NFTs, or nonfungible tokens, have exploded in both the financial markets and the zeitgeist at large. Simply put, NFTs use blockchain technology to authenticate digital assets, which can then be bought and sold—sometimes at staggering sums. Much of the hype around NFTs has been fueled by headline grabbing sales, such as the artist Beeple’s recent $69.3 million payday for a single digital artwork, Twitter CEO Jack Dorsey hawking his first tweet for $2.9 million, and the original GIF of the internet’s favorite Pop-Tart cat going for nearly $600,000.
While some analysts worry that NFTs are a speculation bubble primed to burst, Roham Gharegozlou, CEO of blockchain company Dapper Labs, is planning for the long haul—and he just received a major round of funding to meet that goal.
Announced today, Dapper Labs, the company behind the National Basketball Association’s (NBA’s) digital collectibles platform Top Shot, closed $305 million in funding led by investment management company Coatue, with additional backing from Michael Jordan, Kevin Durant, Andre Iguodala, Will Smith and Keisuke Honda’s Dreamers VC, Andreessen Horowitz, The Chernin Group, and more. Dapper Labs came out of beta last fall and is now valued at a $2.6 billion.
????ALL HAIL THE KING????@YoDough scooped up this Legendary LeBron James Moment from our Cosmic Series 1 set for $208,000‼️ This Moment is from our first Legendary set ever minted ????
The top acquisition for any NBA Top Shot Moment … so far.
Congrats on the nice pickup! ???? pic.twitter.com/rFLMzbwXN7
— NBA Top Shot (@nbatopshot) February 22, 2021
Founded in 2018, Dapper Labs is on a mission to make blockchain technology mainstream. Its first product, CryptoKitties (which Gharegozlou launched in 2017 under venture studio Axiom Zen), gamified the blockchain experience by allowing users to collect and breed digital cats as NFTs. But its partnership with the NBA has been one of the most notable cosigns in making blockchain more accessible. Launched last October, NBA Top Shot, powered by Dapper Labs’s own blockchain system Flow, allows users to buy and sell Moments, i.e. digital trading cards that feature a clip of an NBA player’s best shots or plays.
A video of LeBron James dunking on Nemanja Bjelica during a 2019 matchup between the L.A. Lakers and the Sacramento Kings sold on Top Shot for $208,000. New Orleans Pelican Zion Williamson’s epic shot block in a game against the Denver Nuggets? $115,000. Those kind of transactions have led to some users netting collections worth $20 million. Top Shot is proving there’s demand for a digital version of the collectible trading card market that has seen its own exorbitant sums, such as the recent sale of a 1952 Topps Mickey Mantle baseball card for a record-breaking $5.2 million.
To date, Top Shot has facilitated nearly $500 million in sales, with more than 800,000 registered accounts. Some 338,000 customers have bought at least one Top Shot NFT. Boosting the platform’s ease of use is its acceptance of major credit cards alongside cryptocurrencies.
“We knew the success of CryptoKitties was going to get taken to the next level with sports cards, and the NBA was our top choice partner from the very beginning,” Gharegozlou says. “So we started talking with them in early 2018, explaining the benefits of the technology and trying to get them comfortable with blockchain.”
One of the NBA’s primary concerns was the speculation in the market. “The question from the NBA was: Is this only about high-dollar sales or can the average fan benefit from it?” Gharegozlou says.
Gharegozlou notes that of the 3 million transactions on the platform, more than 1 million have only been between $10 to $50. Also, 90% of the Moments that have fetched six-figures sales haven’t been offered up for resale.
“They’ve been bought by people who’ve kept them and don’t intend to sell them,” he says. “I think that’s evidence there’s a lot of engagement and activity, but it’s not just about flipping six-figure Moments.”
Gharegozlou’s aim for Top Shot is to ensure these digital collectibles have some kind of utility other than turning massive profits. “We focus more on delivering value to the fan,” he says. “Are we making things that people want to buy and hold and keep and enjoy, rather than just selling?”
To that end, Dapper Labs is building a broader ecosystem for Top Shot—and a blueprint for other major leagues the company is in talks with. (The company’s recent funding round also includes investments from Major League Baseball (MLB) players, such as Tim Beckham and Nolan Arenado, and National Football League (NFL) players, including Ken Crawley, Thomas Davis Sr., and Stefon Diggs.)
Dapper Labs is developing a mobile game “where people can take their whole collections and use them to level up their players,” Gharegozlou says. “So you can challenge your friends and show off your collection as part of the gameplay.”
He also mentions the possibility of creating an app, as well as broader use cases for Top Shot down the line, such as being able to use your Top Shot ID in basketball arenas to gain special perks.
“No one even cares about the technology [Top Shot] is based on. It’s more that it’s never been possible to have digital collectibles at this scale before, and at so much lower friction,” Gharegozlou says. “That’s why Top Shot is working and it’ll continue to work. It makes the fan experience better—the technology is in the background.”
His goal is for Dapper Labs to push the possibilities of NFTs beyond the flashy, one-off sales and into a place where they have more regular, mainstream use. Part of the funds Dapper Labs raised in this recent round will go toward helping others build more products on the company’s blockchain system Flow.
“It’s super early days for the ecosystem and we think that it grows by everybody recognizing that this is the future of media on the internet,” Gharegozlou says. “It’s a better way for consumers and for developers to build digital products. Every product that we use, whether it’s a mobile video game or a social network or anything that has people interacting with each other online, needs to be rethought as an open platform rather than a closed platform.”