Investments seem to be skyrocketing, such as venture capital (VC) investing in the areas of digital art, non-fungible tokens (NFTs), among others. It is believed that venture capitalists expect the technology behind NFTs to have a multi-billion dollar valuation.
According to data from PitchBook, a capital market firm, venture capitalists made an investment worth $145 million throughout 2020. In 2020, the numbers changed as investments in NFT companies reached nearly $4.6 billion, about 11 times more than the previous seven years combined. . “Unlike art, NFTs have much more utility than simply capturing beauty. The community NFT ecosystem and industries such as music and games have shown us that NFTs have the potential to deliver returns exponential to VCs. We’ve seen builders and creators of the Web3.0 ecosystem building marketplaces and decentralized community-enabled applications (dApps). I believe the ecosystem is just getting started,” said Pratik Gauri, co-founder and CEO of 5ire, a blockchain-based platform, at FE Blockchain.
Experts believe that venture capitalists can benefit from NFT-oriented investments, thanks to factors such as an ownership-saving platform and access to Web3.0-based gateways for financialization. new products and services. Information from BNY Mellon, an investment banking firm, showed that the growing interest of venture capitalists in NFTs has led to an increase in buyers to entice digital artists to create and sell their NFTs. Although NFTs are seen as a trend mainly in the world of NFTs, it is predicted that assets such as diamond, gold or land could be the next big trend, for which the markets would be required to improvise their strategies of adoption.
“The potential of NFTs can play an important role in the development of the metaverse and Web3.0. If not directly and immediately, VC interest in NFTs signals the beginning of VC interest in DeFi and Web3.0. As DeFi is still a regulatory gray area, VCs have been cautious in their approach to the former. The streamlined nature of NFTs has increased mass consumer appeal and can bring DeFi into the mainstream which most VCs still see as a niche,” said Sachin Jasuja, Founding Partner of Centricity, a technology platform from wealth.
According to reports, venture capitalists such as AU21 Capital, Shima Capital, NGC Ventures, Sfermion, Magnus Capital, Genesis Block Ventures, among others, have started betting big on NFT projects. Other marketplaces such as Nifty Gateway registered $500,000 before being acquired by cryptocurrency exchange Gemini for an undisclosed amount in 2019. Australian venture capital firm Tenacious Ventures led a seed round $1.1 million for Geora, a company that uses NFTs to link traceability data in agricultural projects.
Going forward, investors expect venture capitalist participation in NFTs to be affected by factors such as backend technology infrastructure, retailer participation, and mainstream brand appeal related to NFTs. . As reported by NFT Tech, a capital market firm, traditional venture capital firms such as Andreessen Horowtiz and Sequoia Capital have established their reputations by investing in Web2.0 startups and aim to enhance their potential through the diversification of their portfolio based on Web3.0. Additionally, cryptocurrency-focused VCs such as Pantera Capital and Digital Currency Group have invested in projects in different segments of the cryptocurrency market.
“NFT-based investments are made through a Simple Agreement for Future Tokens (SAFT), for the tokens to be utility-based and help in venture capital-backed company representation. This practice should also incentivize High Net Worth Individuals (HNIs) to participate in VC funding rounds. In the next two years, a scenario of a Web2.0 company such as Meta buying an NFT company to strengthen its Web3.0 backed position may occur, as well as NFT companies making initial public offerings (IPOs) mentioned Amanjot Malhotra, Country Head – India, Bitay, a cryptocurrency exchange.
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