Magic Eden Revenue, Valuation & Funding (2024)

[00:00] Hey, folks. My guest today is Jack Lu. 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, [00:22] >> ready to take us to the top? [00:23] 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? [00:31] >> 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. This month we're about to trade around 400 to $500,000,000 of NFTs on our marketplace, and one of the fastest marketplaces to reach [00:55] cumulatively a billion dollars in GMV traded. So we did that in around four, five months. That's amazing. Guys, there's the data. No beating around the bush. It's right there. Real quick, Jack, put this on a timeline for me. When did you write the first line of code for Magic Eden? [01:10] >> That was around late September. Yeah, September or so. [01:14] So just last year, I mean, were talking like eight months ago. [01:17] >> Yeah, that's right. That's right. We launched a site in fourteen days actually. So the first one was really sticky taped together to dare I say, but we launched fast and let the market tell us what we were doing right and what we're doing wrong. [01:33] And you said you hit 1,000,000,000 in cumulative NFTs sold on your platform in February? [01:42] >> I don't remember the exact month, but it was around that. That's right. Yeah. [01:45] Okay. That's amazing. And so what enabled you to grow so quickly? Right? Obviously, you ran BD at a massive exchange. Maybe there's some connections there that help you grow, but what what was the credit to that original mousetrap and the growth? [01:57] >> Yeah, absolutely. So I think there were a couple of things. Well, number one, I have to definitely give credit to the timing of the market. So [02:09] >> Q1, Q2 last year was when Ethereum NFTs really took off and really the cultural zeitgeist, with Beeple, BAYC 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. We caught that timing really well and rode that tailwind. But separate to that, I think within the company itself, the main point that really helped us grow, I think, was the the skill [02:34] >> set of the founding team. So we've got four founders, myself, our CTO, his name is Sid, [02:43] >> our chief operating officer, his name is Zhuoxun Yin, and our chief engineer, his name is Joji or Rex. And I really felt like the four of us came with a good synergies of skill sets that allowed us to build something really fast and have really good intuition about what was 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, Zhuoxun [03:06] >> Yin, came from Coinbase and dYdX, 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, but the features, the software that you build looks really like a consumer marketplace. So I just felt like we had some really natural intuition about [03:33] >> what were the right things to [03:34] This makes tons of sense. Now, you very diplomatic about equity at the beginning? Everyone gets 25% or how'd you guys think about that? Obviously, maybe maybe there isn't even an equity question. Is this all built in like a Dow or a central treasury or something like that? [03:45] >> No. No. It's it's a it's a equity thing. We're we're pretty vanilla, but, yeah, like, equal split. You know? I think [03:52] Oh, wow. You did equal. [03:53] >> Absolutely. You know? Equal partners in this. We couldn't have done it without, we couldn't have done it without each other. Yep. [04:01] Oh, what's going on there, YouTube? Good to see you guys. Now imagine this. You love watching these interviews with SaaS founders, but imagine if we took all of the valuation data out from over 2,807 interviews I've done manually. Saves you a lot of time. Well, we've done this. We've built it into the beautiful interface inside of Founderpath. Check this out. I'll show you how you can access this in a second, but you log in, you connect [04:24] your Stripe account, you see your valuation real time. You can see what it changed over the past eighty eight days and even set goals for valuation this year. Now the secret evaluation is there's many different ways to value a SaaS business. So the reason you're gonna see three or four different valuations inside of your Founderpath dashboard, this is all free by the way, is because depending on who's doing the buying of your SaaS company, you're gonna [04:49] get a different valuation. A VC is gonna pay a different valuation, Private equity firm is different. If you're gonna do a minority sale, that's different. And if you sell the whole business, that's a different valuation. You can see all those when I hover over here, right? So the teal is what a VC would pay. Yellow is what private equity And red is if you sold the whole thing outright. Now what's cool about this is this is [05:11] not built off random data. Again, you guys hear these interviews on YouTube. All these datas are built from real time valuation data points founder share with us on the show. So traction 1,200,000 seed round 3.7 raise. They sold 22% of their business. Go in here and filter by the event. Maybe you only wanna see companies that have sold the whole business. Well, here are a bunch that have been acquired the valuation and the multiple. Maybe you're [05:36] going out right now and you're raising your seed round. We'll go in here and look at all this recent seed deals that went down, what they raised, what valuation they raised at and what percent that they sold. There's never been a larger dataset of SaaS valuations than what you can get now inside of Founderpath. And we're thrilled to bring it to you. All right, we're gonna go back to the YouTube video here in a second, but [05:58] if you wanna check this tool out, if you wanna jump in and sign up, you can check it out for free to get your valuation at this link. This link, founderpath.com/products/valuations. Or if you go to founderpath.com and hover over products, click on get your valuation here, and go ahead and sign up to give it a whirl. Again, all that valuation data live right inside the platform. I hope to see you there. Alright. Let's jump back into [06:25] the interview. 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 gonna hear these numbers and be a little bit in disbelief, so wanna try and break it down to like Lego blocks, right, where you've now built this masterpiece. The first Lego, the first NFT sold on your platform, what was it? How much did it sell for, and how did you [06:43] help that buyer or seller? Do you remember? [06:45] >> 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 Eden, so I can't remember. Although I do remember [06:58] >> one of the earliest collections, this must be in, you know, 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 [07:18] >> 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's Igor. He was our first BD guy and he was just a killer, like absolutely integral to the founding story and the early success of Magic Eden. [07:36] So is that what you're doing? You're almost like Sotheby's, you're actually spending all of your time recruiting artists effectively? [07:42] >> 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 as you described, it's very much like artist outreach. 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 [08:12] >> 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. [08:20] Mhmm. Obviously you have 100% of revenue, right? What percent is Launchpad versus secondary trading? [08:26] >> Launchpad is a little more spiky. I would say it's around twenty, eighty, so or thirty, seventy. So 20% Launchpad, 80% secondaries, or sometimes it goes up to thirty, seventy. Yep. [08:41] Yep. So and just to I guess just to go back to volume, you quoted 400,000,000. That that was 400,000,000 in GMV last month in April? [08:49] >> Yeah. Yeah. [08:50] And what do you think you'll do this month? [08:52] >> This month has started off pretty strong, actually. So I think we're already at [09:00] >> Well, where are we right now? I don't know the numbers off the top of my head, but this month has started pretty strong as well. One:thirty probably something similar. [09:09] Okay. So I mean, that's what I'm trying to get a sense. Are you going from like 200,000,000 in GMV to 400,000,000 to 800,000,000, you're doubling every month or is it more like 20% growth per month? [09:20] >> Yeah. So right now, [09:23] >> 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. 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- [09:50] >> Solana. [09:51] Yeah, exactly. More of a function of Solana. Right? Yeah. [09:56] Are you involved deeply with the the core Solana team? I mean, if they grow, you grow. [10:01] >> Yeah. That's right. Yeah. That's right. So Solana then Solana Foundation, we've been, in contact with from day one effectively and, very [10:12] >> 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. [10:20] Okay. Yeah. Let's talk about funding. So when was the series a closed? [10:24] >> February? [10:27] Oh, this year. Okay. How much was it? [10:29] >> We raised 27,000,000. [10:31] Okay. 27. And how do you value a thing like this? I mean, in traditional SaaS, your series A, you're selling 10% to 15%. Were you sort of in that same range? [10:38] >> Okay. Fair enough. [10:40] Got it. So I mean, we're talking then what, like a 220 pre money valuation, something like that? [10:46] >> Something that Oh yeah, we'll talk. Yeah, that's right. Okay. [10:48] 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? [10:55] >> Yeah. I mean, it gets valued [11:00] >> 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 transaction volume. [11:17] >> Yeah. So and we've been effectively revenue generative from day one. Pretty much, I think- [11:24] Jack, do you take 2% of all revenue through the platform? [11:28] >> Okay. [11:30] So if we take Can we take 400,000,000 last month times 2%? [11:33] >> Yeah. [11:34] Made $8,000,000 Yeah. [11:35] So you did $8,000,000 last month in revenue? I'm missing something. Mean, that puts you at almost $100,000,000 run rate. You're only getting valued at 2x? [11:46] >> 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. But yeah, I would think that our valuation is significantly higher now. [12:02] Do they not? Mean, what it takes two, three, four months to do 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 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? [12:19] >> So I think that's like a 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 yeah. This is a Okay. [12:33] But my I am getting my numbers right. You valued basically at two x when you closed. [12:39] You're about to break a $100,000,000 run rate. You're valued at like $220,000,000. Yeah. [12:42] >> Around February, we weren't doing 8,000,000. So I think last month we were doing 8,000,000. Around February, maybe we're doing 4,000,000 or something. [12:51] Oh, so you're growing I mean, this is an extreme growth story. You're doubling every two months or something like that. [12:58] >> I see. [13:00] Fascinating. Okay. Got it. That makes sense. Now is this the only capital you've raised? [13:03] >> Yes. That's correct. Yep. [13:05] Okay. So skip the pre seed, skip the seed. [13:07] >> Oh, no. No. We've had a we've had a, like, a small seed as well. Yeah. When was that? That was around October. [13:15] Okay. So 500k seed in house. Two and a Sorry. Two and [13:19] >> a In [13:20] in February of this year? [13:23] >> No. Sorry. October last year, 2.5 mil seed round, and then February, we closed the series a. [13:29] Oh, I understand. I understand. Got it. And that valuation on the seed round, same like 10 cap, 20 cap, something like that? [13:35] >> Yeah. Something along those lines. [13:37] Very interesting. Okay. So how do you I mean, if I'm a series A investor looking at this, I'm going, my gosh, where is Jack going to grow this thing? They already make up 95% of Solana. So you must be telling some massive growth story that does not have to do with Solana moving forward. [13:51] >> Yeah. So there's a couple of things. I think the NFT market growth starts with the creators. Growth doesn't necessarily start with the chain. Right? It's the creators who create use cases for NFTs, and those use cases pull in new users. Chain is just a technology, just like an operating system on which it lives. We're very bullish on new categories. So the category that we have, [14:23] >> built our business on, that's kind of our bread and butter today is digital collectibles, so like profile photos, digital art, and so on. But the category that we're super bullish on going forward and we want to invest deeply in is gaming, Right? In game assets, in game purchases, that's been a tried and tested business model for a decade for the gaming industry. And users that are very tech savvy and [14:48] >> would be open to much more open to adopting new technologies. So for us, we want to bet deep on serving game developers and Solana as a chain with some of its new, like technical fancy technical properties of being super fast and cheap and so on is pretty adept at serving those use cases. So even though we don't see that those gaming developers launching too many of those gaming developers launching their games now on Solana, we're betting [15:16] >> on the future and we're very bullish. [15:18] Mhmm. For artists listening to your people that don't understand NFTs, explain to me why Okay Bears is such a popular collection. [15:27] >> Yeah. That's a really good question. And those well, I'm a an Aussie and I hear the founders are fellow Aussies, so definitely a little bit of Aussie pride there as well. [15:37] Yeah. I mean, just for my audience too to paint the picture here. Right? So 6,000 unique holders. There's only 10,000 in supply. There's 1,300 listed right now, I guess, for sale on Magic Eden. Right? What part what makes a NFT take off? Is it more more unique holders, just higher per unit sale pry like, rarity? What makes it work? [15:57] >> I think I think for Okay Bears, it's really about community. Right? It's about branding and community. Like, in in in some fundamental value, like, in in some fundamental ways, collections like Okay Bears, their profile photos. Right? In a way, it's your Internet version of, I don't know, like a Rolex or something or like a Nike bag. It's your personal branding on the internet. What the Okay Bears team did extraordinarily well was they did a lot of super organic grassroots [16:30] >> community building to build interest in their project over six months. There's a lot of NFT projects which try to [16:38] >> cut a lot of corners. They'll pay a bunch of influencers, juice up some marketing, but there is no real organic interest from the from the community in the collection. And I think what Okay Bears did was just really pound the pavement and do the hard work and build out community, that strength really shows. And, you know, in some ways that translates super well into their brand. [17:02] What does that mean? I own Okay Bear number 4533 with honey dripping out of his mouth and one suspender on. What do I get access to community wise? Are these people that I can go to a digital world somewhere, a URL and talk to people on a chat room, or is it a physical meetup in LA I can only visit once a year? Like, what is the community part? [17:20] >> Yeah. So I think for for Okay Bears, they have a roadmap. I I'm not super familiar with exactly the ins and outs just because we serve so many creators. [17:35] >> Like creators typically, what I will say at a higher in a more generalized level is they will use the funds from the Mint to then build some kind of virtual world or like internet gated experience. They will curate the audience that is there, right, for that specific purpose. People who go there will say, Hey, like, [17:58] >> I really like the vibes or I really like the experience you're creating. Another way of describing would be it's almost a little bit like an internet version of a exclusive club. Right? And you really like the people that you hang out there and a lot of people who buy Okay Bears would be crypto influencers or social leads or something like that in the crypto verse. Generally it might be really hard to be able to have a [18:21] >> conversation with them and talk about or have a common language with them or common topic, but because you are bonded by this, in some ways like the internet luxury purchase, you can create that common language and common topic. [18:32] Yeah. Mean, feels a lot like back when I used to play Age of Empires, The Conquerors Edition, I was part of a clan, right? I go to Okay Bears and I look at their blueprint and it's literally like looking at a blueprint. There's the park, the gallery, the bear market, the boutique, the studio. And if I click into any of these worlds, I can see where this could I mean, basically becomes an online game. It's the [18:52] new version of RPG with a curated community. Is that a good analogy? [18:55] >> A little bit like that. Yeah. A little bit like that. Yeah. [18:58] Interesting. Fascinating world. Okay. Is exciting stuff. So some other quick metrics here before we wrap up. What's the average sale price? So 400,000,000 last month, what was the average sale price? [19:08] >> I think my finance guy is gonna have to keep me honest, but I think it's around 200 to $300. [19:15] Okay. Got it. [19:16] >> Two to three SOL. [19:16] Volume. Yeah. A lot of volume. Right? So we can do 400,000,000, right, divided by 200. What is that? Like, 2,000,000 unique transactions, something like that? [19:24] >> Mhmm. Mhmm. [19:25] That's incredible. Okay. And and are they are they all being bought by, like, the same buyers? Right? One buyer owns a million or is it like, how many buyers of the 400,000,000 in GMV? [19:35] >> In general, we see around 30,000 unique traders every day. So it's still largely pretty distributed. There is definitely some concentration effects, so, like, there are whales who buy a ton. Yeah. But in general, when we've looked at snapshots of the data previously, our our our collective base is fairly distributed. Yeah. [19:57] Jack, are some things I just don't know about. Really know B2B SaaS, I'm still new to crypto. Are there questions I should be asking here that I haven't? [20:04] >> I mean, crypto is So I mean, NFTs is pretty crazy. It's effectively a new media class, right? Or a new asset class, but to roll it up in one. I think in general, we're also experimenting and thinking about where this thing could go. The future, I would say it's pretty early days in terms of this technology primitive. [20:28] >> I think all that to say is we're also thinking about some of these questions ourselves and trying to explore what the future is. [20:34] Yeah. If CAA comes and offers to buy you for a billion dollars, do you sell? No. That is model, right? It would be one of these big record labels or a big gaming company or someone that has connections to a lot of artists. I mean, that would be like, if you were going to merge with someone or do a deal with someone, it would be those kinds of groups, right? [20:58] >> I think philosophically we'll never merge, right? [21:04] Let's just use the word partner. Okay? You're never gonna sell, but if you're gonna partner, that's who you'd be partnering with. Right? [21:09] >> Yeah. [21:12] >> The DNA from Magic Eden is we're we're crypto native. So in the sense of we really want to experiment and explore the boundaries of this new technology and these new primitives. And in that sense, I think [21:29] >> some more like, we want to partner with folks who share our vision to want to basically also want to experiment and try out new things with this technology. I think one aspect to this is definitely is partners who are able to bring super valuable IP. They are invaluable parts of the ecosystem, but there is also other folks who are maybe more on the technology side, more on the software side who'd really want to push the boundaries, [21:57] >> who might also benefit there. [21:58] What's your total team size today full time? [22:01] >> Like a 100 now. [22:02] 100. Wow. How many engineers? [22:04] >> Around 40. [22:06] Any of your own artists? Do you launch your own collections just to be your own customer? [22:10] >> No. We don't do that. Yeah. Okay. Interesting. Yeah. [22:13] Do you have artists on your team that helps new artists launch? [22:17] >> Yeah. So on the business side, we're proud to say around a third of our team are former NFT artists or former NFT collection creators. [22:28] Hire your customers. Right? [22:30] >> Yeah, exactly. You want to have the lifeblood of the user in the company. And I think that [22:38] >> was a really critical move for us. I think that's the wonders for the way that we develop product and the way that we build new things. [22:46] Jack, on that note, let's wrap up with the famous five. Number one, favorite book that you read? [22:51] >> Oh, I'm a huge Haruki Murakami fan, so I love The Wind-Up Bird Chronicle. [22:57] >> The Wind-Up Bird Chronicle. [22:58] Good one. Number two, is there a CEO you're following or studying? [23:02] >> Well, I used to work at FTX. I think the founder there, Sam Bankman-Fried, is a is a absolute monster. So, yeah. That that would keep my eyes on. [23:11] Number three, besides your own, what's your favorite online tool or online place to hang out? [23:16] >> Telegram. It's a must have for crypto folks. [23:20] Number four, how many hours of sleep do you get every night? [23:23] >> Oh, six hours. [23:25] Okay. And what's your situation? Married, single, kids? [23:28] >> Married, no kids. [23:29] No kids. How old are you? [23:30] >> 32. [23:32] >> 32. Last question. [23:33] Something you wish you knew when you were 20. [23:35] >> Well, [23:39] >> when I was 20, I was in law school. So should have studied computer science, I think. [23:45] Skip law school, go to computer science instead. Guys, Magic Eden. Did over $400,000,000 of transaction volume in NFTs on Solana last month alone. The average sale price there about 200 or $300. That means it's about 2,000,000 unique transactions, 30,000 unique traders per day. They make a 2% cut on that 400,000,000. So 8,000,000 in revenue just last month, that's up from 4,000,000 earlier in January and February. So growing very quickly, just closed a 27,000,000 series A at somewhere between [24:16] a 200 and 300,000,000 valuation, growing nicely with a team of a 100, hiring their own customers to make sure they keep that lifeblood going to the company. Jack, thanks for taking us to the top. [24:25] >> All right. Thank you so much, Nathan. Cheers. [24:29] One more thing before you go. We have a brand new show every Thursday at 1PM Central. It's called Shark Tank for SaaS. We call it deal or bust. One founder comes on three hungry buyers. They try and do a deal live and the founder shares back end dashboards, their expenses, their revenue, ARPU CAC, LTV, you name it, they share it and the buyers try and make a deal live. It is fun to watch every Thursday 1PM [24:54] Central. Additionally, remember these recorded Founder interviews go live. We release them here on YouTube every day at 2PM Central. Make sure you don't miss any of that, make sure you click the subscribe button below here on YouTube, the big red button and then click the little bell notification to make sure you get notifications when we do go live. I wouldn't want you to miss breaking news in the SaaS world, whether it's an acquisition, a big fundraise, [25:17] a big sale, a big profitability statement or something else. I don't want you to miss it. Additionally, if you want to take this conversation deeper and further, we have by far the largest private Slack community for B2B SaaS founders. You want to get in there. We've probably talked about your tool if you're running a company or your firm if you're investing. You can go in there and quickly search and see what people are saying. Sign up [25:38] for that at nathanlatka.com/slack. In the meantime, I'm hanging out with you here on YouTube. I'll be in the comments for the next thirty minutes. Feel free to let me know what you thought about this episode and if you enjoyed it, click the thumbs up. We get a lot of haters that are mad at how aggressive I am on these shows, but I do it so that we can all learn. We have to counter those people. We [25:58] got to push them away. Click the thumbs up below to counter them and know that I appreciate your guys'support. Alright, I'll be in the comments. See you.