HACKER Q&A
📣 naterudichuk

Using NFT's to raise capital for a startup?


We are video game and product designers who founded an AI startup with a really solid brand image. Recently we have been developing utility NFT's with the ability to leverage our algorithms in a way that is excluded from our first product (a mobile app). What are your opinions on NFT's as a way to raise capital alongside the traditional VC pipeline, as well as the validity of NFT's as a value producing asset?

  👤 heynk Accepted Answer ✓
A kind of "web3 substack" app just launched their NFTs, doing exactly what it sounds like you're interested in doing. Their NFTs will provide utility (premium features) in their app - no equity or future token or anything.

https://www.explorerguild.io

My thoughts:

Are you sure your target customer would be interested in buying your NFT? From a quick glance, there doesn't seem to be much overlap between crypto/NFTs and your startup. The space for new NFT drops is so saturated - there are new projects every single day, often with 10,000 NFTs for sale. Most of them do not sell out. To execute on this well, you need to build community around your NFTs and create hype, and then deliver a good result. It's not easy, even though it might look like "easy money".

👤 ganoushoreilly
You need to be very clear on what it is you are selling. You need to be 100% sure you aren’t creating a security with your offering.
👤 toss1
Although the "Evolved Apes" game creators unfortunately did a runner, it seems they did prove the concept. Who knows if it would have been enough to fund development, but funds were raised.

Obviously, you've got a handle on working with/around the SEC security rules, and it seems that being non-anonymous and transparent about the development, raise process, etc. could be quite successful.

It also seems that organizing it like a raise might help, and is plausibly possible with smart contracts. E.g., we will be raising a minimum of $5 million with this raise, if we don't reach that then the sales will not complete — or, perhaps will complete at the starting value (to cover the costs of the NFT raise). So, the offer might be:

buy at minimum of $x,

sale will be completed at top bid price if sum of all top bid prices exceeds $5 million

else sales will be exercised at opening price to winning bidders

Just a start of an idea, needs work.

In any case, good luck!

👤 tarun_anand
It's a good idea always to raise capital - but question is at what terms?

Secondly, is NFT tied to the stock? You will still have to register shareholding wherever you are domiciled.

Lastly what are the liquidity and exit options for investors?

👤 dpeck
If you have the ability to have a successful NFT sale that would raise funds for your startup, then that should be the startup.
👤 high_byte
ICOs used to be the thing. now NFTs are all the rage.