SaaS Interviews with CEOs, Startups, Founders
They sold $400m in NFT's last month, made $8m, broke $200m valuation during Series A
30 May 2022
Chapter 1: What makes an NFT take off?
What makes a NFT take off? Is it more unique holders, just higher per unit sale price, like rarity? What makes it work? I think for OK Bears, it's really about community, right? It's about branding and community. You are listening to Conversations with Nathan Latka, where I sit down and interview the top SaaS founders, like Eric Wan from Zoom. If you'd like to subscribe, go to getlatka.com.
We've published thousands of these interviews, and if you want to sort through them quickly by revenue or churn, CAC, valuation, or other metrics, the easiest way to do that is to go to getlatka.com and use our filtering tool. It's like a big Excel sheet for all of these podcast interviews. Check it out right now at getlatka.com. Hey folks, my guest today is Jack Liu.
After monitoring the crypto space and recognizing its potential, particularly around Solana, Jack took the leap of starting out at FTX, one of the industry's leading exchanges where he worked within partnerships and corporate development.
Following this, he decided to fill the gap in the market for a community-focused, interactive NFT ecosystem and marketplace and launched Magic Eden, which has witnessed one of the fastest paces of growth in crypto. Jack, you ready to take us to the top? Absolutely. All right. Fastest pace is a big statement. I have to ask you to back that up with data. What do you mean fastest? By what metric?
Yeah, absolutely. Well, first of all, thanks a ton for having me, Nathan. Well, we started Magic Eden seven months ago. In that time, we've become the second largest NFT marketplace in the world. So this month, we're about to trade around four to $500 million of NFTs on our marketplace. And we're the fastest marketplace to reach cumulatively a billion dollars in GMB traded.
So we did that in around four or five months. That's amazing. Cool. Guys, there's the data. No beating around the bush. It's right there. So real quick, Jack, put this on a timeline for me. When do you write the first line of code for Magic Eden? That was around late September. Yeah, September or so. So just last year, I mean, you were talking like eight months ago. Yeah, that's right.
That's right. Wow. We launched a site in 14 days, actually. So the first one was really sticky tape together to, dare I say, but we launched fast and let the market tell us what we were doing right and what we were doing wrong. And you said you hit 1 billion in cumulative NFTs sold on your platform in February? I don't remember the exact month, but it was around that. That's right. Okay.
That's amazing. And so what enabled you to grow so quickly? Obviously, you ran BD at a massive exchange. Maybe there are some connections there that helped you grow. But what was the credit to that original mousetrap and the growth?
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Chapter 2: How did Magic Eden achieve rapid growth in the NFT marketplace?
Yeah, absolutely. So I think there were a couple of things. Well, number one, you know, I have to definitely give credit to the timing of the market. So, you know, Q1, Q2 last year was when Ethereum NFTs really took off and really caught the cultural zeitgeist with people, SBA, YC and so on.
But Q3, there was a huge boom of interest in Solana, the blockchain that we're built on, as well as the NFT activity there. So we caught that timing really well and broke that tailwind. But separate to that, I think within the company itself, the main point that really helped us grow, I think, was the skill set of the founding team. So we've got four founders, myself, Our CTO, his name is Sid.
Our chief operating officer, his name is Joshin. And our chief engineer, his name is Joji or Rex. And I really felt like the four of us came with good synergies of skill sets that allowed us to build something really fast and have really good intuition about what were the right things to build. So the key there were two of us came from crypto exchanges.
So I came from FTX and our chief operating officer, Jochen, came from Coinbase and BYDX, which is one of the largest DeFi exchanges. And then my two technical co-founders came from Uber Eats. So they came from really big consumer marketplaces. And if you step back and think about it, NFT marketplace, the business model is really like a crypto exchange, right?
But the features, the software that you build looks really like a consumer marketplace. I just felt like we had some really natural intuition about what were the right things to build. This makes tons of sense. Now, were you very diplomatic about equity at the beginning? Everyone gets 25% or how'd you guys think about that? Obviously, maybe there isn't even an equity question.
Is this all built in like a DAO or central treasury or something like that? No, it's a, it's a, it's an equity thing. Pretty vanilla, but yeah, like, uh, equal split, you know, I think. Oh, wow. You did equal. Uh, absolutely. You know, uh, equal partners in this. We couldn't have done it without, um, uh, we couldn't have done it without each other. Yeah. I love this. Okay.
So you get going, you write code, you get volume up quickly. I mean, how did you just like, just people are going to hear these numbers and be a little bit in disbelief.
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Chapter 3: What factors contributed to the success of Magic Eden?
So I want to try and break it down to like Lego blocks, right? Where you've now built this masterpiece, the first Lego, the first NFT store on your platform. What was it? How much did it sell for? And how did you help that buyer or seller? Do you remember? To be honest, I can't remember. I'm embarrassed to say, but we've got like almost 10,000 collections now listed on Magic Unit.
So I can't remember exactly. Although I do remember one of the earliest collections, this must be in the first 10 or something, was called Cyber Trolls. And our team, we were trying to BD the artist to list their collection with Magic Eden. But then the...
The creator of that collection turned the conversation around and started showing himself to us and saying, yo, I actually want to work for you guys because you guys have something really special going on. We hired him. His name is Igor. He was our first BDE guy, and he was just a killer, absolutely integral to the founding story and the early success of Magic Eden. So is that what you're doing?
You're almost like Sotheby's. You're actually spending all your time recruiting artists, effectively. Yeah. Yeah, so we've got two main business lines. We've got a business line called Launchpad, where we help artists launch their NFTs for the first time. And that is absolutely what, you know, as you described, it's very much like artist outreach, right?
And then we have another business, which is called secondary trading. So this is where the art is already in the hands of holders and they're trading it back and forth. It's more like a Craigslist kind of thing. That piece of it is much more about being in touch with the collector community and marketing to them and incentivizing them to come to Magic Eden.
And obviously, you have 100% of revenue, right? What percent is Launchpad versus secondary trading? It's around... Launchpad is a little more spiky. I would say it's around 20-80 or 30-70.
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Chapter 4: When did Magic Eden first launch, and what was the initial strategy?
So 20% launchpad, 80% secondaries, or sometimes it goes up to 30-70. Yep. And I guess just to go back to volume, you quoted $400 million. That was $400 million in GMV last month in April? Yeah. And what do you think you'll do this month? This month has started off pretty strong, actually. So I think we're already at... Well, where are we right now?
I don't know the numbers off the top of my head, but this month I started pretty strong as well. So probably something similar. Yeah. Okay. So, I mean, that's what I'm trying to get a sense. Are you going from like 200 million in GMV to 400 million to 800 million? You're doubling every month or is it more like, you know, 20% growth per month? Yeah.
So right now, our platform is built on the Solana blockchain. We've been consistently around 90% to 95% market share of the Solana blockchain, of all NFTs traded on Solana for the past two, three months or so. So we're really breaching at the edges of what the total market is at Solana. So right now, market growth or GMV trading volume is actually more of a function of Yeah, exactly.
More of a functional Solana, right? And natural micro cycles. Yeah. Are you involved deeply with the core Solana team? I mean, if they grow, you grow. Yeah, that's right. Yeah, that's right. So Solana Foundation, we've been in contact with from day one, effectively, and, you know, very, you know, feel very privileged for them to have been out as an investor in our Series A as well.
So our last round. So we work with them very closely, hand in hand. Okay. Yeah. Let's talk about funding. So when was the Series A closed? February. Oh, this year. Okay.
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Chapter 5: What role does community play in NFT projects like OK Bears?
And how much was it? We raised 27 million. Okay. 27. And how do you value a thing like this? I mean, in traditional SaaS, you're serious that you're selling 10 to 15%. Were you sort of in that same range? Okay. Fair enough. Got it. So, I mean, we're talking then what, like a 220 pre-money valuation, something like that? Something that, oh yeah, Bullpup. Yeah, that's right. Okay. Okay, great.
So teach me here, because I'm a SaaS guy, right? How does a marketplace like this get valued, right? With traditional equity investors? Yeah, I mean, it gets valued very similarly to marketplace businesses. We're revenue generative. So we take a clip of the GMV, the total transaction amount that goes through the marketplace. So right now we clip 2% of the transaction volume.
Yeah, so we've been effectively revenue generative from day one. So pretty much, I think, Jack, do you take 2% of all revenue through the platform? Mm-hmm . Okay. So can we take 400 million last month times 2%? Yeah. Made $8 million. Yeah. So you did $8 million last month in revenue? Yeah. I'm missing something. I mean, that puts you at almost $100 million run rate.
You're only getting valued at 2X? Well, yeah, we raised the last round when we were around 30% market share. So we signed the term sheet around November. It was just a bit of a long closing process. Oh my gosh. I would think that our valuation is significantly higher now. Do they not? I mean, it takes two, three, four months to obviously go through diligence.
Was there not a period where you're going, guys, our monthly growth has been incredible. I'm not going to back out of the term sheet because I'm a good guy, but is there any chance you can give us a little higher valuation to minimize dilution?
So I think like, I think that's like, yeah, there was, there was like a bunch of stuff that happened like in the middle, but we didn't have that conversation. We're very grateful for the, for the, this is okay. But my, I am getting my numbers right. You valued basically two X when you closed. You're about to break $100 million run, right? You're right at like 220, 240. Yeah.
Around Feb, we weren't doing 8 million. So I think last month we were doing 8 million. Okay. Around Feb, maybe we're doing 4 million or something. Oh, so you're like growing. I mean, this is like an extreme growth story. Yeah. Like you're doubling every like two months or something like that. I see. Fascinating. Okay. Got it. That makes sense. Now, is this the only capital you've raised? Yes.
That's correct. Yeah. Okay. So skip the pre-seed, skip the seed. Oh, no, no. We've had a small seed as well. Yeah. When was that? That was around October. Okay. So 500K seed round. Two and a half mil. Oh, two and a half. Sorry. Two and a half. In February of this year? No, sorry. October last year, two and a half mil seed round. And then Feb, we closed the Series A. Oh, I understand.
I understand. Got it. And that valuation on the seed round, what, same like 10 cap, 20 cap, something like that? Yeah. Something that automatically, yeah. Remote teams are all the rage right now. In fact, many companies want to stay this way, even post-pandemic. And the reasoning's obvious. Hiring talent from anywhere in the world means you can bring on better talent.
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Chapter 6: How does Magic Eden generate revenue from its marketplace?
And I think that's the wonders for the way that we develop product and the way that we build new things. Jack, on that note, let's wrap up with the famous five. Number one, favorite book that you read? I'm a huge Haruki Murakami fan. So I love Wind-Up Bird Chronicles.
a bird chronicles good one number two is there a ceo you're following or studying uh well i used to work at ftx uh i think the founder there sam bakeman freed is a is an absolute monster so uh yeah number three besides your own what's your favorite online tool or online place to hang out uh telegram it's a must have for crypto folks number four how many hours of sleep to get every night oh
Six hours. Okay. And what's your situation? Married, single kids? Married, no kids. No kids. How old are you? 32. 32. Last question. Something you wish you knew when you were 20. Well, when I was 20, I was in law school. So I should have studied computer science, I think. Skip loss, too. Go to computer science instead.
Guys, MagicEden.io did over $400 million of transaction volume in NFTs on Solana last month alone. The average sale price there, about $200 or $300. That means there's about 2 million unique transactions, 30,000 unique traders per day. They make a 2% cut on that $400 million, so $8 million in revenue just last month.
That's up from $4 million earlier in January and February, so growing very quickly. just closed a 27 million Series A. It caught between a 200 and 300 million valuation, growing nicely with a team of 100, hiring their own customers to make sure they keep that lifeblood going to the company. Jack, thanks for taking us to the top. All right. Thank you so much, Nathan. Cheers.
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