It is that time of year on my blog. This year-end tradition has lasted happily longer than I would’ve predicted. Each year, as a “committee of one,” I declare the breakout startup of the year. Let’s briefly revisit the past: In 2012 it was Stripe; then Snap in 2013; Slack emerged big in 2014; we took a break in 2015-16; in 2017 all the rage was about Coinbase; in 2018, we had Airtable; in 2019, we had Superhuman; and last year in 2020, Hopin exploded on the scene.
This is going to be a short post for a few reasons out of my control. I’m not “full time crypto” and as a disclaimer don’t want this to come off as a definitive statement on crypto. And I know some folks will say, “Solana!” That’s valid. For this particular designation, I try to pick a startup where the end-user base is growing. Not perfect, but what it is. While I don’t write or tweet about crypto often, I have invested in the space in various ways that I will likely discuss at a later date. Putting this aside for now, here we go…. drumroll please….
Here, I present to you The Breakout Tech Company Of 2020: OpenSea
Why did OpenSea get the nod?
I try to use a simple framework, like I did for Stripe above – “the right person/people, the right product, the right place, and the right time.” OpenSea nailed all of them in the strange year of 2021.
1/ The Right People – The founders hail from Pinterest (built around collections) and other Bay Area software companies. Founded in 2017 by Devin Finzer and Alex Atallah, the early team had experience with marketplace dynamics, driving commerce online, and managing visual assets. Today, the company has quickly scaled to likely over well over 50 employees, likely at or approaching half a billion users, holding lord-knows how many collections and even more NFTs with GMV in the billions and growing, all powered by its breadth of assets and filtering systems, skills likely honed after years at software teams at places such as Palantir and Pinterest.
2/ The Right Product – OpenSea is able to ride the early parts of this large technology wave with a tried and true native internet business model: the marketplace. Coinbase, which went public earlier this year and is approximately valued at $75B+/- at the time of writing this, also had a similar model of source, which laid the foundation for multiple business lines. Like eBay at the beginning of the modern Internet, perhaps one way to think of OpenSea as this new web’s eBay, and upon that foundation, who knows the various other business opportunities that could emerge. As 2021 comes to an end, OpenSea boasts extremely high market share in its category. It’s also worth noting that this is all happening at a time when those who hold valuable tokens worldwide have learned to smartly diversify their digital holdings to preserve their wealth for the long-term. NFTs and other tokens provide a new financial frontier to explore as magnates diversify.
3/ The Right Place, The Right Venue – In tech, “crypto” is *the* place to be. OpenSea emerged at the right time. Crypto was a groundswell during the pandemic and lockdowns. Coinbase went IPO in 2021. It feels like a long time ago as I write this, but it’s still so early. Not even 12 months ago. During Covid, the lockdowns, crypto seemed to become the consensus next technology wave, colloquially codified as “web3.” Since Coinbase went through Y Combinator in 2012 (OpenSea also a YC alum), the past 10 years since then have seen the slow and steady rise of crypto networks and applications — case in point, no one really talked about Solana much a year ago. There are many examples like this today. As a response to the opportunity, a whole new crop of investment firms (with very different models) emerge. During this time, the largest venture capital brands (in size and AUM), such as a16z, Lightspeed, Sequoia, Union Square, and others have molded their brand position toward this new future — to be clear here, this is not an exhaustive list and a16z and USV in particular have been making investments in this category dating back to 2011. New powerhouse firms have emerged, as well, such as 1confirmation, a16z Crypto, Dragonfly, Multicoin, Paradigm, Placeholder, Variant, and many others.
4/ The Right Time – As different types of NFTs caught fire and exploded in aggregate size, OpenSea’s marketplace model and filtering systems emerged at the right time to capture the wave early. Other marketplaces have spawned up with a similar thesis, and I’m sure some will carve out their own niches (just like happened with eBay), but right now, OpenSea had a 3-4 head start which may be hard to beat in this particular model.
5/ The Right Deal – Like Hopin the year before, OpenSea rode its success into multiple competitive financing rounds in 2021. This is the part where I have to admit that I met Devin 3-4 times across different stages of OpenSea way before the pandemic, and despite the declarations from his early investor Nick Tomaino, who kept introducing me to Devin, I didn’t invest. Each time. That is a big mistake on my part. It was right under my nose, but at the time, I didn’t fully appreciate why it caught fire with game artists and managing their assets in a marketplace. Folks like Tomaino, who founded 1confirmation, a16z Crypto, and a host of other early investors (after YC) saw the possibilities, and smartly leaned in. Today, OpenSea has raised over $125M across funding rounds, the latest valuing the startup well over $7B. Like Hopin, the acceleration in private value are at levels rarely seen. So, I’ve met Devin a bunch of times, and he can probably tell you, I was a nice guy but I didn’t see it. I owe Devin and Alex a public “congrats” – it’s amazing to see what has unfolded!