Although the transaction volume of Opensea as a whole fell below 50 million US dollars in August, it seems that capital is accelerating its pace. NFT has grown from the earliest OG collectors, to all in web3 entrepreneurs, to the web2 physical industry looking for new business scenarios, and now more and more venture capital institutions choose to directly invest in incubating NFT projects. It seems that the investment hotspot of the NFT track is no longer just infrastructure, or the NFTfi protocol. And what kind of impact will these NFT projects that have been blessed by capital have on the market? As an individual investor, how should you view the behavior of the NFT project you hold being blessed by a star venture capital institution?
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Well-known NFT project financing cases in 2022
It can be seen that although the currency market and the NFT market have turned from bulls to bears, the speed at which institutions enter the market has not slowed down, and they continue to increase their stake in various types of NFT projects. Among them, DigiDaigaku's freemint was released to a floor price above 10 eth, which made the NFT market at the end of August not deserted. And this phenomenon has also triggered a new trend, that is, should retail players prefer those projects that are blessed by star institutions?
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The project floor price changes seven days after the financing news release
Let's put NFT aside and talk about the financing of Defi projects. Often those projects that are endorsed by large institutions and get enough start-up funds mean that the project can speed up the development progress and speed up the listing process. This is why a large number of individual investors choose to interact and experience projects that have received high-quality institutional financing in the early stage, in order to obtain rich return on listing airdrops.
But the logic of NFT projects is different. First of all, as a project party, the essence of selling NFT is already a financing behavior. Usually, when the project party has nothing in the early stage, it sells NFT to prepare for the road map it wants to realize in the future. Therefore, the early holders of these NFT projects can be understood as doing venture capital themselves, and the difference is that the valuation logic of the NFT project itself is different from the valuation logic of the parent company behind it. In addition, although a large number of NFT projects will have a currency issuance plan, is the purpose of NFT investment for the appreciation of NFT itself, or the expectation of future currency issuance? Will the NFT itself dilute the value of tokens issued in the future? These are all difficult issues for NFT individual holders to verify. Therefore, it is not advisable to think that the NFT will rise because the parent company of the NFT project that you only refer to the Defi project to obtain institutional financing will receive financing.
So, what is the relationship between the parent companies behind these NFT projects obtaining institutional financing and the market value of NFT projects? According to the data of NFTGo, at present, according to the market value of NFT projects, only Azuki has not conducted market-oriented financing. This is a very special example, because its parent company Chiru Labs has not had a real name for a long time. It is still the highest quality Asian painting style and is unique. And Azuki began to accumulate treasury revenue very early, and has accumulated hundreds of millions of assets. It can be said that the popularity of this project makes it rich in capital, so if it is not for strategic cooperation needs, it will definitely not choose the road of market-based financing.
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NFT project valuation ranking
But holding equity in these companies is fundamentally different from holding NFT.
First of all, as shareholders of the company, they have only one expectation, which is the rate of return on financial investment. The rate of return on financial investment depends on whether the company can eventually go public, or be acquired at a price dozens or even hundreds of times the initial investment. And what determines the final result is whether the company can generate enough profits. The logic of traditional web2 companies is that the products they produce or the services they provide are exchanged for income and profits. But as a company that issues NFT projects, this logic has changed. Although this virtual product has been "produced", the purchaser or holder expects to be able to generate real income through the appreciation of this product or the value attached, such as airdrops by the project party. And in this process, there will be a contradiction, that is, how should the income generated by the project itself, or the added value, be distributed to the parent company and NFT holders?
If the project party distributes more benefits such as airdrops or cash flow related to the project’s gameplay mechanism to NFT holders in order to further increase the floor price, then the income of the parent company will naturally decrease, and the profit growth rate will also increase. Shareholders will also have great doubts about the company's value growth potential in the future, which will affect subsequent financing and listing. However, if the project party is very fancy about its brand value and income, and is unwilling to issue airdrops or share revenue with NFT holders, then the value of NFT will drop, which will eventually affect the overall development progress of the project. Therefore, for centralized NFT project parties, how to balance the interests of shareholders and NFT holders has become an eternal problem.
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The relationship between investment institutions, project parties, and NFT holders
author:
author:@ReffoNFT
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