- Find and Scale
- Posts
- The dangers of startup trends
The dangers of startup trends
OpenSea’s Rise and Fall from $13 billion to $1 billion
Find and Scale
October 24, 2024
OpenSea’s Rise and Fall
At its peak, OpenSea was a $13.3 billion startup, backed by top investors like A16Z, Paradigm, and Coatue. However, the platform's rapid rise, driven by the NFT boom, quickly unravelled. In just a year, its valuation crashed by 90% to $1.4 billion, exposing the risks of chasing startup trends.
Startup Story of OpenSea
The 13 Billion Dollar Trend
Founded in 2017 by Devin Finzer and Alex Atallah, OpenSea set out to be the eBay for digital assets. When they first launched OpenSea, it was not successful. For almost three years, the NFT industry had not caught the attention of the mainstream and OpenSea only had a few hundred daily users and less than 10 employees.
“Economies will emerge that look very different than even our wildest imaginations — but we were a little too early.”
However, this changed in 2021 when NFTs exploded into the mainstream, and OpenSea was perfectly positioned to ride the wave. Mike Winkelmann, the artist better known as Beeple, auctioned off an NFT worth $69 million, and OpenSea saw the value of NFTs sold on its platform more than triple from the month prior.
“It was just a lot of craziness — we were growing quicker and quicker and we had to find a way to keep up with the market.”
Co-Founders Devin Finzer and Alex Atallah
As more images of apes, punks, cats, and penguins changed hands, OpenSea collected more fees, and their revenue skyrocketed from $9 million to $186 million by the end of the year.
Within the year, OpenSea had raised $23 million at a $123 million valuation in their Series A, followed by a Series B of $100 million at a $1.5 billion valuation. By the start of 2022, the founders raised yet another round securing $300 million in a Series C funding round, pushing its valuation to $13.3 billion.
“NFTs felt like the next frontier of the internet, and one year later we were suddenly worth $13 billion.”
With investors lining up to pour capital into OpenSea, it did not take long before the risks turned into trouble. The platform's reliance on high transaction volumes and the volatile cryptocurrency market, made it susceptible to market swings.
The Collapse of OpenSea
By mid-2022, the NFT bubble had burst. Interest in digital collectibles had sharply declined, and trading volumes on OpenSea dropped by 80%. The startup’s valuation, which had soared on the back of speculative excitement, was now unsustainable.
“With the trend disappearing, we now faced issues in sticking to the original business model since our investors expected too much.”
Coatue Management, which had co-led the $300 million funding round, reduced its ownership stake by 90%, bringing OpenSea’s valuation down to just $1.4 billion. This forced OpenSea to make tough decisions to stay afloat. In November 2023, the startup laid off 50% of its workforce.
Co-Founder & CEO Devin Finzer
“Building something great requires more than riding a wave.”
The optimism of early 2022 had faded, leaving both the startup and investors grappling with the harsh reality of a trend that had fallen short. OpenSea’s rapid rise and fall highlight the risks of betting too heavily on emerging trends.
Announcing plans for OpenSea 2.0, the founders are pivoting its platform to focus more on the technology and rely less on the trend of NFTs that had originally overvalued the startup.
Presented by Belay
Accomplish More. Juggle Less.
When you love what you do, it can be easy to take on more — more tasks, more deadlines, more hours – but before you know it, you don’t have time to do what you loved in the beginning. Don’t just do more – do more of what you do best.
BELAY’s flexible staffing solutions leverage industry experience with AI systems to increase productivity without sacrificing quality. You can accomplish more and juggle less with our exceptional U.S.-based Virtual Assistants, Accounting Professionals, and Marketing Assistants. Learn how with our free ebook, Delegate to Elevate, and leave the more to BELAY.
Startup News This Week 📰
Perplexity AI seeks valuation of about $9 billion in new funding round
The artificial intelligence search engine startup hoping to chip away at Google’s dominance, is seeking to more than double its valuation.
New VC launches fund to support fintech and infrastructure startups
Chemistry, has raised $350 million for its debut fund, with plans to invest in early-stage startups led by Bessemer, a16z, and Index alumni
Restaurant tech startup raises $10 million.
Checkmate, a provider of unified ordering solutions for enterprise restaurants, has secured $10 million in Series B funding, led by Tiger Global.
If you enjoyed this post, please share on LinkedIn, X, Meta and elsewhere. It goes a long way to support us!
We’ll be back in your inbox next Thursday on our next topic. Thanks for tuning in!
Cheers,
Odin & Hari