(Bloomberg) -- Magic Eden, a marketplace for nonfungible tokens on the Solana blockchain, saw its valuation surge in a fresh funding round despite a slowdown in private investing and a cratering cryptocurrency market.
Investors have plowed a fresh $130 million into the startup at a $1.6 billion valuation – a roughly tenfold valuation increase since March, according to Avichal Garg, managing partner at Electric Capital and an investor in both rounds. Although that’s a startling pop even by boom-time standards, Garg said he invested because he believes the company will ultimately be worth much more.
The raise is notable at a time when other crypto startups have taken a hit during the market's downdraft, with kingpins Coinbase Global Inc. and Crypto.com slashing their ambitions along with their workforces. This has also tempered enthusiasm for NFTs: monthly global sales have decreased about 34% between January and May, according to CryptoSlam. And Solana is down about 80% this year.
Garg said he’s willing to look through the rout.
“I’m not too worried about overpaying because the headwinds will last 18, maybe 24 months, not six years,” Garg, whose firm co-led the round with Greylock Partners, said in an interview. “You have to be patient with crypto.”
Founded last year and based in San Francisco, Magic Eden operates an NFT marketplace similar to competitors OpenSea and AtomicMarket, earning revenue by taking a share of each transaction. Magic Eden has grown quickly, attracting users who liked Solana’s efficiency and lower cost to authenticate transactions compared to Ethereum.
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Magic Eden was the ninth-largest NFT marketplace in mid-March, according to DappRadar. Now it’s second, just behind OpenSea in users and transaction volume as of Friday.
“We weren’t intending to kick off another round immediately, but we had a lot of interest,” Magic Eden Chief Executive Officer and co-founder Jack Lu said in an interview. “A lot of investors still feel we are very, very early.”
Lu, who co-founded the startup with Zhuoxun Yin, said the company had $7.5 million in revenue in May and has been profitable from the start. Magic Eden is on an annual revenue run rate of $100 million, Garg said.
The company will use the new funds to increase headcount to 140 from its current 50 and grow in what Lu described as “a responsible way” over the next six to 12 months. During that time, it aims to expand and consolidate its collection of Magic Eden-minted NFTs with its larger marketplace, expand into gaming and build on other blockchain technologies in addition to Solana.
This could help ensure greater stability for users. The Solana blockchain’s surge in popularity has also made it unstable, leading to a wave of blackouts during the past year.
However, building on multiple blockchains will also make it more similar to five-year-old OpenSea, which uses Solana, Ethereum, Klaytn and Polygon. Investors valued OpenSea at more than $13 billion in a funding round earlier this year.
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