Ethereum Competitor Raises $305 Million

Ethereum Competitor Raises $305 Million To Expand Beyond NBA Top Shot

NBA Top Shot is crushing it. Five months into its open beta, the blockchain-based collectible platform has already handled more than three million transactions and $460 million in sales on the secondary market. Now, with collectors’ interest in non-fungible tokens hitting a fever pitch, the platform’s creator has a jaw-dropping stat of its own.

Dapper Labs has raised $305 million in a round led by the tech-focused investment firm Coatue that values the three-year-old startup at $2.6 billion, a person with knowledge of the deal tells Forbes. The round, which will be announced today, brings the Vancouver-based startup’s total funding to $357 million.

“It’s just more fuel in the tank,” Roham Gharegozlou, Dapper Labs’ CEO and founder, tells Forbes, characterizing the funding as “a big bet on open platforms.”

It’s also a big bet on non-fungible tokens, or NFTs, the unique digital assets that can be bought and sold using the ledger technology known as blockchain. For NBA Top Shot, that means selling video highlights—or moments, as it calls them—that are put together by the NBA and sold in packs as a kind of digital sports card. The packs are priced according to the rarity of the clips they contain, from $9 to $230 for three to ten or so moments.

Dapper Labs also gets a cut of the trading done among users, collecting 5% of each transaction on the secondary market, such as the LeBron James moment that traded for $208,000 last month. Prices are volatile, affected on a night-to-night basis by player performance, injuries or trades, and the transaction volume can vary, too. But the demand is surging: In the last 30 days, Top Shot facilitated more than $200 million in secondary trades, a pace that would mean fees of $120 million annually for Dapper Labs, on top of the money it collects from the original pack sales. To date, that has amounted to nearly $49 million, according to the pack prices and quantities listed on the Top Shot website. The company splits all proceeds with the NBA and the National Basketball Players Association.

Mirroring a surge in cryptocurrencies like bitcoin, the NFT market nearly quadrupled in value in 2020, topping $250 million, according to one report, with retailers and entertainment companies exploring applications. But that proved just the beginning. Musical artists including Mike Shinoda and Kings of Leon have released songs or entire albums as NFTs over the last few weeks. The mania culminated this month in the $69.3 million sale of a digital composite by Mike Winkelmann, the digital artist known as Beeple, at a Christie’s auction.

Leading the way has been Top Shot. The app now has more than 800,000 registered accounts, and 338,000 of those users own at least one moment, making the platform an order of magnitude larger than just about any other NFT project.

“There’s no way you could have predicted it, and if anyone tells you they could, they’d be lying,” says Miami Heat veteran Andre Iguodala, who initially invested in Dapper Labs last summer and joined this new funding round as well.

Other investors in this round include Andreessen Horowitz, the Chernin Group, Union Square Ventures and Venrock, as well as two NBA team owners: basketball legend Michael Jordan, owner of the Charlotte Hornets, and Vivek Ranadivé of the Sacramento Kings. More than 30 pro athletes, including Brooklyn Nets forward Kevin Durant, St. Louis Cardinals third baseman Nolan Arenado and Buffalo Bills receiver Stefon Diggs, also participated.

Top Shot is not Gharegozlou’s first attempt at an NFT business. An earlier effort, a game called CryptoKitties that allowed users to collect and breed cats as NFTs, overwhelmed the Ethereum blockchain it operated on; because the cost to complete a transaction was tied to the traffic on the system, it skyrocketed from fractions of a cent to several dollars. User interest quickly waned.

Roham Gharegozlou, CEO of Dapper Labs.
Roham Gharegozlou, CEO of Dapper Labs. DAPPER LABS

Gharegozlou formed Dapper Labs in 2018, taking the IP, team and technology behind CryptoKitties with him, but he soon decided to build his own blockchain platform, Flow, rather than repeat the experience with Ethereum. It launched last spring, not long before Top Shot started in limited private beta. Top Shot opened to the public in October and so far has proved capable of handling a user base that Gharegozlou says grew by a factor of 20 in just the past two months.

“The transaction volume we did in a year we do in a day on Top Shot,” Gharegozlou, 35, says of the difference with CryptoKitties. Warner Music Group and the game developer Animoca are among the companies building products on Flow while the crypto art marketplace already lives on the platform.



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