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Dapper Labs is reportedly raising more capital, which could nearly triple the company’s valuation to $7.5 billion.
This announcement comes just weeks after a $305 million investment round, which put the Vancouver-based startup’s valuation at $2.6 billion. This round is again being led by hedge fund Coatue Management, which also led the previous round.
The last round was one of several over the last few months that raised over $300 million, which also occurred for BlockFi, and Blockchain.com. The latter just received an additional investment of $100 million from UK asset manager Baillie Gifford.
VCs don’t want to miss the boat
The frequency and amount of these large fundings are noteworthy. Although cryptocurrencies have proven volatile investments over the past few years, their recent prominence has made them irresistible.
Fearful of missing out on what they perceive as a rising tide, venture capitalists are willing to pay a premium. Despite the higher risk, it is worthwhile for them not to “not miss the boat on what they think is a category winner,” says Paul Veradittakt. Veradittakit is a partner at Pantera Capital, one of the earliest investment firms to bet on blockchain technology.
High market expectations
But the added investment comes with significantly higher expectations. Dapper Labs have been extremely successful with their products, CryptoKitties, and NBA Top Shot. This has engendered great confidence in them from investors, enabling them to raise these enormous amounts. However, “there’s a danger to be raising quite a bit of money marked up above the last round,” Veradittakit notes. He says the company risks deploying too much capital too quickly.
In addition to capital outflows, the company will have to account for a slowdown in the market. According to data aggregator Dapp Radar, NBA Top Shot alone was responsible for a third of the $1.5 billion NFT trading volume seen in the first quarter. However, the volumes, the number of traders, and sales have significantly dropped over the last 30 days. “The data would suggest it’s cooling down for the time being,” says Ian Kane, senior content and media relations specialist at Dapp Radar.
Finally, Dapper Labs will also have to contend with user retention and satisfaction. Kane cites “continuously failed drops, a stalling website, and broken queues,” among the issues users have been complaining about. However, these issues are likely what the company could address with the significant additional capital.