The Gamble Road of Opensea's Founders: From a Team of Five to Billionaires

Image source @ Visual China

Titanium Media Note: This article is from Forbes, the original author: Jeff Kauflin, translator | Moni

At the start of the new year of 2022, the first good news for the crypto industry is Opensea, the king of the NFT market, which announced on January 5 that it had completed a series C funding round of up to $300 million, and the valuation soared to $13 billion, and the co-lead investors in this round of financing were Paradigm and hedge fund Coatue Management, which included the crypto and Web3 investment funds founded by former a16z partner Kathryn Haun.

From a humble startup to a unicorn valued at more than $10 billion, OpenSea took just four years.

Survived the epidemic and won the market after a difficult start

OpenSea was founded on November 20, 2017, and the two co-founders are Devin Finzer and Alex Atallah, who received funding from the well-known venture capital incubator Y Combinator seed round in 2018, but soon ushered in a long crypto bear market, and in November 2019 they raised $2.1 million from Animoca Brands and survived that difficult time. Frankly, Devin Finzer and Alex Atallah have not been easy along the way.

Startups are under the impression that they should specialize in developing a technology, but OpenSea founders create and trade NFTs that include art, music, and games by creating an open marketplace. Now that they have become millionaires through the market and are about to enter the billionaire club, they currently face other concerns such as pressure from competitors, threats from fraudsters and the next cryptocurrency crash.

In March 2020, the COVID-19 pandemic spread across the globe, a tough test for OpenSea, which had only five employees at the time. OpenSea is a platform that gives users the freedom to create, buy, and sell all kinds of NFTs, however, after 26 months of going live, they have only 4,000 active users and a monthly turnover of $1.1 million, which is only a minuscule $28,000 per month based on OpenSea's 2.5% referral fee for each transaction.

On the other hand, there was a "dead feeling" in the NFT market at the time, with Alex Atallah, then OpenSea's chief technology officer, recalling that he had to talk to Devin Finzer on the phone every day in the basement of his parents' house because the entire city of New York City was locked down. Even more worrying, OpenSea's biggest competitor at the time, Rare Bits, didn't survive and declare bankruptcy, knowing that Rare Bits had plenty of money, Devin Finzer and Alex Atallah felt the gravity of the situation and decided to set a seemingly impossible goal: to double their performance by the end of 2020!

Perhaps by God's arrangement, Devin Finzer and Alex Atallah's goal was accomplished 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 OpenSea platform reached $350 million in NFT trading volume. In a round of funding led by well-known venture capital Andreessen Horowitz that same month, OpenSea raised $100 million in venture capital at a valuation of $1.5 billion.

In August 2021, the NFT market culminated with an industry boom and a "fear of missing out" investment sentiment, with OpenSea's trading volume soaring 10 times to $3.4 billion — and receiving $85 million in commissions in just one month, and their spending was less than $5 million at the time, so it's not an exaggeration to say "make a big profit.". Although OpenSea trading volume has since fallen back to around $2 billion per month, the platform has firmly dominated the market with 1.8 million active users.

Today, OpenSea has more than 70 employees and is looking for more, including much-needed customer service representatives.

With Devin Finzer, 32, and Alex Atallah, 30, each owning 19 percent of OpenSea, they're undisputed billionaires after their latest funding is complete.

Devin Finzer and Alex Atallah weren't carried away by the victory, though, because their personalities have always been very low-key and calm.

Be strategically clear and dare to take risks

Let's take the time back to November 2021, when Alex Atallah sat next to a 32-foot-tall replica of the Statue of Liberty in a restaurant at The Margaritaville Resort Times Square in New York, which, unlike the real Statue of Liberty, was holding not a torch but a cocktail.

Alex Atallah sat there because he was invited to attend the third NFT. NYC's annual conference, which attracted 5,500 registrants, of whom 3,000 were on the waiting list. Young NFT enthusiasts wander around the hotel in sweatshirts printed with the Bored Ape Yacht Club – a tribute to the ape-based NFT. Frankly, NFTs have become more than just collectibles or investments, but have become a social tool.

You might think that low-key humility is the key to the success of Devin Finzer and Alex Atallah, but they have a very strong entrepreneurial strategy and determination.

In fact, some business consultants have suggested, or even urged, to specialize in a certain NFT segment, such as art, games, or music, but they have chosen to create an NFT trading platform that does not classify others because they think they are not prescient enough to predict which type of NFT will become popular.

Devin Finzer explains that in addition to casting a wide net, another reason OpenSea is thriving is that it "was in the right place at the right time." More importantly, they are willing to listen to their users. The platform tracks NFTs on Ethereum and other blockchains, all purchases are made in a cryptographic fashion, sellers can choose between fixed prices or auction forms, and artists can set a percentage of the commission for each NFT resale. Ultimately, Devin Finzer argues that the NFT ownership verification model works for anything from concert tickets to real estate, and he's just not sure when it will be successful. "My vision of the future has been bleak," says Devin Finzer.

Despite its success, OpenSea still faces significant and diverse risks, such as fraud, another NFT market crash, and other market competitions.

In October 2021, Coinbase, the original investor in OpenSea, the largest cryptocurrency trading platform in the United States, announced that it would launch its own NFT P2P market. Within weeks, the Coinbase NFT platform's waitlist attracted 2.5 million people to sign up, and Coinbase CEO Brian Armstrong predicted that the new NFT business "could be as large as or even larger than its core crypto trading business."

OpenSea's open market strategy exacerbated the risk of counterfeits, scams, and fraud — similarly in early internet markets like Amazon and eBay. For example, a scammer can copy an image of someone else's artwork and sell it as an NFT on OpenSea. Devin Finzer said OpenSea is working on a way to automatically identify counterfeits and has hired moderators who investigate suspicious products.

Still, human involvement can be problematic — in September 2021, Devin Finzer ordered the head of OpenSea products to resign because Twitter users discovered that a crypto wallet related to the executive was buying them shortly before some NFTs appeared on OpenSea's homepage — in other words, he acquired them before OpenSea launched the product.

Heroes don't ask for provenance

Despite the humble impression, the ambitions of the two openSea co-founders are not low. Devin Finzer grew up in the Bay Area, his mom a doctor, his dad a software engineer dad, he was angry about his rejection by Harvard, Stanford, Princeton and Yale (Devin Finzer chose Brown University), and after working as a software engineer at Pinterest for a while, Devin Finzer partnered with others to create 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, his mother is American, and at a very young age, he can make spreadsheets to compare object attributes such as birds, browsers, etc. After graduating from Stanford University, Alex Atallah worked as a programmer for a while before meeting Devin Finzer.

In January 2018, the two joined the startup incubator Y Combinator, where their project at the time was to get "users to pay cryptocurrency to share Wi-Fi hotspots." However, at that time, a popular encryption game attracted the attention of two people, this game is the NFT and chain game originator "crypto cat" Cryptokitties. Alex Atallah recalls, "Crypto Cats made it really remarkable for people who didn't really care about cryptocurrencies to really get interested in the crypto industry for the first time." As a result, the two quickly shifted their focus to OpenSea and moved the company to New York.

However, like Beanie Babies, the "crypto cat" Cryptokitties eventually proved to be short-lived. Most "crypto cats" Cryptokitties are not worth much money due to so much supply, and interest in cryptocurrencies and NFTs has been silenced after a brief spike in their prices in early 2018.

In fact, it wasn't OpenSea that woke up the NFT market in early 2021, but Nifty Gateway, launched by billionaires Cameron Winklevoss and Tyler Winklevoss, a platform that captures attention with carefully curated, high-quality artwork. In March 2021, Christie's auction house sold digital artist Beeple's NFT work everyday: the First 5000 Days for $69 million, the third-highest-selling living artist.

As the price of NFTs becomes more and more eye-popping, ordinary people want to get a piece of it and become NFT creators, collectors or speculators, so they turn to OpenSea because the openSea concept is very much in line with their expectations, namely:

Make it possible for anyone to become an NFT artist.

OpenSea, on the other hand, has a built-in secondary marketplace and an easy-to-use interface, for example, the OpenSea website has an advanced screening system that makes it easy for users to find NFTs with the rarest (and theoretically the most valuable) attributes on them – for example, only 46 Bored Apes NFTs have pure gold fur, so their premium is high. When a new NFT is created and recorded on Ethereum, the site automatically generates a web page that displays it — a great feature because NFTs become a status symbol where people can share their OpenSea pages and change their Twitter avatars to the NFTs they own.

Richard Chen, partner at venture capital firm 1confirmation and an early openSea investor, explains: "Driven by envy and desire, the NFT market has become a cyclical feedback loop, and OpenSea has really captured this market. ”

* Dani, 27, a former fashion designer living in Georgia, turned a $17,000 investment in NFTs such as the women's world into a $715,000 portfolio.

* AJ, a 37-year-old former game company CEO from North Carolina, who invested less than $10,000 in NFTs, now values his digital asset at $1.3 million. AJ also persuaded his brother, a gastroenterologist, to start buying NFTs, who in turn went back to convincing his best friend to join OpenSea. AJ said, "Now, my brother is almost doing a colonoscopy while pulling out his phone to see if there is a new NFT release. ”

Doesn't NFT sound like a bubble market? Well, this actually begs another question: How will OpenSea respond when the bubble bursts? Devin Finzer calmly replied:

We have made a lot of buffer preparations, even if the market deteriorates, we can successfully survive the cold winter.

[This article was originally published in ChainDede, authorized by Titanium Media App, author: Odaily Planet Daily]