TheChek News Flow

One of OpenSea’s biggest investors has marked down by 90% its stake in the struggling non-fungible-token marketplace, implying that the former crypto darling is now valued at $1.4 billion or less on paper. Coatue Management, a New York–based hedge and venture fund, slashed the value of its $120 million stake in the company to $13 million as of the second quarter of this year, according to a document viewed by The Information.

The previously unreported markdown shows how venture investors are reassessing the value of their investments made at the height of the crypto boom, following a severe deterioration in the market. At the start of last year, OpenSea sported a $13.3 billion valuation from a funding round co-led by Coatue and Paradigm.

• Coatue co-led investment with Paradigm during height of crypto bubble

• Firm also slashed valuation of MoonPay stake

• Coatue’s 2021 growth fund has lost money on paper

Coatue also slashed the valuation of its stake in crypto payment startup MoonPay 90%.

Collapsing startup valuations are contributing to lackluster returns for venture investors. As of September, the multiple on invested capital for Coatue’s $7.7 billion growth fund, raised in 2021, which backed OpenSea and Moonpay, equaled 0.8 times, meaning the total paper value of the fund's investments is worth less than the initial money put in, according to a person with direct knowledge of the matter.

For venture funds raised in 2021, the median internal rate of return is negative, meaning most of these funds have lost money so far, according to Cambridge Associates data as of March. Paradigm, a specialist in crypto, had generated a negative 5% net internal rate of return as of May. A spokesperson for Paradigm declined to comment on the value of its OpenSea stake.

Most crypto startups have faltered in the past 18 months, as the end of near-zero-percent interest rates quashed demand for digital assets. OpenSea last week laid off 50% of its staff after volume on its marketplace plunged 99% since the start of 2022.

Coatue and crypto VC firm Paradigm co-led a $300 million Series C investment in OpenSea in January 2022, amid high demand for trendy blockchain-based digital collectibles like the Bored Ape Yacht Club collection. The transaction valued the New York startup at $13.3 billion or nearly 9 times higher than its prior round, led by Andreessen Horowitz, less than a year earlier.

But OpenSea’s business, which had generated revenue by taking a 2.5% cut of each transaction, began to founder once crypto prices declined and NFTs fell from favor. In July 2022, OpenSea made the first of at least three rounds of layoffs over the last year.

By December 2022, Tiger Global Management, another OpenSea backer, had slashed the value of a $126.8 million investment it made in the startup by 76%, The Information previously reported. Early this year, OpenSea temporarily eliminated its fees on most trades following the launch of a no-fee competitor, Blur, crushing trading revenue. A spokesperson for OpenSea didn’t comment.

Coatue’s Crypto Bets

Coatue was one of the most active investors in private tech startups during the pandemic-fueled bull market, backing more than a dozen cryptocurrency startups in that period, according to PitchBook. In October 2021, it invested $100 million in MoonPay, in a $555 million deal alongside Tiger that valued the startup at $3.4 billion. That deal allowed MoonPay CEO Ivan Soto-Wright and his inner circle to cash out $150 million of their own stock. In the second quarter of 2023, Coatue marked down its stake to $11 million, implying a $374 million total valuation for the startup.

In 2021, Coatue also led a $250 million investment in Dapper Labs, a developer of blockchain games like NBA Top Shot, that valued the startup at over $7.5 billion. In July, Dapper completed its third round of job cuts in less than a year, also due to the steep decline in NFT sales. Dapper’s valuation would likely be much lower today.

Some of Coatue’s other investments are partially offsetting the crypto losses. Coatue in September slightly marked up the performance of the $7.7 billion fund, its fifth growth fund, to 0.8 times from 0.7 times the month before due to a 50% valuation jump of security company OneTrust, the person with direct knowledge said.

In July, OneTrust raised $150 million in a round led by Generation Investment Management at a $4.5 billion valuation. That was an increase from OneTrust’s $3 billion valuation in March, when Coatue invested $400 million from its fifth fund, the person said. While the gains improved that fund’s paper returns, OneTrust is still valued less than the $5.3 billion valuation it earned in 2020, when Coatue invested out of an earlier fund. Coatue’s March investment in OneTrust hasn’t been previously reported.

Coatue also backed graphic design startup Figma at a $400 million valuation in 2019, according to PitchBook. Last year, Adobe agreed to buy Figma for $20 billion, though the deal has been held up by antitrust reviews.

The investment firm is currently raising additional capital for its fifth growth fund through a companion vehicle to invest mostly in startups it has not previously backed, which could boost returns, the person with direct knowledge said. Coatue waived its typical management fees on the new capital. Its investments this year include artificial intelligence startups Tome, Replit and Runway.