OpenSea raises another $300 million, extinguishing users' airdrop dreams

On January 4, OpenSea, the world's largest NFT trading platform, announced that it had raised $300 million in Series C financing at a post-investment valuation of $13.3 billion. The lead investors were Paradigm and Coatue. a16z, the lead investor in Series A and B financing, did not appear in the announcement of Series C financing.

Founded in 2017, OpenSea focuses on the non-fungible token (NFT) trading market. It started in the conceptual stage of blockchain applications and exploded in the NFT development boom in 2021. It took 4 years to become a unicorn company in the crypto industry with a valuation of US$13.3 billion.

After OpenSea announced a new round of financing, it aroused strong indignation among users, and people predicted that the platform was not far from its IPO plan. Although IPO is the capital operation choice for any unicorn company, OpenSea users have been expecting the platform to issue its own encrypted tokens and enter the encrypted asset market sequence rather than the stock market.

OpenSea's main way of making money is to charge transaction fees to trading users. In 2021 alone, the platform's trading volume increased by more than 600 times.

According to user expectations, OpenSea, which makes profits from NFT transactions generated on the blockchain, should develop in the direction of applications in the Web3 era, return the management rights of data and assets to users, and let users share the platform's profits, rather than following the Web2 financing path of traditional Internet companies - relying on traffic to attract capital and ultimately allowing institutional capital to be cashed out from the stock market.

As early as December last year, the IPO idea of ​​OpenSea executives angered community users, which led to an NFT community establishing the OpenDAO organization in this name and issuing a coin for OpenSea.

After the C round of financing, the market's expectations for OpenSea's IPO have increased. Although the platform's CFO has stated that it will consider the suggestions of community users, its actual actions are lowering the expectations of those users who are waiting for OpenSea to issue tokens.

Traditional institutions lead OpenSea’s Series C round of financing

Four years after its establishment, OpenSea completed a new round of financing of US$300 million. This round of financing was only half a year after the last round of financing, and the valuation also increased from US$1.5 billion in the B round of financing last year to US$13.3 billion.

OpenSea's latest financing announcement only disclosed the lead investors Paradigm and Coatue. The former, Paradigm, focuses on the crypto industry and Web3, and is considered the so-called "New Money" in the crypto circle. It is a new investor in OpenSea's financing history.

It is worth noting that Coatue, the latter, was OpenSea's Series B financing partner and ranked behind a16z in the financing news at the time. The institution was originally a veteran hedge fund established in 1999, and later 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 "Cool Home". In the past two years, Coatue's investment focus has begun to turn to the blockchain industry. It is also an investor in "Certik", a smart contract and blockchain ecological security service provider.

OpenSea's most high-profile investor, a16z (Andreessen Horowitz), did not appear in the announcement of the C round of financing. The institution was the lead investor in OpenSea's A and B rounds of financing in 2021. Under its leadership, OpenSea raised US$2300 and US$100 million respectively, making the world's largest NFT trading platform valued at US$1.5 billion after the B round of financing.

OpenSea’s Funding History

In the past four years, OpenSea has completed more than five rounds of financing, with investors including institutions such as Blockchain Capital and a16z, as well as celebrities such as actor Ashton Kutcher and NBA Dallas Mavericks owner Mark Cuban, who are deeply involved in the NFT field. Most of them are representatives of "New Money" in the relevant encryption industry. But in the C round of financing, traditional institutions became one of the leading investors.

It is still unknown whether a16z will exit OpenSea in this round of financing, but Coatue appeared again in the C round of financing. Once this capital, which plays the role of both private equity fund (PE) and hedge fund, got involved, it was hard not to think of OpenSea's IPO plan.

For NFT community users, "OpenSea is going to IPO" is a taboo. In their eyes, this platform, which has developed by relying on NFT transactions on the service chain, can become the world's best without the massive contributions of users. Its users have been looking forward to it developing in the direction of Web3 and DAO (decentralized autonomous organization), and issuing governance tokens so that users who contribute to the transaction fees can enjoy its development dividends.

However, rounds of equity financing have gradually shattered users' "OpenSea's dream of issuing coins." After the announcement of the C round of financing, OpenSea's official Twitter account was flooded with angry users, some questioning whether it would issue coins again, some denying that it is a Web3 product, and some calling on NFT colleagues not to trade on this platform.

Will OpenSea go public?

The keyword "IPO" came from within OpenSea, through the mouth of its new CFO.

On December 6 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 taxi 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 personnel appointment for OpenSea in terms of "expanding the company and serving the community", but as soon as Brian Roberts took office, some people in the NFT community speculated that he would lead OpenSea towards an IPO.

The speculation was quickly responded to in the media. Roberts said in an interview with Bloomberg, "When your company grows so fast, it's foolish not to consider going public." He also added that due to OpenSea's rapid growth and profitability, the IPO will be actively welcomed by the public market.

This statement angered users who were waiting for OpenSea to issue crypto tokens, especially the user groups who contributed a lot of transaction fees to this NFT trading platform and helped it grow. They hope that OpenSea will issue its own tokens to raise funds. This method of raising funds was widely used in DeFi startups and old projects last year. Some users believe that if OpenSea gives up airdrops and conducts an IPO, it would be a betrayal of the community that helped it grow.

However, Roberts said the company itself does not need more cash, but needs to raise funds for partners, acquisitions and joint ventures. Due to the dissatisfaction of the community, Roberts later clarified on Twitter that "the reports about OpenSea's plans are inaccurate. Let me clarify: there is a big gap between thinking about what an IPO will eventually look like and actively planning for an IPO." He added that the company does not plan to conduct an initial public offering, but if there is one, it would like to involve the community.

Roberts did not elaborate on how the user community can participate in a company's IPO. Users who can't wait for OpenSea to issue coins will take the lead.

On December 24, 2021, NFT collector "9x9x9" took advantage of the situation and founded the OpenDAO project in the name of DAO, and airdropped the governance token SOS to OpenSea's trading users, which brought about the last large-scale token airdrop event in 2021. The meme-like hype sentiment sent SOS to the secondary market of crypto assets.

SOS trend in the past two weeks

SOS has been in the market for 2 weeks, and has soared from the initial $0.0000014 to $0.000011, with a maximum increase of 685%. Now it is halved from the peak. If we have to say what it left behind, it is probably a performance art of users' counterattack against OpenSea's IPO plan, which shows the users' true expectations for the platform native to the crypto industry.

Now, OpenSea has completed its C round of financing, which is likely not to be its last round of financing.

Take Coinbase, the first crypto-asset trading platform, for example. It went public on the U.S. stock market in April last year. From 2013 to 2020, it went through 17 rounds of financing in 7 years, totaling US$547.3 million, and finally went to IPO. In comparison, OpenSea's financing amount and progress are faster.

Interestingly, both platforms have the participation of capital party a16z, which led the $25 million Series B financing of Coinbase. In OpenSea's A and B rounds of financing, the total financing led by the institution has reached $123 million. This also reveals that capital prefers the NFT market with stronger practicality and transformability.

From the statement of OpenSea CFO Roberts that "OpenSea does not plan to conduct an IPO", the platform may not IPO at present, but it does not rule out the possibility of IPO in the future. He also left a foreshadowing for the community, "if there is one". From this point of view, users who are waiting for OpenSea to issue tokens will probably be disappointed in the end.

OpenSea’s potential and challenges

Since the NFT market exploded in 2021, the application of non-fungible tokens is actually still in the early stages of the market. The on-chain infrastructure is not rich enough, and the scenarios and usage types still need further innovation and expansion.

Data from third-party data service provider OKLink shows that as of January 4, global sales of NFT-related products reached $183 million, with collectibles 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 NFT-related crypto token projects counted on Coingecko was $48.5 billion, accounting for only 2% of the total market value of the crypto asset market.

With more traditional businesses participating in crypto art, crypto collections, the metaverse, games and other fields, the NFT market still has a lot of room for development. This is also the potential for OpenSea to continue to expand the market size.

Currently, the NFT products available for trading on OpenSea include art, collectibles, domain names, music, photography, sports, trading cards, utilities, and virtual worlds. On January 4, when the platform announced its Series C financing, OpenSea's NFT daily trading volume surged to $255.8 million, close to the record of $322 million set at the end of August last year.

OpenSea’s NFT categories available for trading

In December last year, OpenSea's monthly trading volume reached $3.24 billion, only 5.3% lower than the platform's peak of $3.42 billion in August. Just four days into 2022, the platform's trading volume has exceeded $700 million. Some media predict that in the first month of the new year, OpenSea's monthly trading volume is likely to hit a new high.

The data shows that whether OpenSea issues coins or not will not hinder its growth to a larger scale, but it is actually facing a crossroads - should it prepare for the Web 3 era, or reap the benefits of the Internet's transformation from Web2 to Web3 now?

Whether or not there is an IPO 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 NFTs, which is one of the manifestations of its Web3 characteristics.

According to professionals' definition of Web3, the future Internet should be a network where users control data and have power over 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 manage their own digital assets and products through wallets. Relevant creation, transaction and other data are recorded on an unalterable chain. Because blockchain data storage does not need to rely on centralized servers, data is synchronously stored by decentralized network nodes.

In this way, OpenSea is not Web3 enough. It is not built on the chain, but the NFT products sold by it come from the chain. In the long run, such NFT trading platforms are not impossible to be replaced, and DeFi is an example. The daily trading volume of the decentralized trading application Uniswap has surpassed the centralized trading platform Coinbase many times.

There are already decentralized NFT trading platforms. Mintable is one of OpenSea's competitors. Although its trading volume is not yet dominant, it is managed by a decentralized autonomous organization DAO, which is more in line with the characteristics of a commercial platform in the Web3 era. Especially when OpenSea's coin issuance is hopeless, crypto users may begin to consider platforms that are more decentralized and more willing to listen to user needs.