OpenSea Is A $13 Billion Business

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Hey Friends,

It felt like you couldn’t go anywhere last year without hearing about non-fungible tokens (NFTs), and I’m not sure anyone benefitted more from that than OpenSea.

The peer-to-peer NFT marketplace founded in 2017 by Devin Finzer and Alex Atallah watched its annual transaction volume go from $475,000 in 2018 to more than $15 billion in 2021 — that’s a compounded annual growth rate of 1,233%.

OpenSea Transaction Volume

• 2018: $475k

• 2019: $8 million

• 2020: $24 million

• 2021: $15 billion

And with a 2.5% fee on all transactions, it’s fair to say OpenSea had a great year.

But with business off to an even hotter start in 2022—OpenSea is currently on pace to do $80 billion in transaction volume this year—the NFT marketplace just raised a $300 million Series C led by top investment firms Paradigm and Coatue Management.

The craziest part? After raising at a $1.5 billion valuation just six months ago, this new $300 million Series C round values OpenSea at an astonishing $13.3 billion.

And with an estimated 18.5% stake in the business, co-founders Devin Finzer & Alex Atallah are now worth around $2.2 billion each.

Here’s what Coindesk had to say about the funding round:

Now I don’t consider myself an expert on the security, marketing, infrastructure, distribution, or scaling of OpenSea. Many people spend way more of their time on that than I do, so it’s probably best that I leave that analysis to them.

But I don’t think most people outside the NFT space realize how dominant OpenSea has become — here are a few charts from Dune Analytics to illustrate what I mean.

First, here’s how OpenSea’s user base has grown over the last year.

Here’s the total growth of all NFT transactions — from a virtually non-existent market 12 months ago to roughly 400,000-plus weekly transactions today.

Lastly, this chart shows you how much of a dominant position OpenSea has built up in the NFT space, owning nearly 100% of the transacted market volume today.

This isn’t to say OpenSea doesn’t have problems; they do. Many people who use the marketplace seem to be shocked at the disconnect between venture capital funding and the feedback from people that are actually using the platform daily.

There are security issues. The website crashes multiple times per week, and the general feeling I get is that most people would be willing to try Coinbase or a decentralized alternative should it be available later this year.

Of course, it’s nearly impossible for one company to own 100% of a multi-billion-dollar market for an extended period. Other companies will launch similar products, raise money, and start aggressively subsidizing user acquisition costs.

The key will be to watch how OpenSea defends against this.

But we could discuss the nuance forever. It’s a new market that is showing explosive growth, and the truth is that no one actually knows for certain how this will play out.

Instead, my biggest takeaway from the success of OpenSea is the concept of optimism.

The “right-click save” crowd has been calling NFTs a scam on Twitter for over a year now, and maybe it doesn’t turn out to be the next big thing, but in the meantime, Devin Finzer and Alex Attalah spent that time building a $13 billion business and created more than $2 billion of personal wealth for themselves.

Remember, pessimists sound smart. Optimists get paid.

We’ll see how this all plays out. My guess is that the next 12 to 24 months end up determining the biggest winners in the space. But regardless, I’m rooting for the team at OpenSea.

You don’t have to own an NFT to realize that the world is a much better place when people have optimism for the future and builders are able to spend their time building.

I hope everyone has a great day, and we’ll talk tomorrow.

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