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Our Investment in REALY

Multicoin capital
By Multicoin Capital
April 16, 2021 | 5 minute read

Today, I’m excited to announce our investment in REALY, a platform that trades the legitimacy of streetwear and other real world collectibles. Our friends at Alameda Research and SNZ Capital also participated in the round.

In 2017 CryptoKitties broke out as the first successful digital collectible, represented as an NFT. However, their popularity was largely limited to participants within the crypto ecosystem. At the beginning of this year, we saw another breakout success—by Dapper Labs, the same team that created Cryptokitties—with the launch of NBA Top Shot. NBA Top Shot is a collectibles platform that memorializes moments from NBA games in tradable NFTs. Since launch, it has captured the imagination of the public and celebrities.

Why is it that NBA Top Shot, which was built by the same exact team as Cryptokitties, was able to achieve mainstream success while CryptoKitties did not?

The most important difference is brand value. Unlike CryptoKitties, which is an original brand, Top Shot leverages the brand equity of the NBA. The NBA is a massive brand with tens of millions of rabid fans all over the world. These fans are deeply in love with the NBA, and therefore are willing to pay for experiences that extend the brand.

Compared to Cryptokitties, Top Shot was built atop an existing brand recognition. This brand value is largely what enabled Top Shot to appeal to more people than a new brand. Top Shot has demonstrated that NFTs can accelerate their time to mainstream adoption by building on the foundations of widely loved and recognized brands.

REALY is a NFT ecosystem that capitalizes on this strategy beautifully. They are laser focused on China-based streetwear and celebrity creators—i.e., building on top of brands and celebrities with large, super-engaged fan bases.

Streetwear (e.g. Travis Scott’s fashion products) and collectible toys (e.g. Be@rbrick) are highly sought after items among the Gen Z population in China. However, due to their popularity, fraud and counterfeits are a huge problem, and fans lack a trusted place to buy authentic designer collectibles. The friction of trading a pair of Yeezy Sneakers is also high: the professional sneaker speculators have to trade the receipt of sale for the sneakers, and sometimes when the buyer is uncertain about the authenticity of a pair of second-hand shoes, a third party authenticator needs to be involved too.

REALY elegantly solves these problems with a differentiated product strategy and a gamified system that incentivizes creators to share their success (sales) with their fan communities.

The Platform For Interest-Focused NFT Applications

REALY is live today with a suite of creator and brand mobile applications, including REALY Global, Mars Space, Macott Station, Revenge, and SHINE. REALY Global offers a sleek online shopping marketplace for designer brands’ collectible toys and streetwear, whereas Mars Space offers collectibles specifically issued by Chinese superstar Chenyu Hua. While each of these applications is hyper-tailored for their respective communities, they are all powered by the REALY platform. Creators can either list directly in the marketplace (i.e. REALY Global) or work with REALY to design a community-focused app like Mars Space.

REALY binds each collectible it lists with a unique NFT issued by the creator by adding embedded chips to the items sold on the platform. This helps collectors avoid buying fraudulent items and actively track the provenance and sales history of each item they purchase. It also helps speculators reduce trading friction; now they can simply trade the NFTs on the blockchain instead of exchanging physical receipts.

There are two additional aspects to highlight with this intentional product marketing strategy:

  1. This creator-focused platform model is optimized to find product-market fit quickly, particularly in China. As I’ve described before, China is a mobile-first market. People are accustomed to shopping on their mobile apps, and in many cases even prefer it. REALY actively leverages this culture for its advantage.
  2. The look and feel of each application is intentionally branded—each catering to a specific super fan group. While fans of Chenyu Hua could also be the collectors of Edison Chen’s designer brand or a big collector of Yeezy sneakers, they don’t necessarily always overlap. Therefore, REALY customizes each NFT marketplace for superfans. This product (and platform) strategy optimizes for what Chris Dixon calls “True Fans,” by creating district marketplaces for fans that actively want to participate with creators and brands and who want to buy their products first.

REALY launched their product on Binance Smart Chain, and is also building on Solana to further lower transaction costs. REALY also allows application operators to pay for users’ transaction fees, which makes the shopping experience of non-crypto consumers butter-y.

The REAL Tokenomics

REAL is the native token of the REALY ecosystem. Fans earn REAL tokens by buying collectibles from creators across the various applications within the ecosystem.

The REALY network captures 10% of all sales from across the REALY ecosystem. Fans who stake REAL tokens get xREALs (inspired by xSUSHI), which makes them eligible to collect transaction fees from the entire ecosystem. This makes it possible for fans and collectible investors to get exposure to the growth of the entire REALY ecosystem.

Additionally, creators (i.e. designer brands) can set up creator pools that revenue share with fans. Fans can stake their REAL to these creator pools where they can earn 9% of the creators’ sales (which comes from the 10% fee charged by REALY). This creates a way for fans to stake on their favorite creators and participate in upside if they become more popular and successful. General traders love the platform because it creates a more systematic way of trading a specific brand’s future potential or the entire ecosystem without needing to make a specific choice on an individual collectible.

The REALY team

George Yang, the CEO of REALY, is a serial entrepreneur in the fashion and collectible industry. Before REALY, George was the co-founder of INNERSECT, an online streetwear platform backed by Edison Chen’s designer brand founded in 2016. As the co-founder, he expanded sales to more than $30.7M, by bringing various global designer brands, toy collectibles, and artists onto the platform. Prior to running the fashion related business at INNERSECT, George was an investor at a local private equity firm in China, focusing on consumer products and new energy sectors.

George has profound insight into consumer retail markets, both as an operator and an investor. We are excited to back George and his team, and to help them explore the intersection of real world collectibles and Web 3.0 ownership!

Disclosure: Unless otherwise indicated, the views expressed in this post are solely those of the author(s) in their individual capacity and are not the views of Multicoin Capital Management, LLC or its affiliates (together with its affiliates, “Multicoin”). Certain information contained herein may have been obtained from third-party sources, including from portfolio companies of funds managed by Multicoin. Multicoin believes that the information provided is reliable but has not independently verified the non-material information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in this blog are subject to change without notice and may differ or be contrary to opinions expressed by others.

The content is provided for informational purposes only, and should not be relied upon as the basis for an investment decision, and is not, and should not be assumed to be, complete.  The contents herein are not to be construed as legal, business, or tax advice. You should consult your own advisors for those matters. References to any securities or digital assets are for illustrative purposes only, and do not constitute an investment recommendation or offer to provide investment advisory services.  Any investments or portfolio companies mentioned, referred to, or described are not representative of all investments in vehicles managed by Multicoin, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results. A list of investments made by funds managed by Multicoin is available here: https://multicoin.capital/portfolio/.  Excluded from this list are investments that have not yet been announced (1) for strategic reasons (e.g., undisclosed positions in publicly traded digital assets) or (2) due to coordination with the development team or issuer on the timing and nature of public disclosure.

This blog does not constitute investment advice or an offer to sell or a solicitation of an offer to purchase any limited partner interests in any investment vehicle managed by Multicoin. An offer or solicitation of an investment in any Multicoin investment vehicle will only be made pursuant to an offering memorandum, limited partnership agreement and subscription documents, and only the information in such documents should be relied upon when making a decision to invest.

Past performance does not guarantee future results. There can be no guarantee that any Multicoin investment vehicle’s investment objectives will be achieved, and the investment results may vary substantially from year to year or even from month to month. As a result, an investor could lose all or a substantial amount of its investment. Investments or products referenced in this blog may not be suitable for you or any other party.

Multicoin has established, maintains and enforces written policies and procedures reasonably designed to identify and effectively manage conflicts of interest related to its investment activities. For more important disclosures, please see the Disclosures and Terms of Use available at https://multicoin.capital/disclosures and https://multicoin.capital/terms.

Disclosure: Unless otherwise indicated, the views expressed in this post are solely those of the author(s) in their individual capacity and are not the views of Multicoin Capital Management, LLC or its affiliates (together with its affiliates, “Multicoin”). Certain information contained herein may have been obtained from third-party sources, including from portfolio companies of funds managed by Multicoin. Multicoin believes that the information provided is reliable but has not independently verified the non-material information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in this blog are subject to change without notice and may differ or be contrary to opinions expressed by others.

The content is provided for informational purposes only, and should not be relied upon as the basis for an investment decision, and is not, and should not be assumed to be, complete.  The contents herein are not to be construed as legal, business, or tax advice. You should consult your own advisors for those matters. References to any securities or digital assets are for illustrative purposes only, and do not constitute an investment recommendation or offer to provide investment advisory services.  Any investments or portfolio companies mentioned, referred to, or described are not representative of all investments in vehicles managed by Multicoin, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results. A list of investments made by funds managed by Multicoin is available here: https://multicoin.capital/portfolio/.  Excluded from this list are investments that have not yet been announced (1) for strategic reasons (e.g., undisclosed positions in publicly traded digital assets) or (2) due to coordination with the development team or issuer on the timing and nature of public disclosure.

This blog does not constitute investment advice or an offer to sell or a solicitation of an offer to purchase any limited partner interests in any investment vehicle managed by Multicoin. An offer or solicitation of an investment in any Multicoin investment vehicle will only be made pursuant to an offering memorandum, limited partnership agreement and subscription documents, and only the information in such documents should be relied upon when making a decision to invest.

Past performance does not guarantee future results. There can be no guarantee that any Multicoin investment vehicle’s investment objectives will be achieved, and the investment results may vary substantially from year to year or even from month to month. As a result, an investor could lose all or a substantial amount of its investment. Investments or products referenced in this blog may not be suitable for you or any other party.

Multicoin has established, maintains and enforces written policies and procedures reasonably designed to identify and effectively manage conflicts of interest related to its investment activities. For more important disclosures, please see the Disclosures and Terms of Use available at https://multicoin.capital/disclosures and https://multicoin.capital/terms.