SuperRare Venture Capital Investment Memo

Tl;dr: 1confirmation invested in SuperRare at the $1.4m seed round.  They shared their investment memo on Twitter. Read to understand how a venture capital investor thinks about investing in a company and how they communicate it to their partners and potentially their limited partners.

About the VC investment memo

Nick Tomaino shared it on Twitter with “Our @superrare investment memo (July 2020)”

I’ve nothing else to tell you!

About SuperRare

About 1confirmation

Founded by Nick Tomaino and backed by individuals like Peter Thiel, Marc Andreessen, and Mark Cuban and institutions like Horsley Bridge and Runa Capital, 1confirmation is a venture fund that supports exceptional founders fueling the decentralization of the web and society.

Usual caveats

No investment memo made voluntarily public will ever be 100% as it was. The pressure is just too high for VCs to look smarter, and not make founders uncomfortable, etc. I highly praise the VCs that share their thought leadership so we can all learn.

If you’re learning to make a VC investment memo, don’t assume the memos are what you exactly need to do. Information will be redacted. Assume anything “delicate” or sensitive is not in the memos.

The only memo that is 1 to 1 is the Youtube memo because it was in a lawsuit.

SuperRare Venture Capital Investment Memo

Summary:

SupeRare is the leading primary marketplace for on-chain digital art. The marketplace allows artists to tokenize their digital art on Ethereum and sell it to a small but growing passionate community of collectors. To date, SuperRare has enabled creatives to sell over $1.6M worth of digital art on-chain and the platform appears to be hitting an inflection point, with $250K in volume last month (up 47% m/m). We think crypoart has a chance to displace traditional art over the next 10 years and SuperRare has a chance to be the defining cryptoart company.

We are leading a seed investment of [redacted] at a [redacted].

Key assumptions for SuperRare:

• Cryptoart is going to be The traditional art market is worth $3T+ in total value despite being opaque, illiquid and exclusive to the rich. Digital art on Ethereum has full transparency on pricing and sales, growing global liquidity and is inclusive to all. The context by which people display their digital art is improving dramatically: digital frames (Meural and The Frame by Samsung) and VR worlds (Sonium Space and Cryptovoxels). In 10 years, we believe digital art has a chance to exceed $3T in total value and flip traditional art.
• Design, product and curation will persist as key differentiators for SuperRare in a competitive market landscape for digital art. Superior design, product and curation has enabled the platform to attract a strong community of the highest quality artists and most important collectors and we believe this will persist over time.
• Token model execution. Giving the community ownership of the platform via a governance token makes a lot of sense for this platform, but the team needs to execute and that will not be

Team (8/10): The team is scrappy and has done a lot with a little so far. The co-founders are CEO John Crain, his brother and CTO Charles and CPO Jonathan. They’re authentic and passionate about art and not traditional Silicon Valley hustlers, which is likely a good thing given the product and community. But they will need a healthy amount of hustle too to win big in a fast growing market.

Product (8/10):

Design and UX are superior to other products in the category, though there’s lots of low hanging fruit improvements that must be made post funding. They’re hiring a director of design and two engineers to focus solely on improving the product.

It’s important to note that Nifty Gateway may look competitive on the surface, but the truth is Nifty has an off-chain product and fiat-onramps so we view it to be complementary to SuperRare. SuperRare is unique because it allows artists t truly own and authenticate the works that they sell on Ethereum. The one of one nature of all SuperRare authenticated artworks is likely to command a premium in the market in the long-run.

Community (10/10):

They’ve got a small but extremely passionate community of artists and collectors using the product daily. Here’s our notes from discussions with some artists (Pak, Hackatao, Marterium, Thato Tatai, Osiris, Arc4g) and collectors (Whaleshark, Moca): https://drive.google.com/file/d/1NrGnTj7OtgAM7Po8dGLeeBE7Rr-LicvU/view?usp=sharing

Artists love SR because it enables a new business model for them.

Collectors love SR because it gives them a new investable asset class, and they love to support great artists.

Token mechanics (N/A): There’s no token yet, but there may be in the future. Rarible, an inferior product by all accounts, launched with a token market cap of ~$20M.

Key Risks:

• Execution: The founding team is scrappy and passionate but not experienced and not well-versed in scaling a team
• Competition: It’s early, they have a head start but we may new competition emerge in the future

Recap (Team + Product + Community + Token mechanics: 8.7):

Tokenizing digital art is a use case that appeals to both new people (artists who came from outside of crypto are already making $100K+ selling their works) and crypto natives (ETH whales who have money to spend and want to buy digital art as an alternative store of value and for signaling).

Overall, we think a great product, mission driven team and passionate community puts SuperRare in a strong position to capture massive value as cryptoart grows in the future.

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