Walmart is looking at ways to shore up on-time, last-mile deliveries by having autonomous vehicles and drones tag team in the event of roadblocks. A filing with the U.S. Patent and Trademark Office by the retailer Thursday, which was first reported by Insider, indicates the retailer is looking to further build on a previously issued patent as it relates to delivery.
- Voyager Digital, a New York-based crypto lending company, filed for Chapter 11 bankruptcy on Wednesday. The company has $654 million in outstanding loans to Three Arrows Capital, the crypto hedge fund that a British Virgin Islands court ordered to liquidate last week.
- Crypto exchange FTX extended an additional $400 million revolving credit facility to BlockFi in a deal that also includes the option to acquire the crypto lender for up to $240 million.
- Vauld, a Singapore-based crypto lending company, froze customer withdrawals on Monday and said it was in talks to be acquired by rival lender Nexo.
In aggregate, it’s really easy to look at those headlines and say to yourself “see, crypto ain’t all it’s cracked up to be!” But the truth is, just about every major crypto tragedy that’s come up in the past week isn’t at all a function of the decentralized blockchains the assets sit on. Rather, it’s a function of the web of lending and speculation that people build around them.
And those tragedies – the ones that have to do with people defaulting on loans made by lending companies, and then those lending companies not being able to return money to depositors – aren't anything new. They are the result of problems that have long existed in the traditional financial system, which is what post-2008 regulations tried to address.
The crypto solution to these problems was never supposed to be a centralized lending company that could unilaterally decide how to allocate customer deposits, which is essentially what Voyager, Vauld and other popular lenders like Celsius became. If anything, the blockchain answers to those problems are the markets built with decentralized finance, where lending protocols and exchanges are managed by token holders and liquidate risky accounts automatically based on smart contracts.
Relatively speaking, those DeFi protocols have held up fine over the past few months (save those that were tied to now-defunct stablecoins). The take home: when evaluating crypto, it’s important to separate the technology that entrepreneurs are building from the classic, risky dynamics that inevitably spring up around any burgeoning asset.
Last month, ahead of the NFT.NYC conference that brought more than 15,000 people to the Big Apple to celebrate all things non-fungible, the conference’s founder Jodee Rich appeared dumbfounded when our own Margaux MacColl asked whether the crypto market crash had impacted any of his plans for the event.
“We’re not a crypto conference,” he told her.
But as crypto prices have fallen sharply in recent weeks, so have NFT trading volumes. The Guardian reported earlier this week that NFT sales hit a 12-month low in the month of June following the crash of crypto prices after a high in January, citing data from Chainalysis.
That got us thinking about the valuation of OpenSea, the most popular NFT marketplace by volume, and how it might hold up should the drop in NFT trading turn into a prolonged slump.
When OpenSea fetched its $13.3 billion valuation in early January, we did some back-of-the-envelope math to find an estimate for its forward-looking revenue multiple. Using data from DappRadar, which said OpenSea had around $2.5 billion in transaction volume during the month before, we estimated it took in $62.5 million in revenue that month since the company makes money by charging a 2.5% fee on all transactions. Adjusted to a yearly figure, that gave the firm an estimated $750 million in forward-looking revenue, meaning it was operating at 17 times its forward revenue—not unreasonable compared to other startups at the time.
Fast forward to the present day and you have a different story. DappRadar reports that OpenSea has had about $550 million in trading volume over the past month, which would translate into estimated annual revenue of only $165 million. Applying the same revenue multiple as before, that implies a valuation of just under $3 billion, an 80% drop from the private valuation in January. A spokesperson for OpenSea declined to comment.
There are signs that valuations for NFT marketplaces have already been compressing. Magic Eden, which last month announced a $130 million Series B round that valued the startup at $1.6 billion, had $470 million in trading volume during the month prior to announcing the raise, according to data from DappRadar. By factoring in the 2% fee the startup applies to transactions, it’s not unreasonable to assume that Magic Eden could take in $140 million in revenue over the next year, meaning that it is valued at 11 times next year’s revenue. A spokesperson from Magic Eden declined to comment. —Aidan Ryan
“Creator economy startups that incorporate blockchain technologies—sometimes referred to as Web3—into their business models raised less than $80 million in the second quarter, 12% of the quarter’s total funding. That’s down from $332 million in the first quarter, which made up almost 40% of total funding,” my colleague Mahira Dayal reported on Wednesday.
Her piece on creator economy funding (which you can read in full here) found that investments in creator startups have fallen 60% from a year ago, in large part due to a pullback in investments into Web3 creator firms. To be sure, that doesn’t mean the crypto funding well has run dry—Andreessen Horowitz, Electric Capital and Haun Ventures are among the firms who have launched new crypto funds worth $1 billion or more this year. And as our editor-in-chief Jessica Lessin wrote in The Briefing last night (sign up here!), just because firms have money doesn’t mean they’ll spend it. —Aidan Ryan
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| | Bird, Nikola and Other Cash-Hungry SPAC Targets Ink Novel Share Sales | By Maria Heeter | Several electric vehicle and mobility startups went public and raised money in the past two years by merging with special purpose acquisition companies. Now, as companies find it far more difficult to raise cash, they are turning to unusual methods. Scooter rental service Bird, electric truck maker Nikola and electric vehicle startup Canoo are among the companies that have agreed to pay hedge funds or investment banks a fee for the option to sell additional shares, usually over a two- to three-year period, according to securities filings. The hedge funds and banks generally can buy the shares at a small discount. These deals, referred to as equity lines of credit or share price agreements, provide an alternative to sources of cash that once were more readily available, such as secondary stock offerings. But those funding sources are becoming harder to access as markets tumble and investors grow wary of companies that are burning cash. (See our chart below of recent deals.) | |
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