT trading platform, announced that it had achieved a C round of $300 million in financing with a post-investment valuation of $13.3 billion. Leading investment institutions are Paradigm and Coatue. The lead investor a16z in the A and B rounds of financing did not appear in the C round of financing announcement.
OpenSea, established in 2017, focuses on the non-homogeneous token NFT trading market. It started in the concept period of blockchain applications and broke out in the NFT development boom in 2021. It took 4 years to become a unicorn company in the crypto industry with a valuation of USD 13.3 billion.
After OpenSea announced a new round of financing, it aroused strong indignation among users. It is predicted that the platform is not far from the IPO plan. Although IPO is the capital operation choice of any unicorn company, users of OpenSea have been expecting the platform to issue their own encrypted tokens and enter the sequence of the encrypted asset market, not the stock market.
OpenSea’s main profit method is to charge transaction users a fee. In 2021 alone, the transaction volume of the platform has increased by more than 600 times.
In accordance with user expectations, OpenSea, which captures profits from NFT transactions generated on the blockchain, should develop in the direction of applications in the Web3 era, returning the management rights of data and assets to users, and allowing users to share platform benefits. Instead of taking the Web2 financing method of traditional Internet companies. Relying on flow to attract capital, and finally let institutional capital be monetized from the stock market.
As early as December of last year, OpenSea executives’ IPO ideas once angered community users, and once led a certain NFT community to set up an OpenDAO organization under this name and issue a coin for OpenSea.
After the C round of financing, the market’s expectations for OpenSea’s IPO have increased. Although the CFO of the platform has stated that it will consider the suggestions of community users, the actual action is to lower the expectations of users who are waiting for OpenSea to issue tokens.
Traditional institutions dominate OpenSea Series C financing
In the four years since its establishment, OpenSea has completed a new round of US$300 million in financing. Only half a year has passed since this round of financing, and the valuation has risen from 1.5 billion U.S. dollars in the B round of financing last year to 13.3 billion U.S. dollars.
OpenSea’s latest financing announcement only disclosed lead investors Paradigm and Coatue. The former Paradigm focuses on the encryption industry and Web3, and is a new investor in the history of OpenSea financing.
It is worth noting that the latter Coatue, which is OpenSea’s Series B financing party, ranked behind a16z in the financing news at the time. This institution was originally a veteran hedge fund established in 1999. Later, it gradually focused on equity investment in the public market, including technology, media and telecommunications industries.
In 2021, Coatue’s investment events include China’s new energy vehicle developer “Ziyoujia”, and VR interior design platform “Kujiale”. In the past two years, Coatue’s investment focus has begun to turn to the blockchain business. It is also an investor in smart contracts and blockchain ecological security service provider “Certik”.
OpenSea’s most high-profile investor a16z (Andreessen Horowitz) did not appear in the C round of financing announcement. This institution is the lead investor of OpenSea in the two rounds of financing of A and B in 2021. Under its lead investment, OpenSea has successively raised US$2,300 and US$100 million, allowing the world’s largest NFT trading platform to raise funds after the B round The valuation reached 1.5 billion U.S. dollars.
OpenSea’s financing history
In the past 4 years, OpenSea has conducted more than 5 rounds of financing. There are not only institutions such as Blockchain Capital and a16z, but also celebrities such as Ashton Kutcher, an actor who is deeply involved in the NFT field, and Mark Cuban, owner of the NBA Dallas Mavericks. Most of them are representatives of “New Money” in the related crypto industry. But by the C round of financing, traditional institutions have become one of the investment leaders.
Whether a16z will withdraw from this round of OpenSea financing is unknown, but Coatue has once again appeared in the C round of financing. Once this capital, which is also a private equity fund and hedge fund, intervenes, it is hard not to remind people of OpenSea’s IPO plan.
For users in the NFT community, “OpenSea wants an IPO” is a no-no. In their eyes, this platform, which is developed by relying on NFT transactions on the service chain, can reach the world’s most inseparable from the massive contributions of users. Its users have been expecting that it can develop in the direction of Web3 and DAO (Decentralized Autonomous Organization), by issuing governance tokens, so that users who contribute fees can enjoy its development dividends.
However, rounds of equity financing have gradually shattered users’ “OpenSea currency issuance dreams.” After the announcement of the C round of financing, OpenSea’s official Twitter flooded with angry users, asking whether it would still issue coins, others denying it is a Web3 product, and others calling on NFT colleagues not to trade on this platform.
Will OpenSea head towards an IPO?
The keyword “IPO” came from within OpenSea, borrowed from its new CFO.
On December 6th last year, OpenSea welcomed its first Chief Financial Officer (CFO) Brian Roberts. In 2014, Roberts served as the first CFO of Lyft, the second largest ride-hailing app in the United States, and led the company to complete a multi-billion-dollar initial public offering (IPO). Before joining Lyft, he held important executive positions at Microsoft and Walmart.
This was originally an important appointment by OpenSea on “expanding the company’s scale and serving the community.” But once Brian Roberts took office, there was speculation in the NFT community that he would take OpenSea to the IPO road.
Speculation quickly received a response in the media. Roberts said in an interview with Bloomberg:
“When your company is growing so fast, it is foolish not to consider going public. Due to OpenSea’s rapid growth and profitability, the IPO will be actively welcomed by the open market.”
As soon as this remark came out, it angered the users who were waiting for OpenSea to issue encrypted tokens, especially the user group who contributed a lot of fees to this NFT trading platform and helped it develop and grow. They hope OpenSea will issue its own token to raise funds. This method of raising funds was widely used in DeFi’s start-up and established projects last year. Some users believe that if OpenSea abandons the airdrop and conducts an IPO, it is a betrayal of the community that helps its development.
However, Roberts said the company itself does not need more cash, but needs to raise funds for partners, acquisitions and joint ventures. As a result of community dissatisfaction, Roberts later clarified on Twitter:
There was inaccurate reporting about @OpenSea's plans. Let me set the record straight: there is a big gap between thinking about what an IPO might eventually look like & actively planning one. We are not planning an IPO, and if we ever did, we would look to involve the community.— broberts.eth (@BKRoberts) December 8, 2021
How can the user community participate in a company’s IPO? Roberts did not elaborate. Users who can’t wait for OpenSea to issue tokens take the lead.
On December 24, 2021, NFT collectors “9x9x9” created the OpenDAO project under the name of DAO, and conducted an airdrop of governance token SOS for OpenSea trading users, which brought the last game of 2021 Large-scale token airdrops and Meme-like hype sent SOS to the secondary market of encrypted assets.
SOS trend in the past 2 weeks
SOS has been in the market for 2 weeks, from the initial $0.0000014 to the highest soaring to $0.000011, the highest increase is 685%, and now the distance to the highest point has been cut in half. Not to mention what it left behind, it is probably the user’s performance art like a counterattack to the OpenSea IPO plan, which shows the real expectations of users for the platform native to the encryption industry.
Now that OpenSea has achieved a C round of financing, it is highly probable that it will not be its last round of financing.
With reference to Coinbase, the first stock in the crypto industry, this crypto asset trading platform was listed on the U.S. stock market in April last year. From 2013 to 2020, seven years have gone through 17 rounds of financing, totaling 547.3 million U.S. dollars, and finally heading for an IPO. In contrast, OpenSea’s financing amount and process have gone faster.
Interestingly, both platforms have the capital side a16z, which led the investment of Coinbase’s Series B financing of US$25 million. In OpenSea’s A and B rounds of financing, the total amount of financing led by the institution has reached 123 million US dollars. This also reveals that capital favors the more practical and transformative NFT market.
From the statement of OpenSea CFO Roberts that “OpenSea does not intend to conduct an initial public offering”, the platform may not be IPO at present, but the possibility of the future is not ruled out. He also buried a foreshadowing expression “if any” for the community. In this way, users who are waiting for OpenSea to issue coins may not escape the ultimate disappointment.
The potential and challenges of OpenSea
Since the outbreak of the NFT market in 2021, the application of non-homogeneous tokens is actually still in the early stages of the market. The infrastructure on the chain is not rich enough, and the scenarios and usage types still need to be further innovated and expanded.
According to data from the third-party data service provider OKLink, as of January 4, global sales of NFT-related products were US$183 million. Collectibles are still the main category of NFT sales, followed by virtual worlds and game-related NFT scenarios. As of January 5, the total market value of related NFT cryptocurrency projects on Coingecko was 48.5 billion U.S. dollars, accounting for only 2% of the total market value of the crypto asset market.
With more traditional commercial entities participating in fields such as encrypted art, encrypted collections, metaverse, games, etc., there is still a lot of room for development in the NFT market. This is where OpenSea has the potential to continue to expand its market size.
Currently, the NFT products available for trading on OpenSea include 9 categories of art, collectibles, domain names, music, photography, sports, trading cards, utilities, and virtual worlds. Just as the platform announced the C round of financing on January 4, OpenSea’s daily NFT transaction volume surged to 255.8 million U.S. dollars, close to the record of 322 million U.S. dollars set at the end of August last year.
OpenSea NFT categories available for trading
In December of last year, OpenSea’s monthly transaction volume was as high as US$3.24 billion, which was only 5.3% short of the platform’s peak of US$3.42 billion in August. In just 4 days from 2022, the transaction volume of the platform has exceeded 700 million US dollars. Some media predict that in the first month of the new year, OpenSea’s monthly transaction volume is likely to hit a new high.
The performance of the data plane shows that whether OpenSea is issued or not will not prevent it from moving to a larger scale, but it also faces a crossroads. Should we prepare for the Web 3 era, or should we eat the dividends of the Internet’s transformation from Web2 to Web3?
IPO or not is not the fundamental basis for judging whether OpenSea is a Web2 product or a Web3 application. Since its creation, this platform has naturally built a wallet system to provide services for users who love NFT, which is one of the manifestations of its Web3 features.
According to the professional definition of Web3, the future Internet should be a network where users control data and users control the value of data. Blockchain is one of the paths to realize this vision. It allows users and merchants to enter the network without censorship. Users can control their own digital assets and products through their wallets, and related creation, transaction and other data are recorded on an immutable chain. Because the data storage of the blockchain does not need to rely on a centralized server, the data is stored synchronously by decentralized network nodes.
In this way, OpenSea is not enough for Web3, it is not built on the chain, but the NFT products sold through it come from the chain. Taking a long-term perspective, such an NFT trading platform is not without the possibility of being replaced. DeFi is an example. The daily transaction volume of the decentralized trading application Uniswap has surpassed the centralized trading platform Coinbase many times.
There has been a decentralized NFT trading platform. Mintable is one of OpenSea’s competitors. Although its transaction volume is not yet dominant, it is managed by the decentralized autonomous organization DAO, which is more in line with the business platform of the Web3 era. characteristic. Especially when there is no hope for OpenSea to issue coins, crypto users may begin to consider platforms that are more decentralized and more willing to listen to user needs.