NFTfi, a marketplace for non-fungible token collateralized loans, has raised $5 million in Series A funding. The lead backer was 1kx. Other backers included Sound Ventures, Maven 11, Scalar Capital and Kleiner Perkins.
CAPE TOWN, SOUTH AFRICA (November 16, 2021) – NFTfi, the marketplace for non-fungible token (NFT) collateralized loans, announced today that it has raised a $5 million Series A funding round to accelerate its mission to build NFT-based financial infrastructure. The round was led by 1kx, a leading early-stage crypto fund specialized in scaling up decentralized token networks, and will allow NFTfi to grow its operations, marketing, and product development teams to keep up with fast-growing demand. Other investors include Sound Ventures, Maven 11, Scalar Capital, Kleiner Perkins, and more.
As NFTs have become the latest frontier of Web 3 innovation and have seen explosive – in some NFT sub-verticals up to 10000% – user growth in 2021, most NFT holders are looking for ways to use their valuable assets productively without having to sell them.
NFTfi is a two-sided loan marketplace addressing this need. It allows NFT holders to borrow liquidity against their NFT assets in the form of peer-to-peer cryptocurrency loans. NFT holders can then use this liquidity productively – for instance by taking trades in other markets – before paying back the loan and obtaining back their NFT. Lenders, on the other hand, are using NFTfi as an attractive new source of yield by lending out their capital against NFT collateral.
NFTfi currently supports over 100 leading NFT projects, including Art Blocks, Bored Ape Yacht Club, Cryptopunks, Autoglyphs, Meebits, and VeeFriends. Since the first NFT loan in May 2020, over 2100 loans totaling more than $26.5 million in value have been executed on the platform.
The NFTfi platform is blockchain / smart contract-based, and does not act as a “middleman” as known from traditional loan platforms, but instead directly (“peer-to-peer”) connects lenders and borrowers, who negotiate loan terms between themselves. Once these terms are agreed upon, the borrower locks his/her NFT into a trustless “escrow” smart contract (which means that no one, including the NFTfi team, has access to it). Once the loan (plus interest) is repaid, the NFT automatically returns to the borrower’s wallet. If the borrower defaults on the loan, the lender receives the NFT.
Interestingly, a growing category of lenders has emerged who are not only interested in attractive annual percentage rates (ARPs) of around 20% (low-risk assets) to 70% (highly risky assets) but who actually speculate on loan defaults as a means of obtaining exclusive NFTs at a discounted price. A typical NFTfi loan has a loan-to-value ratio of around 50% (meaning the loan is around 100% overcollateralized) and default risk of up to 20%. This means a lender has a 20% chance of obtaining the respective collateral at a 50% discount.
NFTfi’s user base has very diverse backgrounds. Borrowers range from NFT holders requiring urgent liquidity – one user lost her job during the COVID pandemic and was able to keep themselves afloat using liquidity obtained against her NFTs – to university students taking out loans against their NFTs to stay liquid while at school. Lenders are as diverse and range from early NFT users monetizing their in-depth knowledge of specific NFT projects´, to high-net-worth individuals and Decentralized Autonomous Organizations (DAOs) looking for reliably high yield.
“NFTs are becoming their own financial asset class,” said Stephen Young, Co-Founder and CEO of NFTfi. “As new types of NFTs are created, there will be a demand for new types of NFT-focused financial products. Our platform is a tool that empowers users to borrow cryptocurrency using their NFTs as collateral. This allows them to be liquid in times of need, without having to sell their NFT. The NFT space is only going to grow more, and I believe that people have, and will continue to see the value in having a marketplace that gives them the option to leverage the value of their assets. We’re excited to keep building and growing – there is a massive opportunity”.
“NFTfi is building critical infrastructure to bridge NFTs and DeFi, which will enable new experiences for users, increase utility for NFTs, and unlock new markets.”, said Lasse Clausen, Founding Partner at 1kx.
NFTfi was founded by Stephen Young in February 2020 during the early stages of the COVID-19 pandemic, as digital assets became more prominent with stay-at-home orders. Young spent the first lockdown coding and getting NFTfi up and running, and the second lockdown speaking with investors to get funding to move the project forward. Combining Young’s passion for art, and his previous background designing software for banks and financial institutions, NFTfi sits at the crossroads between tech and art. Previous to NFTfi, Young was co-founder and Chief Product Officer at Coindirect, a cryptocurrency exchange and OTC desk. Before that, he was a software architect, Head of Design, and Head of Digital Marketing at the largest private financial services company in Africa.
NFTfi is the leading marketplace for peer-to-peer NFT collateralized loans. Borrowers use their NFTs as collateral in order to obtain cryptocurrency loans while lenders can earn attractive yields. Since the first NFT loan in May 2020, over 2100 loans totaling more than $26.5 million in value have been executed using the NFTfi DApp (Decentralized Application). NFTfi’s vision is to support the seamless financialization of NFTs through its innovative protocol and user-friendly applications.