NFTs or non-fungible tokens began to gain popularity among niche circles of crypto and blockchain enthusiasts over a handful of years ago. However, it wasn’t until Christie’s auction house sale of “The First 5,000 Days” in March 2021 that the concept of art produced on the blockchain officially exploded onto the mainstream. The digital asset, the first of its kind to be bought at auction, is a collage of images created by Michael Winkelmann, professionally known as Beeple, which sold for $69.3 million.
Concurrent with this uptick, last year, two of the largest venture capital firms worldwide, Andreessen Horowitz and Paradigm (Crypto Fund), became leading investors in the NFT space. And they are far from alone in betting on the hyped-up digital assets—fund managers and VC firms have quickly followed suit in building out NFT strategies and frameworks. According to data tracked in the PitchBook Platform, as of October 13, global capital invested in NFTs swelled to $5.7 billion across 1,071 deals.
What are NFTs?
- In their most simplified form, these unique digital assets are represented as a unit of data in the form of a digital receipt on the blockchain
- Minting an NFT requires the execution of a smart contract which conforms to various conditions set by the creator or artist
- Smart contracts are managed on the blockchain, cannot be copied or destroyed and are traded using cryptocurrency
- NFT applications range from video clips to photographs and include digital art, gaming and collectibles like CryptoKitties and CyberPunks
- Every transaction is tracked and confirmed by the blockchain’s computer network and made visible to all
How do NFTs work?
Alongside accessibility to a broader market and greater control over their work, verifiable authenticity is a key driver for NFT artists and creators. The traditional route of selling art involves networking with a gallery or auction house. But, by cutting out the middleman, the artist can directly connect with their audience and receive a more significant payout for their work. Through terms pre-established by a smart contract, the creator sets a percentage of royalties earned on every sale in perpetuity.
Make your own NFT
Try your hand at minting an original NFT with with our interactive art board below. If you were an artist or digital creator with a clamoring fanbase, upon completion, you could use any crytpocurrency facilitator like, OpenSea, to sell the final product.
Top 10 VC firms investing in NFTs by deal count (2021-present)
Below we look at leading NFT VC investors from 2021 to present, as of September 16, 2022. NFT investment counts represent deals for each firm per data sourced from the PitchBook Platform, for the same period, by either follow-on or new investments.
- NFT investments: 93
- HQ: Hong Kong, China
Animoca Brands is a venture capital and software gaming company that develops digital property rights to gamers via NFTs and gaming to build the open metaverse. The company leverages the blockchain to create and market a portfolio of mobile applications and products orientated to educational learning, ensuring transparency and security.
On September 9, the company received $110 million of development capital in a deal led by Temasek Holdings, Boyu Capital, GGV Capital and other investors. They plan to use the funds for acquisitions, investments and “popular intellectual properties” to further push the metaverse into public view.
- NFT investments: 63
- HQ: San Francisco, CA
Founded in 2017, AU21 Capital is a venture capital firm seeking to invest in companies operating in the blockchain and artificial intelligence sectors. In February of 2022, the hedge fund announced its investment in Sidus Heroes, a play-to-earn NFT-centric MMORPG, revolutionizing the decentralized gaming industry with its metaverse-centric game that develops the traditional play-to-earn model.
- NFT investments: 60
- HQ: San Francisco, CA
Shima Capital invests in cryptocurrency and blockchain startups. On September 14, in a seed round led by Framework Ventures and seven other investors, Shima invested $7 million into ThirdWave Systems, a developer of a blockchain discovery engine intended to connect people with games, projects and communities. The company’s technology empowers blockchain projects with analytics that enable businesses to find and retain their best customers.
- NFT investments: 46
- HQ: Singapore, Singapore
NGC Ventures, established in 2017, is a venture capital firm that invests in blockchain and financial technology sectors. On September 6, the company financed an undisclosed amount of seed funding into PANONY, a provider of blockchain consulting services, localizing knowledge and expedient access to global market resources. The fund will expand PANONY’s presence into other jurisdictions and launch new service offerings and networking capabilities.
- NFT investments: 44
- HQ: Chicago, Illinois
Sfermion invests in early-stage blockchain sectors and direct non-fungible token investments that support the emergence of the metaverse. This August, the venture capital firm participated in a $3.55 million seed funding round for Quivr, a developer of a decentralized social platform that allows individuals access to their true digital identity via identification and authentication. The financing round was led by Infinity Ventures Crypto, with participation from C2 Ventures, Liqing Zeng, FBG Capital and other undisclosed investors.
- NFT investments: 44
- HQ: Philippines
Exnetwork Capital is a hyperconnected fund, accelerator and incubator firm based in the Philippines that prefers to invest in cryptocurrency and the blockchain sectors. In July, Exnetwork and 38 other investors led by True Global Ventures participated in a Series A venture funding round for a deal for blockchain gaming launchpad developer Enjinstarter. The company, which facilitates a marketplace that enables game developers to build digital asset strategies, will use the funding to expand the company’s verticals, including Game Publishing and Metaverse Innovation Consulting.
- NFT investments: 41
- HQ: Amsterdam
Magnus Capital is a VC firm and incubator based in Amsterdam and focuses on investments in cryptocurrency. Last month, the firm participated in a financing round that raised $3 million in capital for EUA-based metaverse startup MetaFi. Founded earlier this year, MetaFi provides a suite of services for NFTs, the metaverse and game finance that employs essential tools and infrastructure for blockchain project owners and traders.
Genesis Block Ventures
NFT investments: 41
HQ: Cayman Islands
Established in 2020, Genesis Block Ventures invests in seed-stage, early-stage and later-stage companies operating in blockchain sectors. On September 1, Genesis completed an early-stage venture funding round for an undisclosed amount for Beoble, a developer of a Web3 social module designed to integrate social functionalities like instant messaging and posting of feeds into their services all within minutes—regardless of which Web 3.0 service and chain are used.
NFT investments: 40
HQ: Seoul, South Korea
HG Ventures invests in seed-stage, early-stage and later-stage blockchain technology companies. In August, the company, alongside four other co-investors, raised $291,000 of venture funding for Portal, an operator of a decentralized platform for secure bitcoin trading. Portal allows traders to execute fast trades with the privacy of underlying blockchains.
NFT investments: 37
HQ: Kyiv, Ukraine
Since 2017, ZBS Capital has invested in the blockchain, marketing and finance sectors. In May of this year, the VC firm invested a seed financing round of $1.1 million in MeMusic, operator of blockchain-based platform that allows artists, users and companies to participate in transparent payouts.
How are NFTs and Web3 interconnected?
NFT’s association with the emergence of Web3, the third iteration of the World Wide Web, built on the blockchain and premised on security and data decentralization, has driven optimism for digital assets and art among investors and artists. Web3 will reinforce and support the use of cryptocurrencies, decentralized finance (DeFi), NFTs, and token-based economic exchanges.
According to PitchBook’s Q1 2022 Emerging Tech Indicator, a report that tracks promising technologies and companies receiving early-stage VC funding, Web3 & DeFi deals are among some of the quarter’s top performing.
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