Moonbirds – a turning point

Posted on April 18, 2022

Moonbirds marks a turning point in NFTs.

It’s not about @moonbirds_xyz specifically. It’s about the whole market.

As an experienced startup person, I can see a pattern emerging here. It has some important implications for the future of NFTs.

Read on to find out more.

Since all the way back in October last year, I have been suggesting that one of the primary functions of the NFT PFP project, as pioneered by @yugalabs’ BAYC, is as a fund-raising mechanism for startups:

NFTs have offered an entirely novel way to do this, that, imho, can and will displace share issues as the primary way for startups big and small to raise funds.

They have pros and they have cons, for sure. The instant liquidity is a double edged sword. But a huge part of the promise of NFTs, for me, is that they export the Silicon Valley, “fund everything and see what works” model to the entire world.

As non-negligible side-benefits, they also democratise the process (instead of only VCs and accredited investors having access to them), they superpower the startup with an instant community, and they’re more fun an engaging.

But at the core, I see several key uses of NFTs atm:

  • As the fundamental building block of a global digital marketplace
  • As collectible/tradable items for games
  • As a powerful alternative to selling shares for startup funds

There are probably more, but these are the big ones.

Part of the confusion in the NFT market is that those things get blurred and mixed together, sometimes as part of the innovation process (“Why can’t we be all three?”), sometimes as a way to obfuscate things and scam people (“don’t judge our roadmap, we’re art!”).

Often in Twitter and Discord conversations I see that confusion and it makes conversations more difficult. So let me be extra clear:

Moon birds is a turning point for NFTs as a fundraising mechanism. Not for art. Not for web3 gaming.

For startups.

I think I can see this clearly because I’ve been in the tech startup world for 15+ years. I’ve met countless founders at various points in their journeys, coached some, helped some with funding, observed their evolution. This is an area of expertise for me.

And from that perspective, here’s what I see as some major steps that have occurred in the last year, which will shed a light on why Moonbirds is important, and what it means for the future of NFTs as a fundraising mechanism.

The first big step was BAYC. It took a while to really prove itself, but it seems to me BAYC essentially pioneered the model of NFTs as a fundraising platform, with their godlike timing and flawless execution, they proved that a lot can be achieved with NFTs.

Since then, there have been a million copycats. I’m not saying this to dismiss those that followed BAYC: following in the footsteps of great innovators is not dishonourable! It’s smart!

But essentially almost every project I’ve encountered is a BAYC follower in some way.

The more BAYC got successful, the more it validated that it is possible to fund and build innovative businesses via NFTs.

But one thing I observed over all these months is, most NFT project creators, even well intentioned and driven, are not experienced business operators.

That’s again not a diss. I love first-time founders. I was one too! All experienced founders were once first-time founders. We all have to start somewhere, and actually that’s still where my preference lies in terms of investments.

But having worked with many people who are skilled and experienced serial founders, I can tell you there’s a very good reason why angels/VCs are way more likely to fund them than first time founders:

Proven experience is a huge edge in the startup space.

The level of determination and focus that skilled founders are able to muster is just on another level. They have a very clear sense of what matters and what doesn’t, they know how to deal with the typical business scaling issues, they end up just more relentlessly effective.

So I’ve been surprised to see so few of them in the space, despite the clear, obvious, huge opportunity, the large amounts of funding sloshing about, etc. I’ve been asking myself – why is anyone bothering to raise angel/VC funds at all when this is available?

I guess it was just a matter of time, but as a second unlikely turning point in our journey, I’d like to offer:

Pixelmon.

It might seem like a pretty cheap follow-up to the excellence of Yuga Labs… but bear with me.

What Pixelmon proved was that you can raise serious, Series-A/B money ($70m) with basically nothing. No credentials. Not even a doxxed team (or even any team at all, perhaps). Just a not-very-fancy video and some hype.

The obvious point that must have arisen in the minds of many founders observing this space is: if they can get $70m with nothing, I can probably get $70m with something, and use it for something I think is worth building.

I don’t know what led @Kevinrose05 and @ryancarson to conceive @moonbirds_xyz, but if they said Pixelmon was one of their data points I would not be at all surprised.

YugaLabs raised the ceiling of what’s possible. Pixelmon showed the floor is pretty damn low.

Finally, our third turning point in our journey of NFTs as a fundraising mechanism: @moonbirds_xyz .

For many months now, the NFT fundraising space has been in a state of slight schizophrenia about what it actually is and what that means.

Every time I mention how NFT projects are startups and NFTs are innovative alternatives to shares, people get scared that the SEC will come cracking down on the space, shut everything down, end the party, etc, because they’ll classify NFTs as securities.

To this I’ve said: most of those NFTs are securities. You can stick your fingers in your ears and yell and pretend they’re not, but they’re still securities. And they’re better than shares, so embrace their nature and improve them, instead of dancing around the truth.

Moonbirds is, afaik, one of the first majorly successful (so far) projects that is unashamed about what it is. Kevin and Ryan have been very clear that they’re raising money, that they’re not “selling art”, that they’ll treat the money as funds to build a product, etc.

They likely have spoken to enough lawyers to have multiple lines of defence in place to ensure they don’t fall foul of securities law, so I’m not worried about “attracting the SEC’s attention” to them.

They are serial entrepreneurs: they know how to deal with this stuff.

Whereas YugaLabs, when they started, operate in a grey area where utility was still a novel concept that ppl didn’t understand, Moonbirds is clear that they’re building a product and holding one of these early investment tokens will be rewarded if the product succeeds.

Whereas Pixelmon was a nobody raising a lot of money with a lot of hype to probably do nothing useful with it, Moonbirds shows that credible, serial entrepreneurs can raise a very substantial sum of money for a project via NFTs.

Moreover, whilst Pixelmon was a notable event for people who were deep enough in the NFT space already to understand its significant, Moonbirds is obvious to everyone outside the NFT space. Kevin Rose and Ryan Carson are well known already in regular startup circles.

The headline news for people who have been hesitating to get into NFTs because of all the stupidness could not be more clear:

  • Well known startup founders raise $75m of funding via NFTs

Cue tens of thousands of non-NFT entrepreneurs realising this road is open to them too.

Moonbirds have proven the model for entrepreneurs. Whether they then make Moonbirds itself a success is irrelevant.

The door is open.

Many more will come through.

Imho this will be the second killer app for NFTs (and crypto), after art: kickstarter on steroids.

I’ve said before that the current state of things, where just having a coherent value proposition makes you stand out in the NFT space, is a temporary state of affairs. Eventually this space will be very crowded with high quality, just like Kickstarter:

I believe Moonbirds is a turning point in that regard: the door is open. Many more skilled entrepreneurs are going to flood through.

That’s great. But it is the beginning of the end for the degen phase of the market imho.

Not that that will go away, but it’ll become a minority.

My prediction is that by the end of 2022, a very substantial portion of successful mints will be by people with existing startup experience, or with rock-solid value propositions, rather than “come mint our pugs, the roadmap is merch, metaverse and raffles”.

I like that. It’ll get harder to identify the best projects, because there’ll be so many to choose from, but a much larger proportion of new projects launching will actually be worth investing in (after due diligence).

Another implication of this is that competition will get harder. Right now, the meta, imho, is that if you invest in a legitimate project, with a driven, capable team and an engaged community, it’s probably going to do alright eventually.

That might change. The bar is rising.

This doesn’t mean that weird and off the wall crazy cool ideas won’t get funding. But that most of the big funding will likely (appropriately) go to projects which have the most chances of delivering.

Having strong credentials is such a must-have for a credible startup pitch that I also expect the “undoxxed team” problem to possibly start resolving itself without us needing to do so much more. Why invest in shadowy figures when there are so many great founders to back?

I also expect that many non-crypto-native founders will get the web3 transition hopelessly wrong, and there’ll be some really bad foot-in-mouth misfires as this gets going and the “best practices” become clearer.

Expect some real clunkers to come along.

On the really positive side, I expect that this “Silicon Valley”-style “fund everything” model, scaled up to the world, will be an engine of innovation the likes of which we’ve never seen before.

I really look forward to seeing what it produces.

I don’t expect VCs to disappear entirely. But their role might decrease.

On the other hand, angel investors as they are now will imho become a dying breed. Who needs them when you can raise $10m+ direct from the market and get an hyped up community as a bonus?

But all these angels are in the business because they have money they want to invest, in startups.

As the NFT space becomes a legitimate startup investment arena, guess where they’re going to go?

Angel investment is what’s dying dying. Angel investors will become NFT investors.

So all in all I’m extremely bullish about this development.

I look forward to a global, more liquid, more inclusive and accessible, less discriminatory version of the Silicon Valley innovation engine.

Let’s see where it takes us.

TL;DR: @moonbirds_xyz opens the door to Silicon-Valley style funding for experienced innovators and operators to flood the NFT market. Expect many more startups to raise money via NFTs.

gm & gl

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