Magic Eden is the latest NFT marketplace to cash in
Crypto may be down, but Jack Lu and Zhouxun Yin are continuing to build.
The cofounders of Magic Eden, the top Solana SOL -based NFT marketplace by market share, announced today the close of a $130 million Series B venture round. The added capital brings the company’s valuation up to $1.6 billion and is one of the first major investments to be announced since the recent crypto plunge that saw bitcoin fall below $20,000 and ether drop under $1,000.
Magic Eden now becomes the third NFT marketplace to achieve unicorn status alongside $13 billion OpenSea and $7 billion LooksRare. The funding was co-led by Electric Capital and Greylock and it comes three months after the company announced its $27 million Series A in March 2022.
“Magic Eden’s ability to keep pace and drive innovation in a rapidly evolving NFT market is extremely impressive,” said Avichal Garg, cofounder and managing partner at Electric Capital. “They are one of the fastest moving and most user-centric companies in Web3.”
In its nine months since its launch, Magic Eden has grown to become the largest Solana-based NFT marketplace, holding about 97% of daily NFT purchases on the platform, per Dune Analytics.
Unlike traditional NFT platforms, Magic Eden operates as both a primary and secondary trader, meaning that NFT creators are able to launch NFT collections through the platform’s “Launchpad” feature, as well as sell pieces they’ve created or purchased on the secondary market. It features popular Solana-based collections including Degenerate Ape Academy and Solana Monkey Business.
This vertical integration stems from Lu and Yin’s vision of NFTs as the initial ramp into the Web3 ecosystem. “They’re the fun, the social, the cultural, and the very emotionally relatable aspects of a blockchain or Web3 use case,” says CEO and cofounder Jack Lu. “We see ourselves as the bridge to bring the next billion users onto Web3 using NFT technology.”
However, taking this next step will not come easy.
For starters, NFT transaction volume and prices have been dropping along with the rest of the crypto market. Solana is also a much less popular blockchain compared to Ethereum ETH , the preferred blockchain for NFT transactions. Ethereum processed about 83.58% of all NFT transactions in the past week, which is dominated by OpenSea. Furthermore, of the total $4 billion in monthly transactions during the month of May across all chains, OpenSea was responsible for $2.6 billion compared to Magic Eden’s $292.1 million. Additionally, OpenSea officially integrated Solana to its network in April of this year, becoming a direct competitor to Magic Eden.
Solana’s reputation has also taken a major hit as the chain reported five major outages in 2022, a major concern for blockchains that are never supposed to go down. These restarts contributed to the price of SOL, Solana’s native token, to a nearly 80% plunge so far in 2022. Magic Eden plans to use this round to help move away from its reliance on Solana and explore multi-chain options.
Finally, with this new round of funding, the Magic Eden team is planning to expand its gaming NFT offerings. The marketplace already lists 35 blockchain-based games with over 430,000 monthly users, per its website. Amongst games listed on the website are Aurory and Genopets, two established Solana-based gaming collections.
To the cofounders, the gaming industry already has the key elements of NFTs – a strong community and an exchange of goods within the gaming ecosystem.
“We realized that this is actually very similar to how people think about NFTs and what people were doing with them,” says cofounder and COO Zhouxun Yin. “When you combine the two, Web3 native and games, you get true ownership of these items.”
The team is betting that this desired integration, combined with these new funds, will help Magic Eden weather what could be a protracted crypto winter.
“A downturn, especially when the company is as well capitalized as Magic Eden and who has been generating real significant cash flows, is actually a pretty great position to acquire that talent and just build through it,” says Mike Duboe, partner at Greylock.
“There’s no better time to build than in a bear market,” adds Yin.
