The gamble of the founder of Opensea: From a team of five to a billionaire
This article comes fromForbes, original author: Jeff Kauflin
Odaily Translator |
Odaily Translator |
From an obscure start-up company to a unicorn with a valuation of more than $10 billion, OpenSea only took four years.
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Survive the epidemic and win the market after a difficult start
OpenSea was established on November 20, 2017. The two co-founders are Devin Finzer and Alex Atallah. They received seed round financing from the well-known venture capital incubator Y Combinator in 2018, but soon ushered in a long encryption bear market. In November 2019, they raised a $2.1 million investment from Animoca Brands, and they survived the difficult time smoothly. Frankly, it hasn't been an easy journey for Devin Finzer and Alex Atallah.
Startups are supposed to specialize in the development of a certain technology. However, the founders of OpenSea created and traded various NFTs by creating an open market. These NFTs include art, music, and games. Now they have become millionaires through the market and are on the verge of entering the billionaire club, but they now face other worries, such as pressure from competitors, the threat of fraudsters and the next cryptocurrency crash.
In March 2020, the new crown virus epidemic spread around the world. For OpenSea, which had only five employees at the time, it was an extremely severe test.
OpenSea is a platform that allows users to freely create, buy, and sell various NFTs. However, after 26 months on the line, they have only acquired 4,000 active users, with a monthly transaction volume of 1.1 million US dollars. According to OpenSea’s analysis of each transaction Based on a 2.5 percent sales commission, they make a paltry $28,000 a month. On the other hand, the NFT market at the time had a “feeling of lifelessness.” Alex Atallah, then CTO of OpenSea, recalled that he could only talk to Devin Finzer in the basement of his parents’ house every day because the entire New York City was closed. up.
Even more worrisome, OpenSea's then-biggest competitor, Rare Bits, which at the time had plenty of money, didn't make it through and declared bankruptcy. Devin Finzer and Alex Atallah felt the seriousness of the situation and decided to set up a seemingly Impossible goal: double sales by the end of 2020.
Perhaps the result of hard work and luck, the goals of Devin Finzer and Alex Atallah were completed ahead of schedule in September 2020.
In February 2021, the NFT market woke up from hibernation, and then became more and more crazy. In July 2021, the NFT transaction volume on the OpenSea platform reached 350 million US dollars. In the same month, OpenSea raised $100 million in venture capital at a valuation of $1.5 billion in a round of financing led by well-known venture capital Andreessen Horowitz. In August 2021, as the industry boomed and the market was flooded with "fear of missing out" investment sentiment, the NFT market reached a climax, and OpenSea's transaction volume soared tenfold to $3.4 billion—and in just one month, They received a commission of 85 million US dollars, and their expenses at the time were less than 5 million US dollars, so it is not an exaggeration to say that they "made a lot of money". Although OpenSea's transaction volume has since fallen back to around $2 billion per month, the platform has otherwise firmly established market dominance with 1.8 million active users.
OpenSea now employs more than 70 people and is looking for more, including much-needed customer service representatives.
However, Devin Finzer and Alex Atallah were not overwhelmed by the victory, because their personalities have always been very low-key and calm.
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Clear strategy, dare to take risks
Back in November 2021, Alex Atallah sat next to a 32-foot replica of the Statue of Liberty at a restaurant in New York's new Margaritaville Resort Times Square, Unlike the real Statue of Liberty, this replica is holding a cocktail instead of a torch. Alex Atallah was sitting there because he was invited to present at the third annual NFT.NYC convention, which attracted 5,500 registrants, 3,000 of whom were on the waiting list. Young NFT enthusiasts wandered the hotel wearing sweatshirts emblazoned with Bored Ape Yacht Club — a nod to the hottest NFT in the crypto community right now.
Frankly speaking, NFT has become more than a collectible or investment item, but has become a social tool.
You might think that low-key humility is the key to the success of Devin Finzer and Alex Atallah, but in fact, the two have a very firm entrepreneurial strategy and determination.
In fact, some business consultants have suggested and even urged them to specialize in a certain NFT niche, such as art, games, or music, but they have chosen to create a non-category NFT trading platform because they feel that they do not have enough Foresight to predict which type of NFT will become popular.
Devin Finzer explained that aside from casting a wide net, OpenSea thrived because it was "in the right place at the right time." More importantly, they are willing to listen to the voice of users. The platform tracks NFTs on Ethereum and other blockchains, all purchases are made in encryption, sellers can choose a fixed price or auction format, and artists can set a commission percentage for each NFT resale. Ultimately, Devin Finzer thinks the NFT ownership verification model will work for anything from concert tickets to real estate, he's just not sure when it will be.
"I've always been pessimistic about the future" - said Devin Finzer.
Despite its success, OpenSea still faces huge and diverse risks, such as fraud, another NFT market crash, and other market competition.
OpenSea's open marketplace strategy exacerbated the risk of knockoffs, scams, and fraud -- a situation similar to that seen in early Internet marketplaces such as Amazon and eBay. As an example, scammers can copy images of other people's artwork and sell them as NFTs on OpenSea. Devin Finzer said OpenSea is working on a way to automatically identify knockoffs and has hired moderators to investigate suspicious products. But despite this, human participation can still be problematic - in September 2021, Devin Finzer ordered the OpenSea product director to resign after Twitter users discovered that an encrypted wallet related to the executive was found shortly before some NFTs appeared on OpenSea's homepage. Is buying these NFTs - in other words, he acquired these NFTs before OpenSea launched related products.
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Heroes don't ask where they come from
Despite their modesty, OpenSea's two co-founders have always been ambitious. Devin Finzer, who grew up in the Bay Area with a doctor mom and a software engineer dad, grumbled about being rejected from prestigious schools like Harvard, Stanford, Princeton, and Yale (Devin Finzer chose Brown University), After a stint as a software engineer at Pinterest, Devin Finzer co-founded his first startup, Claimdog, in 2015 and sold it to Credit Karma a year later.
Alex Atallah was born in Colorado. His father is a Colombian immigrant and his mother is an American. At a very young age, he was able to compare the attributes of objects, such as birds and browsers, by making spreadsheets. After graduating from Stanford University, Alex Atallah worked as a programmer for a while, and then met Devin Finzer.
In January 2018, the two entered the startup incubator Y Combinator, and their entrepreneurial project at the time was to allow "users to pay cryptocurrency to share Wi-Fi hotspots." However, a popular encryption game at that time attracted the attention of two people. This game was Cryptokitties, the originator of NFT and chain games. Alex Atallah recalled, "Crypto Kitties made people who didn't really care about cryptocurrencies really interested in the crypto industry for the first time, and I thought it was really amazing." So, the two quickly shifted their business focus to OpenSea, And moved the company to New York.
Like Beanie Babies, however, Cryptokitties turned out to be short-lived. Interest in both cryptocurrencies and NFTs has died down after a brief spike in prices in early 2018, when most Cryptokitties were worth little due to too much supply.
In fact, it is not OpenSea that will wake up the NFT market in early 2021, but the Nifty Gateway launched by billionaire brothers Cameron Winklevoss and Tyler Winklevoss. This platform attracts attention with well-curated high-quality artwork. In March 2021, Christie's auction house sold digital artist Beeple's NFT work "everyday: the First 5000 Days" at a high price of US$69 million, which is also the third highest price for a living artist.
As the price of NFT becomes more and more eye-popping, ordinary people also want to get a share of it and become NFT creators, collectors or speculators, so they turn to OpenSea, because the concept of OpenSea fits their expectations very well, namely:
Let anyone become an NFT artist.
On the other hand, OpenSea also has a built-in secondary market and an easy-to-use interface. For example, the OpenSea website has an advanced screening system to facilitate users to find NFTs with the rarest attributes (and theoretically the most valuable) — For example, only 46 NFTs of Bored Apes have solid golden fur, so they command a high premium. When a new NFT is created and recorded on Ethereum, the site automatically generates a webpage displaying it—a nice feature, as NFTs become a status symbol and people can share their OpenSea page and change their Twitter avatar to an NFT they own.
Richard Chen, a partner at venture capital firm 1confirmation and an early investor in OpenSea, explained: "Driven by envy and desire, the NFT market has become a continuous feedback closed loop, and OpenSea has really captured this market."
* Dani, 27, a former fashion designer living in Georgia, turned a $17,000 investment in NFTs like Women's World into a $715,000 portfolio.
* AJ, a 37-year-old former gaming company CEO from North Carolina, put less than $10,000 into an NFT and now values his digital asset at $1.3 million. AJ also convinced his gastroenterologist brother to start buying NFTs, and the brother in turn convinced his best friend to join OpenSea. AJ said, “Right now, my brother is almost doing a colonoscopy while pulling out his phone to see if there are new NFT releases.”
Does it sound like NFT is a bubble market? Well, this actually begs another question: How will OpenSea respond when the bubble bursts? Devin Finzer calmly replied:
