If you ask me the most significant change brought by Web 3 in the world dynamics, I believe it is everyone can become an investor. Everyone can “bet” on projects, teams, companies, artists… Equally. I wouldn’t say I like to use the word betting or gambling in Web 3 because if you know what you are doing or genuinely like these projects, it isn’t betting. You might not be aware of this, but if you have been collecting NFTs, you are, in a way, investing.
So why am I talking about investing? Because before Web 3, only those with great wealth or lucky to be in the right moment at the right time could invest in awesome projects or companies. Now you don’t need to be wealthy to support the projects you appreciate (you can invest according to your financial situation). Thanks to decentralization and the internet, ALL Web 3 projects are discoverable and accessible through tokens. Think about this for a second. In the past, if you wanted to invest in a company, you had to wait until it traded publicly in an exchange (multiple years after its inception), or you had to know the team when they were starting, or you had to work there in the early days to get some stocks. Oh, and additionally, you couldn’t just throw in 20 bucks. You had to invest massive amounts of capital to be allowed in a seed round. These were very restrictive dynamics.
Web 3 equalizes the game for everyone. I see three main players in this new paradigm:
Investors: in the NFT world, you could also call them collectors.
Creators: in the NFT world, you usually call them artists or developers.
Consumers: the product's users (NFT, dApp, etc.).
In Web 3, it is normal to be a combination of all.
Claus Wilke, who is a collector, artist, and also a community reader, shared some advice on my Discord server related to NFT investment/collecting that resonated with me:
I think it's important to have a clear strategy and goal. If your goal is to make money quickly, your best bet is probably buying on secondary artists and collections that are already established and are rising quickly. The problem with this strategy is that it requires a substantial amount of starting capital. The interesting collections are currently trading at maybe 50 - 1000 tez a piece, and they will only go up from here.
On the other hand, if you want to support artists, you can just buy whatever you like and don't think about value much at all. But with this strategy you have to be prepared to see many pieces in your collection to lose value or at least not gain.
Finally, what's your time horizon. I feel most people in this space are way too impatient. Realistically, if a series trades at 2-5x mint price in a few years from today that's a successful investment outcome. The whole space looks for 100x gains in a few weeks but that's just not realistic for the vast majority of artists/series. If you have patience, you can consider looking for and backing artists that maybe don't do so well now but where there is substance and some likelihood of long-term success in the space. If the artist is building a following and clearly having some fans/collectors who are excited about the work, the work may become quite valuable over time.
For the last point, let's say an artist releases a series of 200 pieces but currently has only 20 committed collectors. That series will likely trade below mint price, if it even mints out. But if the artist manages to go from 20 committed collectors to 200, things may start to look different. And if they go to 2000 committed collectors, a series of 200 starts looking rather scarce.
In the grand scheme of things, finding say 1000 people that are each willing to invest 100 tez into a given artist's work is not that hard, and that could easily 10-100x the prices of an artist who currently sells for maybe 1-5 tez.
For the last strategy, if you identify maybe 10-20 artists you want to follow more closely, if you do your homework, at least some of them will likely see success over time.
In practice, I assume we all do some mix of these three strategies. I know I do.
This reflection is a remarkable collecting and investment mindset. Your goal should be to support artists and projects. If you like their NFT art, there is a big chance more people will do so. You can help them get noticed, and if their followers grow to a certain number, artists could continue to create art and live from it.
Who is a good investor? I used to watch the famous tv show shark tank. There are some well-known investors; some of them made their fortunes starting from the bottom. After watching that show and reading about funding, I learned good investors not only look for companies with fantastic potential. They look for companies they can help. How do they help those companies and founders succeed? Money isn’t the only way.
Good investors take companies under their wing and support them with expertise, opening opportunities in their network, helping them with marketing and promotion, giving them feedback and suggestions from what they perceive, and the list goes on…
What does this have to do with NFTs and Web 3? Well, as I said earlier, Web 3 normalizes the playing field. Everyone is, theoretically, an investor. How can you support NFT projects, artists, marketplaces, or the new generation of dApps?
Promote the values and goals of NFT projects you own. Be vocal.
Help with exposure by wearing the NFT art when possible… On Twitter, Discord, etc.
Onboard your non-crypto friends and show them those projects. Maybe they will like them too.
Are you an expert in a particular field? Offer support to the project founders, developers, or artists (marketing, finance, strategy, partnerships, etc.).
Do you think prices or editions are too high or too low? Reach out to the artists. Brainstorm together.
These are just a few ideas I have seen good collectors practice. Interestingly, as an early investor/collector (for example, when collecting NFTs from new artists or a new project), your advice has a bigger chance of being heard than in other cases.
Are you a good Web 3 investor? Don’t be silent watching the floor raise or drop…
Until next time,
- Kaloh