Non-fungible tokens are only a decade old as a technology. Despite this, venture capital firms are pouring money into NFT businesses, converting them into billion-dollar corporations — dubbed “unicorns” in Silicon Valley — almost overnight in an investment frenzy evocative of the 1990s dot-com craze.
Yuga Labs, the parent firm of the Bored Ape Yacht Club – a collection of NFTs with cartoon ape profiles — announced a $450 million investment round this week. This puts the company’s worth at $4 billion. In January, NFT platform OpenSea announced a $300 million funding round, valuing the firm at an even higher $13 billion.
According to the Venture Capital Journal, which cites PitchBook, venture investors spent $4.6 billion in NFT startups last year, up from $145 million in 2020.
What is it about these digital-token companies that makes them so appealing? According to Jason Heltzer, managing partner at Origin Ventures and adjunct professor of entrepreneurship at The University of Chicago Booth School of Business, venture capitalists are flocking to the NFT area for two key reasons.
“While NFTs are valuable in and of themselves, the underlying blockchain technology may be employed in a variety of applications,” Heltzer told CBS MoneyWatch.
Yuga Labs declined to comment on its current fundraising round, but the business expects to spend some of the $450 million to grow its creative and engineering teams, as well as create the Otherside metaverse platform.
In a statement released Tuesday, tech investor Guy Oseary, who participated in the investment round, said, “This cash will provide Yuga speed to market on several things underway.”
OpenSea CEO Devin Finzer stated earlier this year that a portion of the company’s most recent fundraising round will be used to make it easier for artists to build NFTs on the platform. In addition, the business is introducing a funding programme for NFT developers.
An NFT uses a unique code linked to a picture or video on the blockchain to provide digital evidence of ownership of goods or access to services. NFTs can be transferred or sold, but not replicated or divided into smaller sections, due to their one-of-a-kind nature.
Some people purchase NFTs in the hopes that their value would increase, while others do it just for the sake of bragging rights.
Customers flock to NFT markets to acquire digital collectibles in the form of NFTs. When a buyer buys anything, a portion of the money goes to the person who invented (or “minted”) the NFT, and the rest goes to the marketplace. On OpenSea, for example, 2.5% of the purchase price of an NFT — which is decided by the author — goes to the site.
Celebrities, entertainers, and sportsmen utilised NFTs to market their work, causing their popularity to skyrocket in 2021. Last year, 3LAU, a New York DJ, sold a collection of NFT football cards for more than $11 million, while NFL player Rob Gronkowski sold one NFT football card for himself for more than $1.6 million.
According to experts at investment bank Jefferies, the worldwide market for NFTs is expected to expand to $35 billion this year and $80 billion by 2025. In the next few years, venture investors expect an increasing number of consumers to desire to acquire an NFT.
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