The first billionaires have emerged from the NFT frenzy.
Following a new fundraising round announced on Tuesday that valued the firm at $13.3 billion, up from $1.5 billion just six months ago, the founders of buzzy blockchain startup OpenSea have joined the three-comma club. Cofounders Devin Finzer and Alex Atallah are individually worth roughly $2.2 billion thanks to their estimated 18.5 percent interests in OpenSea.
The New York City-based business, which was founded four years ago, was an early player in the NFT sector, which took off in early 2021. NFTs (short for “nonfungible tokens”) are computer files that are used to track ownership of unique digital goods such as art, music, and even virtual sports cards on a blockchain ledger. OpenSea describes itself as a peer-to-peer platform where users can build, purchase, and sell various NFTs in exchange for a 2.5 percent cut of each transaction.
Over the last year, OpenSea has experienced significant growth. In March 2020, the five-person company had over 4,000 active customers who transacted $1.1 million per month, generating about $28,000 in monthly revenue. In February 2021, its fortunes shifted when platforms like the Winklevoss twins’ Nifty Gateway created a stir by auctioning off high-end digital art. By the end of July, OpenSea had raised $100 million in a round sponsored by venture capital company Andreessen Horowitz, and had completed $350 million in transactions. The following month, transactions totaled $3.4 billion, a ten-fold increase that netted the company $85 million in commissions.
In the months that followed, the NFT market cooled significantly before heating up again in December. Last month, OpenSea handled more than $3.3 billion in sales, producing $82.5 million in income for itself. The company now has more than 70 employees.
Finzer and Atallah, both in their thirties, have the kind of résumé that young tech billionaires are known for. CEO Finzer is a Bay Area native who attended Brown University and worked at Pinterest as a software developer. He co-founded his first company, Claimdog, in 2015, and sold it to Credit Karma for an unknown price a year later. Chief Technology Officer Atallah, who was born in Colorado, has always been a spreadsheet prodigy. According to his LinkedIn profile, he worked at Palantir while at Stanford and at Silicon Valley firms Zugata and Whatsgoodly following graduation.
The two partnered up for the Y Combinator business accelerator in January 2018 with the idea of paying consumers cryptocurrency to share their Wi-Fi hotspots. CryptoKitties, however, a cartoonish virtual kitten that was one of the first demonstrations of NFTs, caught their imagination. Finzer and Atallah swiftly shifted their focus and relocated to New York to create OpenSea.
According to data from PitchBook, OpenSea has raised over $420 million in funding since its inception. Paradigm and Coatue, two venture capital firms, led a $300 million Series C round announced on Tuesday. OpenSea intends to expand its workforce, focusing on its “trust and safety” teams, as well as investing in making its goods more accessible to a broader audience.
OpenSea is up against the stiff competition, including cryptocurrency behemoth Coinbase, which revealed plans to start its own NFT exchange in October. In the NFT realm, critics have also raised concerns about the possibility of fraud and cons. Finzer asked OpenSea’s head of product to leave in September when it was discovered that he was buying NFTs just before they went live on the marketplace. Last week, a New York art gallery alleged that $2.2 million in NFTs had been stolen from him and listed on OpenSea.
There is hope for even more wealth accumulation if only the corporation could endure the current status quo. According to statistics recorded by DappRadar, $23 billion worth of NFTs exchanged (virtual) hands in 2021–and the market is just getting started.
In an emailed statement, Finzer said, “Our objective is to be the destination for these new open digital economies to develop.”