How do we think about those NFT projects favored by crypto VCs?

What kind of impact will these capital-backed NFT projects have on the market?

Although the transaction volume of the entire Opensea in August has fallen below 50 million US dollars, it seems that capital is accelerating its pace. NFT has grown from the earliest OG collectors, to all in web3 entrepreneurs, to the web2 entity industry looking for new business scenarios, and now more and more venture capital institutions choose to directly invest in and incubate NFT projects. It seems that the investment hotspot of the NFT track is no longer just infrastructure, or NFTfi protocols. And what kind of impact will these capital-backed NFT projects have on the market? As an individual investor, how should you view the behavior of your NFT project being blessed by a star venture capital institution?

For this reason, we have specially compiled some well-known NFT project financing cases so far this year:

How should we think about those NFT projects favored by crypto VCs?

Famous 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 of institutional entry has not slowed down, and they continue to increase their investment in various types of NFT projects. In particular, the floor price of DigiDaigaku’s freemint released to a stable price of more than 10 eth made the NFT market at the end of August no longer deserted. And this phenomenon has also triggered a new trend, that is, should retail players prefer projects that are blessed by star institutions?

For this reason, we deliberately studied the changes in the floor price of some typical projects in one week from the date of the release of the financing information. Surprisingly, only DigiDaigaku and veteran project Veefriends have experienced significant floor price increases, exceeding 200% and 40% respectively. However, the floor prices of Moonbird, Jadu and Doodles have fallen instead of increasing. This phenomenon is worth thinking about.

How should we think about those NFT projects favored by crypto VCs?

Project floor price changes seven days after financing news release

Let’s put NFT aside and talk about the financing of Defi projects. Often those projects that are endorsed by big institutions and get enough start-up funds mean that the project can speed up the development progress and the listing process. This is also why a large number of individual investors choose to interactively experience projects that have received high-quality institutional financing in the early stage, in order to obtain rich listing airdrop returns.

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 prepares for the roadmap that it wants to achieve in the future by selling NFT. Therefore, the early holders of NFTs in these projects can be understood as doing venture investment themselves, and the difference is that the valuation logic of the NFT project itself is different from that 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 NFTs themselves dilute the value of tokens issued in the future? These are all issues that are difficult for individual NFT holders to verify. Therefore, it is not advisable to think that the parent company of the project side of the NFT that it holds will get financing so that the NFT will rise because it only refers to the Defi project to obtain institutional financing.

So, what is the connection between the parent companies behind these NFT projects getting institutional financing and the market value of NFT projects? According to the data of NFTGo, at present, only Azuki has not conducted market financing for NFT projects according to the market value, which 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 best quality Asian style and unique. Azuki began to accumulate treasury income very early, and has accumulated hundreds of millions of assets. It can be said that the explosion of this project makes it rich in capital, so if it is not for the needs of strategic cooperation, it will not choose the road of market-oriented financing.

But in addition to Azuki, we can clearly see that the success of the project itself has a great positive correlation with whether it has resource binding or capital endorsement. Big Mac Yuga Labs was valued at over 5 billion US dollars long before the land was released. Through continuous nesting doll games, huge sales revenue, royalty revenue, IP peripheral product revenue, offline commercial revenue, and ultimately the success of Apecoin were generated. listed. It is also such a stable ability to continue to generate income that supports its expensive valuation. Clonex’s parent company RTFKT was acquired by Nike as a whole as early as the end of last year, and has been trying to integrate with Nike’s online business. Not to mention Proof/Moonbird, the founder’s years of Internet venture capital experience in Silicon Valley has made the project prosperous since its listing.

How should we think about those NFT projects favored by crypto VCs?

NFT project valuation ranking

But holding equity in these companies is fundamentally different from holding NFTs.

First of all, as the shareholders of the company, they have only one expectation, and that is the return on financial investment. And the return on financial investment depends on whether the company eventually goes public or is acquired for tens or even hundreds of times the original 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, in exchange for revenue, generate profits. But as a company issuing NFT projects, this logic has changed. Although the virtual product is “produced”, the expectation of the purchaser or holder of the purchase is to generate real benefits through the appreciation of the product, or the attached value, such as the project’s airdrop. In this process, a contradiction will arise, that is, how should the income generated by the project itself, or the value added, be distributed to the parent company and NFT holders?

If the project party allocates more benefits such as airdrops or cash flow related to the project’s gameplay mechanism to NFT holders in order to further raise the floor price, then the parent company’s income will naturally decrease, and the profit growth rate will also increase. If the value declines, 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 interested in its own brand value and income, and is unwilling to issue airdrops or share profits with NFT holders, then the value of NFT will drop, which will ultimately affect the overall development progress of the project. Therefore, for the centralized NFT project party, how to balance the interests between shareholders and NFT holders has become an eternal problem.

For NFT holders, if they hear that the projects they support have received institutional financing in the future, it is very likely that negative emotions or hitting the floor will appear. Because investment institutions may bring long-term resources and empowerment to the project, but at the same time, it will also compress the profit space that the holders themselves can reap from this project. Therefore, for the behavior of institutional endorsement, the floor price of NFT projects may be higher in the early stage, but in the long run, it limits its room for growth and the ceiling becomes lower.

How should we think about those NFT projects favored by crypto VCs?

The relationship between investment institutions, project parties, and NFT holders

Going back to DigiDaigaku at the beginning of this article, when the floor price of the project rose all the way to 16+, it lasted for less than a few days and fell rapidly to below 10e at present. Leaving aside the issue of the project party’s high degree of control, maybe the next time the public sees such eye-catching financing news, they will not have such a big fomo mood as this time. After all, it is possible for the capital to enter the market to reduce the profit margin of the holder. But if you think in reverse, it may be this fomo sentiment that creates profit opportunities for quants and high-frequency traders.

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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