Magic Eden is a leading exchange for the NFT market, based around Solana blockchain community and coin. He spotted some gaps while working at FTX, where he decided to focus on a community-based NFT marketplace where users and traders could interact.
Nathan Latka sat down with Jack Lu, founder of Magic Eden. Key highlights include:
- $400mm transaction value on the marketplace
- 2 million unique transactions
- Raised $27mm in series A financing
Nathan Latka (00:00):
Hey, folks. My guest today is Jack Lu. After monitoring the crypto space and recognizing its potential, particularly around Solana, Jack took the leap of starting out at FTX, one of industry’s leading exchanges, where he worked within partnerships and corporate development. Following this, he decided to fill the gap of the market for a community focused, interactive, NFT ecosystem and marketplace and launched Magic Eden, which has witnessed one of the fastest paces of growth in crypto. Jack, you ready to take us to the top?
Magic Eden CEO Jack Lu (00:24):
Nathan Latka (00:25):
All right. Fastest pace is a big statement. I have to ask you to back that up with data. What do you mean fastest, by what metric?
Magic Eden CEO Jack Lu (00:31):
Yeah, absolutely. Well, first of all, thanks a ton for having me, Nathan. Well, we started Magic Eden seven months ago. In that time, we’ve become the second largest NFT marketplace in the world. So this month, we’re about to trade around $4 to $500 million of NFTs on our marketplace. And we’re the fastest marketplace to reach cumulatively a billion dollars in GMV traded. So we did that in around four, five months.
Nathan Latka (01:00):
That’s amazing. Cool. Guys, there’s the data. No beating around the bush. It’s right there. So real quick, Jack, put this on a timeline for me. When did you write the first line of code for Magic Eden?
Magic Eden CEO Jack Lu (01:11):
That was around late September. Yeah, September.
Nathan Latka (01:14):
So just last year? I mean, you are talking like eight months ago?
Magic Eden CEO Jack Lu (01:17):
Yeah, that’s right. That’s right.
Nathan Latka (01:19):
Magic Eden CEO Jack Lu (01:20):
We launched a site in 14 days actually. So the first one was really sticky taped together, dare I say, but we launched fast and let the market tell us what we were doing and what we were doing wrong.
Nathan Latka (01:33):
And you said you hit $1 billion in cumulative NFTs sold on your platform in February?
Magic Eden CEO Jack Lu (01:42):
I don’t remember the exact month, but it was around that. That’s right. Yeah.
Nathan Latka (01:45):
Okay. That’s amazing. And so what enabled you to grow so quickly, right? Obviously, you ran BD at a massive exchange. Maybe there were some connections there that helped you grow. But what was the credit to that original mousetrap and the growth?
Magic Eden CEO Jack Lu (01:57):
Yeah, absolutely. So I think there were a couple of things. Well, number one, I have to definitely give credit to the timing of the market. So Q1, Q2 last year was when Ethereum NFTs really took off and really caught the cultural zeitgeist, right? With peoples, BAYC, and so on. But Q3, there was a huge boom of interest in Solana, the blockchain that we’re built on as well as the NFT activity there. So we caught that timing really well and broke that tailwind. But separate to that, I think within the company itself, the main point that really helped us grow, I think, was the skillset of the founding team. So we’ve got four founders, myself. Our CTOs name is Sid. Our chief operating officer, his name is Zhuoxun and our chief engineer, his name is Zhuojie or Rex. And I really felt like the four of us came with a good synergy of skillsets that allowed us to build something really fast and have really good intuition about what were the right things to build.
Magic Eden CEO Jack Lu (02:59):
So the key there were two of us came from crypto exchanges. So I came from FTX and our chief operating officer, Zhuoxun, came from Coinbase and dYdX, which is one of the largest DeFi exchanges. And then my two technical co-founders came from Uber Eats. So they came from really big consumer marketplaces. And if you step back and think about it, the NFT marketplace, the business model is really like a crypto exchange. But the features, the software that you build, looks really like a consumer marketplace. So I just felt like we had some really natural intuition about what were the right things to build.
Nathan Latka (03:34):
This makes tons of sense. Now, were you very diplomatic about equity at the beginning, everyone gets 25%? Or how’d you guys think about that? Obviously, maybe there isn’t even an equity question. Is this all built in a Dow or central treasury or something like that?
Magic Eden CEO Jack Lu (03:45):
No, no. It’s an equity thing. Pretty vanilla, but yeah, equal split.
Nathan Latka (03:52):
Oh wow. You did equal.
Magic Eden CEO Jack Lu (03:54):
Absolutely, equal partners in this. We couldn’t have done it without each other.
Nathan Latka (06:26):
I love this. Okay, so you get going, you write code, you get volume up quickly. People are going to hear these numbers and be a little bit in disbelief so I want to try and break it down to Lego blocks where you’ve now built this masterpiece. The first Lego, the first NFT sold on your platform, what was it? How much did it sell for and how did you help that buyer or seller? Do you remember?
Magic Eden CEO Jack Lu (06:45):
To be honest, I can’t remember. I’m embarrassed to say, but we’ve got almost 10,000 collections now on Magic Eden so I can’t remember. Although I do remember one of the earliest collections. This must be in the first 10 or something, was called cyber trolls and our team, we were trying to BD the artist to list their collection with Magic Eden, but then the creator of that collection turned the conversation around and started showing himself to us and say, “Yo, I actually want to work for you guys because you guys have something really special going on.” We hired him, his name’s Eagle. He was our first BD guy and he was just the killer, absolutely integral to the founding story and the early success of Magic Eden.
Nathan Latka (07:36):
Is that what you’re doing? You’re almost like Sotheby’s, you’re actually spending all of your time recruiting artists effectively?
Magic Eden CEO Jack Lu (07:43):
Yeah. So we’ve got two main business lines. We’ve got a business line called Launchpad where we help artists launch their NFTs for the first time. And that is absolutely as you describe, it’s very much like artists outreach. And then we have another business which is called Secondary Trading. So this is where the art is already in the hands of holders and they’re trading it back and forth. It’s more like a Craigslist kind of thing. That piece of it is much more about being in touch with the collector community and marketing to them, incentivizing them to come to Magic Eden.
Nathan Latka (08:20):
And obviously you have a hundred percent of revenue. What percent is Launchpad versus Secondary Trading?
Magic Eden CEO Jack Lu (08:30):
Launchpad is a little more spiky. I would say it’s around 20/80 or 30/70. So 20% Launchpad, 80% Secondary. And sometimes it goes up to 30/70, yeah.
Nathan Latka (08:43):
Yeah. I guess, just to go back to volume, you quoted $400 million. That was $400 million in GMV last month in April?
Magic Eden CEO Jack Lu (08:49):
Nathan Latka (08:50):
And what do you think you’ll do this month?
Magic Eden CEO Jack Lu (08:52):
This month has started off pretty strong actually. So I think we’re already at… Where are we right now? I don’t know the month numbers off the top of my head, but this month has started pretty strongly as well so probably something similar. Yeah.
Nathan Latka (09:09):
Okay. I mean, that’s what I’m trying to get a sense… Are you going from $200 million in GMV to $400 million to $800 million, you’re doubling every month? Or is it more like 20% growth per month?
Jack Lu (09:19):
Yeah. So right now, see, our platform is built on the Solana blockchain. We’ve been consistently around 90 to 95% market share of the Solana blockchain of all NFTs traded on Solana for the past two, three months or so. So we’re really breaching at the edges of what the total market is at Solana.
Nathan Latka (09:42):
Magic Eden CEO Jack Lu (09:42):
So right now, market growth or GMV trading volume is actually more of a function of-
Nathan Latka (09:51):
Magic Eden CEO Jack Lu (09:51):
Yeah, exactly. More of a function of Solana, right.
Nathan Latka (09:53):
Yeah. So I mean are you in-
Magic Eden CEO Jack Lu (09:55):
It’s the micro cycles. Yeah.
Nathan Latka (09:56):
Are you involved deeply with the core Solana team? I mean, if they grow, you grow.
Magic Eden CEO Jack Lu (10:01):
Yeah, that’s right. Yeah. That’s right. Solana Foundation, we’ve been in contact with, from day one effectively and feel very privileged for them to have as an investor in our series A as well, so our last round. So we’ve worked with them very closely, hand in hand.
Nathan Latka (10:20):
Okay. Yeah. Let’s talk about funding. So when was the series A closed?
Magic Eden CEO Jack Lu (10:26):
Nathan Latka (10:27):
Oh, this year. Okay. And how much was it?
Magic Eden CEO Jack Lu (10:29):
We raised $27 million.
Nathan Latka (10:30):
Okay, 27. And how do you value a thing like this? I mean, in traditional SaaS, your series A, you’re selling 10 to 15%. Were you sort of in that same range?
Magic Eden CEO Jack Lu (10:41):
Nathan Latka (10:41):
Okay. Fair enough. Got it. So, I mean, we’re talking, then what, like a $220 pre-money valuation? Something like that?
Magic Eden CEO Jack Lu (10:46):
Something that, oh yeah. On top, yeah. That’s right.
Nathan Latka (10:48):
Okay. Okay. Great. So teach me here, because I’m a SaaS guy, right? How does a marketplace like this get valued with traditional equity investors?
Magic Eden CEO Jack Lu (10:55):
Yeah. I mean, it gets valued very similarly to marketplace businesses. We’re revenue generative so we take a clip of the GMV, the total transaction amount that goes through the marketplace. So right now we clip 2% of the transaction volume and we’ve been effectively revenue generative from day one pretty much I think.
Nathan Latka (11:25):
Jack, do you take 2% of all revenue through the platform?
Magic Eden CEO Jack Lu (11:28):
Nathan Latka (11:30):
Okay. I mean, can we take $400 million last month times 2%?
Magic Eden CEO Jack Lu (11:34):
Yeah. Made $8 million. Yeah.
Nathan Latka (11:35):
So you did $8 million last month in revenue?
Magic Eden CEO Jack Lu (11:38):
Nathan Latka (11:40):
I’m missing something. I mean that puts you at almost a $100 million run rate. You’re only getting valued at 2X?
Magic Eden CEO Jack Lu (11:47):
Well, yeah, we raised the last round when we were around 30% market share. So we signed a term sheet around November. It was just a bit of a long closing process, but yeah.
Nathan Latka (11:58):
Oh my gosh.
Magic Eden CEO Jack Lu (11:59):
I would think that our valuation is significantly higher now.
Nathan Latka (12:02):
Do they not? I mean, what, it takes 2, 3, 4 months to obviously go through diligence. Was there not a period where you’re going, “Guys, our monthly growth has been incredible. I’m not going to back out of the terms sheet because I’m a good guy, but is there any chance you can give us a little higher valuation you to minimize delusion?”
Magic Eden CEO Jack Lu (12:19):
No. Yeah, there was a bunch of stuff that happened in the middle, but we didn’t have that conversation though. We’re very grateful for the… Yeah, this is the
Nathan Latka (12:33):
Okay. But I am getting my numbers right. You valued basically at 2X when you closed? You’re about to break a $100 million dollar run, right? You’re at like 200, 220.
Magic Eden CEO Jack Lu (12:42):
Yeah. Around Feb, we weren’t doing $8 million. So I think last month we were doing $8 million.
Nathan Latka (12:48):
Magic Eden CEO Jack Lu (12:49):
Around Feb, maybe we were doing $4 million or something.
Nathan Latka (12:52):
Oh. So you’re growing… I mean, this is an extreme growth story. You’re doubling every two months or something like that?
Magic Eden CEO Jack Lu (12:58):
Nathan Latka (12:59):
I see. Fascinating. Okay. Got it. That makes sense. Now is this the only capital you’ve raised?
Magic Eden CEO Jack Lu (13:03):
Yes, that’s correct. Yeah.
Nathan Latka (13:05):
Okay. So skipped the pre-seed, skipped the seed.
Magic Eden CEO Jack Lu (13:07):
Oh no, no. We’ve had a small seed as well. Yeah.
Nathan Latka (13:11):
When was that?
Magic Eden CEO Jack Lu (13:13):
Oh, that was around October.
Nathan Latka (13:14):
Okay. So $500K seed?
Magic Eden CEO Jack Lu (13:17):
Two and a half mil. Two and a half.
Nathan Latka (13:18):
Oh, two and a half. Sorry, two and a half. In February of this year?
Magic Eden CEO Jack Lu (13:23):
No, sorry. October last year, two and a half mil seed round. And then Feb, we closed the series A.
Nathan Latka (13:29):
Oh, I understand. I understand. Got it. And that valuation on the seed round, what, same like 10 cap, 20 caps, something like that?
Magic Eden CEO Jack Lu (13:35):
Yeah. Something in that order of magnitude. Yeah.
Nathan Latka (13:37):
Very interesting. Okay. So I mean, if I’m a series A investor looking at this, I’m going, “My gosh, where is Jack going to grow this thing? They already make up 95% of Solana.” So you must be telling some massive growth story that does not have to do with Solana moving forward?
Magic Eden CEO Jack Lu (13:52):
Yeah. So there’s a couple of things. I think the NFT market starts with the creators. Growth doesn’t necessarily start with the chain. It’s the creators who create, use cases for NFTs and those use cases pull in new users. Chain is just a technology, just like an operating system on which it lives. We’re very bullish on new categories. So the category that we’ve built our business around, that’s kind of our bread and butter today, is digital collectibles. So like profile photos, digital art, and so on. But the category that we’re super bullish on going forward, and we want to invest deeply in is gaming, in-game assets, in-game purchases. That’s been a tried and tested business model for a decade for the gaming industry and users there are very tech savvy and would be much more open to adopting new technologies.
Magic Eden CEO Jack Lu (14:53):
So for us, we want to bet deeper on serving game developers and Solana as a chain, with some of its new fancy technical properties of being super fast and cheap and so on is pretty adept serving those use cases. So even though we don’t see too many of those gaming developers launching their games now on Solana, we’re betting on the future and we’re very bullish about it.
Nathan Latka (15:19):
For artists listening to you, people that don’t understand NFTs, explain to me why Okay Bears is such a popular collection.
Magic Eden CEO Jack Lu (15:28):
Yeah, that’s a really good question. Well, I’m an Aussie and I heard the founders are fellow Aussie, so definitely a little bit of Aussie pride there as well.
Nathan Latka (15:37):
Yeah. I mean just for my audience too, to paint the picture here, right? So 6,000 new unique holders, there’s only 10,000 in supply. There’s 1,300 listed right now, I guess, for sale on Magic Eden. What makes a NFT takeoff? Is it more unique holders, just higher per unit sale, like rarity, what makes it work?
Magic Eden CEO Jack Lu (15:58):
I think for Okay Bears it’s really about community. It’s about branding and community. In some fundamental ways, collections like Okay Bears, they’re profile photos. And in a way it’s your internet version of, I don’t know, a Rolex or something or a Nike bag. It’s your personal branding on the internet and what the Okay Bears team did extraordinarily well was they did a lot of super organic, grassroots community building to build interest in their project over six months. There’s a lot of NFT projects which try to cut a lot of corners. Basically, they’ll pay a bunch of influencers, juice up some marketing, but there is no real organic interest from the community in the collection. And I think what Okay Bears did was just really pound the pavement and do the hard work and build out community and that strength really shows. And in some ways that translates super well into their brand.
Nathan Latka (17:02):
What does that mean? I own, Okay Bears number 4533 with honey dripping out of his mouth and one suspender on. What do I get access to community-wise? Are these people that I can go to a digital world somewhere, a URL and talk to people in a chatroom? Or is it a physical meetup in LA I can only visit once a year? What is the community part?
Magic Eden CEO Jack Lu (17:20):
Yeah, so I think for Okay Bears, they have a roadmap. I’m not super familiar with exactly the ins and outs just because we serve so many creators, but the creators typically, what I will say on a more generalized level, is they’ll use the funds from the mint to then build some kind of virtual world or internet gated experience. And they will curate the audience that is there for that specific purpose and people who go there will say, “Hey, I really like the vibes,” or, “I really like the experience you’re creating.” Another way of describing would be it’s almost a little bit like an internet version of an exclusive club. And you really like the people that hang out there. And a lot of people who buy Okay Bears would be crypto influencers or social elites or something like that in the cryptoverse. And generally, it might be really hard to be able to have a conversation with them or have a common language with them or common topic. But because you are bonded by this, in some ways an internet luxury purchase, you can create that common language and common topic.
Nathan Latka (18:32):
I mean, this feels a lot like back when I used to play Age of Empires, the Conquerors’ Edition, and I was part of a clan. I go to Okay Bears and I look at their blueprint and it’s literally looking at a blueprint. There’s a park, the gallery, the bear market, the boutique, the studio. And if I click into any of these worlds, I can see where this could… I mean, this basically becomes an online game. It’s the new version of a RPG with a curated community. Is that a good analogy?
Magic Eden CEO Jack Lu (18:56):
A little bit like that. Yeah. A little bit like that.
Nathan Latka (18:57):
Yeah, yeah. Interesting. Fascinating world. Okay, this is exciting stuff. So some other quick metrics here before we wrap up, what’s the average sale price? So $400 million last month, what was the average sale price?
Magic Eden CEO Jack Lu (19:09):
I think my finance guy is going to have to keep me honest, but I think it’s around $200 to $300.
Nathan Latka (19:15):
Yeah. Okay. Got it.
Magic Eden CEO Jack Lu (19:15):
So its 2 to 3 cents.
Nathan Latka (19:16):
So a lot of volume.
Magic Eden CEO Jack Lu (19:17):
Nathan Latka (19:18):
A lot of volume. So we can do $400 million divided by $200? What is that? 2 million unique transactions, something like that?
Magic Eden CEO Jack Lu (19:24):
Nathan Latka (19:25):
That’s incredible. Okay. And are they all being bought by the same buyers? One buyer owns a million? Or how many buyers of the $400 million in GMV?
Magic Eden CEO Jack Lu (19:36):
In general, we see around 30,000 unique traders every day. So it’s still largely pretty distributed. There is definitely some concentration effects like the whales who buy a ton. But in general, when we’ve looked at snapshots of the data previously, our collector base is fairly distributed.
Nathan Latka (19:57):
Jack, there are some things I just don’t know about. I really know B2B SaaS. I’m still new to crypto. Are there questions I should be asking here that I haven’t?
Magic Eden CEO Jack Lu (20:05):
I mean NFTs is pretty crazy. It’s effectively a new media class or a new asset class, but two rolled up in one. I think in general, we’re also experimenting and thinking about where this thing could go in the future. I would say it’s pretty early days in terms of this technology primitive. I think all I have to say is we’re also thinking about some of these questions ourselves and trying to explore what the future is.
Nathan Latka (20:33):
Yeah. If CAA comes and offers to buy you for a billion dollars, do you sell?
Magic Eden CEO Jack Lu (20:39):
Nathan Latka (20:43):
That is the model, right? It would be one of these big record labels or big gaming company or someone that has connections to a lot of artists. I mean, if you were going to merge with someone or do a deal with someone, it would be those kinds of groups, right?
Magic Eden CEO Jack Lu (20:59):
I think philosophically, we would never merge.
Nathan Latka (21:04):
Let’s just use the word partner. Okay? You’re never going to sell but if you’re going to partner, that’s who you’d be partnering with, right?
Magic Eden CEO Jack Lu (21:09):
Yeah. The DNA for Magic Eden is we’re crypto native. So in the sense of we really want to experiment and explore the boundaries of this new technology and these new primitives. And in that sense, I think we want to partner with folks who share our vision, who basically also want to experiment and try out new things with this technology. I think one aspect to this is definitely partners who are able to bring super valuable IP. They are invaluable parts of the ecosystem, but there is also other folks who are maybe more on the technology side, more on the software side who’d really want to push the boundaries who might also fit there.
Nathan Latka (21:58):
What’s your total team size today, full time?
Magic Eden CEO Jack Lu (22:01):
We’re like a hundred now.
Nathan Latka (22:02):
A hundred. Wow. How many engineers?
Magic Eden CEO Jack Lu (22:05):
Nathan Latka (22:06):
Any of your own artists? Do you launch your own collections just to be your own customer?
Magic Eden CEO Jack Lu (22:10):
No, we don’t do that.
Nathan Latka (22:11):
Magic Eden CEO Jack Lu (22:12):
Nathan Latka (22:12):
Magic Eden CEO Jack Lu (22:12):
Nathan Latka (22:13):
Do you have artists on your team that helps new artists launch?
Magic Eden CEO Jack Lu (22:17):
Yeah. So on the business side, we’re very proud to say around a third of our team are former NFT artists or former NFT collection creators.
Nathan Latka (22:28):
Hire your customers, right?
Magic Eden CEO Jack Lu (22:30):
Yeah, exactly. You want to have the lifeblood of the user in the company. And I think that was a really critical move for us. And I think that’s done wonders for the way that we develop our product, the way that we build new things.
Nathan Latka (22:46):
Jack, on that note, let’s wrap up with the famous five. Number one, favorite book that you read.
Magic Eden CEO Jack Lu (22:51):
Ooh, I’m a huge Haruki Murakami fan so I love the Wind-Up Bird Chronicles.
Nathan Latka (22:57):
Wind-Up Bird Chronicles, good one. Number two, is there a CEO you’re following or studying?
Magic Eden CEO Jack Lu (23:02):
Well, I used to work at FTX. I think the founder there, Sam Bankman-Fried is an absolute monster. So, yeah, that’s one I keep my eyes on.
Nathan Latka (23:11):
So number three, besides your own, what’s your favorite online tool or online place to hang out?
Magic Eden CEO Jack Lu (23:16):
Telegram. It’s a must have for crypto folks.
Nathan Latka (23:20):
Number four, how many hours of sleep do you get every night?
Magic Eden CEO Jack Lu (23:23):
Ooh. Six hours.
Nathan Latka (23:25):
Okay. And what’s your situation, married, single, kids?
Magic Eden CEO Jack Lu (23:28):
Married, no kids.
Nathan Latka (23:29):
No kids. How old are you?
Magic Eden CEO Jack Lu (23:30):
Nathan Latka (23:32):
Last question, something you wish you knew when you were 20?
Magic Eden CEO Jack Lu (23:35):
Ooh. Well, when I was 20, I was in law school. So should have studied computer science, I think.
Nathan Latka (23:46):
Skip law school, go to computer science instead. Guys, magiceden.io did over $400 million of transaction volume in NFTs on Solana last month alone, the average sale price there about $200 to $300 bucks. That means there’s about 2 million unique transactions, 30,000 unique traders per day. They make a 2% cut on that $400 million. So $8 million in revenue just last month. That’s up from $4 million earlier in January and February. So growing very quickly, just close to $27 million series A, caught between a $200 and $300 million valuation, growing nicely with the team of a hundred, hiring their own customers to make sure they keep that lifeblood going to the company. Jack, thanks for taking us to the top.
Magic Eden CEO Jack Lu (24:25):
All right. Thank you so much, Nathan. Cheers.