NFTs or Non-fungible tokens are cryptographic possessions belonging to a blockchain that certify unique ownership of a digital asset such as music, art, games, or other collectables. What makes it distinct from a cryptocurrency, is that its tokens cannot be exchanged. While they have seen a massive spike in interest over the last two years, global sales have fallen this year.

Interest in NFTs

Source: https://www.bnymellon.com/us/en/insights/all-insights/venture-capital-investment-in-nft-marketplace.html

Fall in NFT global monthly sales:

Examples of NFTs

• Digital artwork
• Virtual fashion items
• In-game items
• Essays and articles
• Digital collectables 
• Domain names
• Tickets and coupons

NFT Marketplaces

NFT marketplaces are similar to most e-marketplace sites, and some offer a wide array of NFTs to choose from namely; OpenSea and Rarible, and some are more specialised. Hybrid marketplaces, such as Genies, which received startup funding from VCs in 2021, allow customers to create or buy customizable wearable NFTs. Top Shot, is another firm that secured venture capital funding and sells animated NBA basketball cards. SuperRare is one of the companies that focuses on a niche of NFTs and raised $9M of venture capital to sell high-end digital art. Whether NFTs are a passing ‘fad’ or are here to stay mainly comes down to an individual’s opinion. What can’t be disputed though, is the fact that venture capital firms are still fans of crypto assets – almost giving away VC funding from their much sought-for kitties. But before we get to the venture capital firms that invest in seed funding and startup funding, we need to understand the craze behind ownership of NFTs and why VCs continue to believe in them.

Why Own?

• Support artists you like:

Apart from getting basic usage rights; like posting an image online, buying NFTs is a great way to support local artists and their work. This promotes a more creative artistic environment for artists who don’t really have a market to sell in – or have no way to secure VC funding for their businesses.

• Great for collectors:

Selling at a profit after buying low is the greatest fiscal reward a collector could gain. There is a tremendous upside to NFTs – if bought right.

• Limited availability:

This is another factor that can shoot up the price; some NFTs that you purchase are only one-of-a-kind and is highly valuable due to them being scarce.

• Authentic:

Since each token is unique, there are ways to trace the originality of the token in question. Reproducing something digitally doesn’t always mean that you’re allowed to. Most countries have copyright laws that oversee this.

Venture Capital and NFTs: A match made in heaven

If falling sales, widespread ridicule, and overpriced tokens are all here to spoil the NFT party, then why are investors continuing to pour in venture capital financing? What makes this even more interesting is that startups secure seed funding and venture capital financing at early stages, without having to ‘proven’ track record. What are we missing?

• Cultural Shift:

VCs believe that NFTs will dominate the future, and bring cryptocurrencies to the masses. Unlike most cryptos, NFTs are relatable to everyday life such as art, music and games.

• Unlimited innovation potential:

VCs, see NFTs as the missing piece in their incessant pursuit to chase innovation that has high amounts of returns in the foreseeable future.

• The trend of big-names buying NFTs:

VCs believe that more money is going to come from celebrities over the next few years – they prefer ownership of art and other tokens rather than traditional ways of investments. Some of the noteworthy personalities who’ve bought NFTs are Jay-Z, and Mark Cuban.

• Diversify:

The old adage continues to dominate the investment strategies of venture capitalists. Diversify, and diversify in innovation.

Going forward, analysts expect VCs in NFTs will be impacted by backend technology infrastructure, retail participation, and the consumer brand appeal related to NFTs.

Noteworthy VC investments in NFTs: Seed funding and beyond

Common Questions

How Can I Buy NFTs?

Step 1: Buy Ethereum

Step 2: Get a Crypto Wallet

Step 3: Visit an NFT Marketplace

Step 4: Purchase Your NFT

Are they Safe?

Generally, yes – but they aren’t impossible to hack. Also, another risk you face is that if the platform you used goes bust, you could lose access to your NFT token.

How do I make my own NFT?

• Choose a digital wallet
• Set up a digital wallet to pay for your NFT
• Add cryptocurrency to your wallet
• Connect your wallet to an NFT platform
• Upload the file you want to turn into an NFT
• Set up an auction for your NFT
• Add a description to sell your NF
• Pay the listing fee to sell your NFT

• What does this mean for me as an NFT business?

On the off chance that you own an NFT platform, and are looking to get access to venture capital funds, it would work in your favour knowing that VCs are investing in this segment more than ever simply because they believe that it will be the new boon in the future.  Because there’s a lot that goes into securing capital, make sure you have pros by your side every step of the way. Give us a call at +1-213-600-7272, and we’ll help you get your business off the ground.

Parting Words

Whether NFTs are here to stay or not, is up for debate. What we can do for now is understand the figures that lead us to a fuller narrative of the crypto market. Falling sales and widespread criticism can be used as red flags, but there’s a reason why VC analysts spend so much time and money investing in Non-fungible tokens. Rather than just simply jumping on the bandwagon, take your time to study what you’re getting yourself into, and as always – have pros guiding you.