Steve Cohen is riding the crypto wave
The latest round of funding for sports-related NFT projects is underway – and this is the largest Series A of its kind.
Recur, the crypto platform owned by the Winklevoss twins, has raised $ 50 million for a post-money valuation of $ 333 million. He is backed by New York Mets owner Steve Cohen, Gary Vaynerchuk, Jason Derulo and Gemini.
The company is developing an NFT platform that connects brands with their fans and allows businesses, celebrities and athletes to interact with those fans through an NFT experience. Founded by Zach Bruch and digital licensing pioneer Trevor George, the company seeks to disrupt the way IP owners can monetize their assets.
The company has partnered with Veritone to license PAC-12 highlights and NIL rights for conference athletes. Recur will also partner with CLC, a division of Learfield, to license the rights of other universities.
The $ 50 million Series A was led by Digital, which is supported by Steve Cohen’s family office. The Mets owner and renowned hedge fund billionaire who inspired the main character of the hit TV show “Billions” has made various forays into blockchain technology since 2018.
- 2018: Point72 invests in Autonomous Partners, a crypto-based hedge fund.
- 2021: Cohen hires crypto manager for Point72 Asset Management.
- 2021: Point72 invests in crypto analysis and information company Messari.
- 2021: Cohen invests personally in Radkl, a crypto quantitative trading company.
- 2021: Cohen invests in Recur through his new blockchain / crypto-based fund Digital.
Needless to say, Cohen fully subscribed to the thesis that blockchain technologies will have a place in the world – and he puts his money where he says.
While Cohen’s investments are heavily geared towards the commercial and financial markets, the investment in Recur’s NFT market highlights a new kind of project.
The market has experienced three main types of sports-specific blockchain applications:
- IP monetization via NFT: From leagues monetizing their content banks to individual players monetizing their name, image and likeness, NFTs enable digital ownership of traditionally analog assets. Much of the benefit comes from traceability. In traditional formats, these assets took the form of YouTube videos and trading cards. On the blockchain, these same assets become individual collectibles that can be continuously tracked and verified on the blockchain. Leagues and players can now more easily and verifiably turn intangibles into a form of income.
- Digital ticketing: Similar to IP monetization through NFTs, turning tickets into digital assets offers issuers the ability to collect royalties on secondary transactions. Whenever a note is traded in a secondary market, the issuer can continue to monetize as each transaction is stored on the blockchain. (Think of a permanent digital ledger that stores an infinite number of transactions.) In March, Dallas Mavericks owner Mark Cuban hinted at the possibility of the Mavericks offering their tickets as an NFT to capture a game of the value of secondary market transactions.
- Social Tokens: In the buzz surrounding the transfer of former Barcelona star Lionel Messi to French club PSG, you may have seen that part of the deal included a payment in PSG tokens. These tokens are yet another blockchain application we’ve seen introduced to the sports ecosystem. They represent a hybrid form of currency and alternative asset. On the one hand, tokens can be exchanged for goods and services like regular currency and their value will increase or decrease depending on market forces. On the other hand, tokens give holders special privileges like choosing walkout music before a match or voting on a new stadium design.
So where does Cohen’s investment in this framework land?
From my perspective, Recur fits most comfortably into the IP monetization compartment. The ultimate goal of the platform is to create a market where athletes, artists, and businesses can generate royalties in perpetuity for their work.
But how have these sports IP games performed in the market?
Recently, not too hot. While NBA Top Shot and Sorare were the leaders in the February and March NFT boom – those two months saw sales of $ 224 million and $ 208 million, respectively – the bubble has since burst for Top Shot. Since the February highs, Top Shot has averaged sales of just $ 45 million.
Even during the current bull run on NFTs, which saw more than $ 5 billion in trading volume (up from $ 342 million in February), NBA Top Shot has fallen behind as sports-related NFTs have been mostly overwhelmed by art projects and game applications. After the demise of its initial novelty, Top Shot failed to provide its users with applications for their digital assets in any meaningful way.
This then poses the question: Why did Steve Cohen put his money behind Recur?
First, it’s important to consider the type of intellectual property that Cohen invests in.
Recur plans to launch a platform called NFTU in early 2022. This platform will be a one-of-a-kind marketplace for college sports enthusiasts to buy and sell highlights from their favorite universities. Try to think of a more rabid fan base than the top college sports teams. Haven’t you thought about it? Neither do I.
Partnering with conferences such as PAC-12 not only helps monetize sports memories and traditions, but will also allow the platform to act as a marketplace for NIL deals to be facilitated through NFTs.
Cohen found the convergence of two of the hottest trends in the market. Both NIL and NFT represent significant changes in their respective markets. Cohen is investing at the intersection of two tidal waves with the potential to really hit hard if athletes choose to monetize digitally.
Gambling on NFT has been lucrative for some and disastrous for others. Projects have historically been successful when the user base has a cult devotion to the project. Sounds a lot like college football fans to me.
Cohen’s bet on the emerging trend of NIL and the thesis that blockchain-based royalties will be a primary monetization channel in the future seems like a good choice to me.