The Future of NFTs with Devin Finzer, Co-Founder and CEO of OpenSea
Devin Finzer launched OpenSea, the world’s largest NFT marketplace, in 2017 when early NFT (non-fungible token) projects were starting to turn heads. This was around the time of the CryptoKitties craze, where people spent over $1M buying virtual cats on the Ethereum blockchain. Today, NFTs have seen rapid growth with major projects such as NBA Top Shot, CryptoPunks, and Decentraland leading the way. Additionally, NFT use cases are expanding with the most notable projects involving collectibles, virtual real estate, and digital artwork. In 2021, NFTs have really started to take off and OpenSea has grown from $8M in GMV (total merchandise sold on the marketplace) in January to $150M in March!
Devin recently joined the Xoogler.co community for an insightful fireside chat where he discussed his journey building OpenSea, tips on fundraising, advice for founders, and the future of NFTs. If you are interested in a role at OpenSea, you can review their openings on their careers page.
Fireside Chat with Devin Finzer, Co-Founder and CEO of OpenSea
Can you tell us about your journey from getting introduced to blockchain to starting OpenSea?
In 2017, I became really interested in crypto. I had followed Bitcoin on the periphery, but in 2017 I went deep down the rabbit hole of learning the underlying technology behind it. At some point, I realized I wanted to tie my career to it — it was just a question of what I want to do. NFTs caught my attention when I began learning about interesting use cases for crypto. One interesting case was the CryptoKitties project, which was a tech culture phenomenon where people were buying CryptoKitties for hundreds of thousands of dollars. I was intrigued by this whole unexplored territory of crypto. When people talked about crypto, it was all about finance and currencies. But there wasn’t much exploration of other applications of blockchain. I became interested in how NFTs provided this new, unique asset class.
I came up with a rough set of ideas and applied to YCombinator with a project centered around sharing wifi bandwidth using blockchain. After we got into YC, we pivoted into building OpenSea.
What is OpenSea?
OpenSea is a decentralized marketplace for NFTs. It’s like an Ebay for NFTs where you can buy, sell, auction, and more. We are also an explorer for NFTs; you can find any NFTs on Ethereum and several other blockchains on our platform. You can also look up its history as far as where it came from, where it’s been sold, and so on.
How was your experience building OpenSea early on and what were your challenges when not many people knew about NFTs?
In the beginning, we were in an experimentation phase where we had early competitors but it was really more about how we can grow the market as a whole rather than winning an established market. I felt we found our product market fit, but with a very niche audience. Our users were very passionate, but there were not many users and people that were knowledgeable about crypto. Nonetheless, it was always really exciting. That’s what kept us going. We were mesmerized by what people were launching. Even though we were frustrated because the growth was slow, we really enjoyed working on it. Early on, we were doing 1–2M GMV per month. And we were doing those numbers with a terrible user experience. That was partially our fault and partially the blockchain system’s fault. There is still lots of friction in crypto, but it is becoming better as people innovate around the space.
When you get deep into crypto, you start to understand that this space is not going to shut down. I never thought about doing anything else because I believe this is the next paradigm shift in tech. Plus, it was always exciting because we had so many ways to improve the product. But if we were looking for more of an immediate, high-growth startup, that would have been a concern. There was a company that was a direct competitor, and they shut down. Over the last 6 months, it’s taken us by surprise. We didn’t expect such momentum around NFTs. It’s been very exciting but more stressful now that there are more eyes on the space.
On your website, OpenSea has listed $354M in volume, 50M listed NFTs, over 150k users, and only 19 employees. When did OpenSea start taking off and adding employees?
For a good portion of 2020, we were a team of 7 people. Then in August 2020, we started seeing exciting growth. We did about $1M in GMV in August, $8M in January, $95M in February, and $150M in March. Suddenly, our company was in a completely different stage. We started facing technical challenges scaling the website and supporting so many new users — especially with how rough our product was. Now we are putting a lot of effort into putting a great team together.
And a lot of that hiring is because of the new funding round led by a16z. Can you talk about how that funding round came into play?
I would say a16z marries the two worlds of traditional VC and crypto thinking, which was very attractive to us. I’ve always admired their view on crypto, which is much broader than just financial views. They think wider and view crypto as a tech phenomenon which could really impact everything on the internet. We talked to a16z about the business and they were excited about the growth we were seeing.
For earlier stage founders, do you have any advice on fundraising?
I went into fundraising with no experience, so hopefully this helps:
- Develop a deep understanding of fundraising. Some books I recommend are Venture Deals and Secrets of Sand Hill Road.
- Doing an accelerator is very beneficial if you are not well-networked. At YC, they create an environment where many investors are looking at you at the same time. This way you can build a market around your raise and drive the fomo mechanic.
- Having investors that are former founders are important for operational advice. Founders that have had successful companies have provided the most helpful advice to us.
- One mistake we made was having too many investors involved. So being selective and not just taking money from wherever is a good strategy depending on your situation.
- Have investors who are deep in the space or people who use your product.
What are your favorite NFTs today, and what do you wish people would make but nobody has yet.
My personal favorite are virtual world projects where people own and build on virtual land. A while back, I was looking to buy some land and I had no idea what land to buy. So I went to a virtual real estate person who spends his whole day looking over crypto real estate. I was amazed that there was this real economy here. So I am a big fan of that. What I like is it is a sneak peak into the metaverse where you can own land and bring in other NFTs that have no affiliation with the land.
As far as what I wish people would make, I wish we would see more done with concert tickets. With Covid, it hasn’t caught on but tickets seem like a natural fit to me. One of the big challenges with NFTs right now is the transactional costs with moving them around. Once we lower them, we will widen the spectrum of things that can be traded.
Can you talk about the challenges of the transaction costs and what needs to be improved?
A big challenge around Etherium is that there is around a $50 transaction cost to buy an NFT. And that is regardless of if you are buying an nft that is $5 or $5,000. As you can imagine, that limits the types of NFTs that make sense to sell. At OpenSea, we are about to launch some exciting stuff around supporting other blockchains and other ways to reduce that cost for higher output trading.
The way I see it, the Ethereum blockchain is v0 when it comes to generalized computing chains, and now there are new versions that have many improvements. If you are deep in the NFT space, the user experience around it feels like the early internet. With NFTs, you have to get MetaMask, then you have to get your cryptocurrency on Coinbase, then you have to pay transaction costs, then sometimes there are issues on the transaction going through. So there’s lots of room for improvement.
Could NFTs solve problems in the physical space?
Certainly. A model that we have seen a couple of projects take on is they will take a physical item and then issue an NFT against it so then the NFT can move around the blockchain multiple times and then the final buyer can redeem it. It lets people tokenize items and create a marketplace without having to physically move the item around.
Many brands like the NBA are beginning to create their own NFT marketplaces. What are your thoughts on individual marketplaces and where do you see OpenSea’s role in the future?
Ultimately, we envision ourselves supporting content from all different blockchains. As far as other marketplaces go, we foresee many new major ones in the future. Where we thrive is the long tail of smaller games and projects that need marketplaces. A good analog is in e-commerce: There is the Nike shop and then there is a thriving secondary ecosystem on Ebay. I think there will always be these proprietary marketplaces, but we also believe there is a place for secondary marketplaces.
What do you see as the business models in crypto?
It will be interesting to see if there are business models that are symbiotic across spaces. One cool thing about blockchains is that you can create incentives across systems through smart contracts. One rough example is you can put something on sale on a marketplace that is going to list a fee, and this listing will be broadcasted across other marketplaces. The marketplace that fulfills it receives a percentage, then the referrer gets a percentage, so then you can create an incentive system where all of the parties benefit. I think that is going to happen more in the future.
What are your thoughts on partnerships with OpenSea?
We recently started getting deeper in primary sales. We’ve launched NFT projects with the Golden State Warriors, Rob Gronkowski, Shawn Mendes, and more.
Where do you see OpenSea in 5–10 years?
We see the crypto landscape to be similar to the birth of the internet where there was tons of opportunity. It’s not quite as sizable as the internet, but we see a lot of companies being successful so we want to play an important role in this new ecosystem. Nobody really knows what will be the most successful application for NFTs, but we want to help it succeed. We see ourselves as a utility layer for this evolving ecosystem and want to be a fertile ground where all of this can emerge.
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More about Devin
Devin began his career interning at Google in 2012 and became a software engineer at Pinterest on the growth team. In 2015, Devin founded ClaimDog, which is a TurboTax style website for helping consumers find unclaimed property and funds. ClaimDog was acquired by Credit Karma where Devin served as an engineering manager until founding OpenSea in 2017.
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