Magic Eden | The Community-Centric Marketplace

Hey, everyone. Welcome to Gray Matter, the podcast from Greylock. I'm Mike dubeau, a partner here. My guests today are Zed and Jack, the founders of Magic Eden, leading NFT marketplace that is north of 95% share in the Salon ecosystem and has really been one of Web3's fastest growth stories over the past year. Greylock was really fortunate to invest in the Series A with these guys and worked very closely with the company in the months since. And we're now excited to announce the Series B shortly after. This team is really truly exceptional in velocity and just general overall thoughtfulness around its community. So I guess jumping into it, guys, we did a conversation several months back and it's crazy to think that's only four or five months ago, which is really a testament to your velocity. But maybe just to set the stage for new listeners, can you briefly share the vision for Magic Eden and where you are today on this journey?

Absolutely, I can jump in on that. And thanks, Mike, for having us. Awesome to partner with you and super grateful to be here. So, Magic Eden, we want to be the biggest and most liquid NFT marketplace in the world, and we want to be the leading destination when folks think about collecting, trading, discovering NFTs and for us to get there. We started off on the Solana blockchain, where there is the cost and the transaction generally its ability to enable really polished product experiences was really nice and really differentiated. But our vision is to go much broader than that and we want to be the biggest place in the leading destination for our users.

Great.

And maybe for listeners just hearing this for the first time, maybe you could share a bit about your background and the journey that actually led you to finding this.

So we've got like four co founders for Magi Edit, myself, Zed, Sid and Rex. Two of us came from the crypto exchange background. So Joshua and Zed worked at Coinbase dydx, the leading centralized exchange and also one of the leading decentralized exchanges.

Right.

And now worked at ftx. So we really came from that kind of crypto native exchange kind of background. And then our two other co founders on the technical side, Sid and Rex, they were really early uber engineers. So we had a really unique mix of consumer marketplace experience and crypto exchange experience. And when we think back and look at it like NFT marketplaces, the business model itself is actually very similar to a crypto exchange. There's like secondary trading, prime issuance, that kind of stuff. But the app itself and the software itself looks like a consumer marketplace exchange. And I Think that combination of skills and that kind of origination of our skillset really helped us kind of figure out who we want to be and have really strong intuitions about what we wanted to build.

I think a lot of us had been thinking about starting something for quite some time and the confluence of Factors was number one, NFT growth very clearly was taking off in 2021 and we saw PFPs kind of just break through the sound barrier and sort of large auctioned 1 of 1 pieces of art digital artwork as well 2 is jacketed front receipt to the growth of Solana through being at FTX. And we really started to feel the possibilities of NFTs being much more than just profile pictures. Not that that category is going away, but really the future here is many, many, many different types of assets and many different, more use cases to come. And then, yeah, our general feeling that NFTs would be a much, much larger market was driven by, I think, a lot from the fact that if we can help enable a whole bunch of these use cases going forward, then NFT should really be at the forefront of a cultural, social, super fun experience more than just being a pure commerce kind of layer. And that's I think, what people think about NFT marketplaces today. And we felt like the best place to start that was nine months ago and here we are. So it's been an amazing journeysense.

Yeah, I mean there's a bunch of awesome points to dig into there. I want to actually start with talking a bit about Solana. So like, one of the things as you highlighted that's really notable is just how much more accessible it is as a chain due to transaction fees and just kind of where the price points of these NFT projects lie in Solana. Like how is this accessibility kind of impacted the product roadmap and vision?

Yeah, so I think there's a few reasons that we decided to start this way. The main reason was to Jack's point, we wanted to, you know, we come from kind of product backgrounds. We wanted to build something that really could help onboard the next hundred million, you know, 1 billion kind of users. And you need something that's easy to use, something that feels, you know, pretty close to what people are used to. And I think that's pretty clearly, pretty clearly going to be something like Solana. And we were pretty excited to start building this ecosystem because when things are fast and cheap, it just enables a lot more functionality and a lot more experimentation that otherwise would not happen. So that was kind of like a thesis that we had. And I think that's played out to be very largely true. And the reason that's happened is because when things are cheaper, people are more willing to experiment. And when that experimentation happens, just like cool things start to brew. Right. And then for us as a team, what does that mean? So that means that, you know, what we are building is sort of something more general and something that enables a bunch of these new creators to come and do something right. And the classic example that we have seen so far is, and this is something that is a big focus of the Solana ecosystem too, is around gaming, which we can absolutely talk about in a little bit, but this has absolutely guided the way we think about our product. So we want users to have like the fastest, snappiest, you know, most seamless, you know, buttery experience possible when they deal with NFTs. And we want that to really be at the forefront of what they see for the first time when they land on Magic Eden. It's sort of you land on the page, you land on the website, on the mobile app and you start to enter this world that is cool, immersive and, you know, in time, what we hope is that you see, you know, gaming PFPs, you see music stuff, you see a whole bunch of different categories of NFTs and there are many, many different ways to interact with that.

It is buttery, the experience, actually it's kind of like night and day if you've actually worked with other NFT marketplaces. As a consumer, my first time transacting a Magic Eden was almost like a breath of fresh air. And this is just a few months after it, maybe even less than that when it went live. And so clearly some of it's driven by just the underlying chain. But I think more important than that is kind of your product DNA and just like how quickly and thoughtfully you've been able to ship on products. Can you talk a little bit about kind of some of the recent kind of product features and maybe where the product's going as you start to work more with kind of different NFT use cases?

I can share a little bit about that. So a couple of things that we've been super excited to release over the last couple of months would be number one. Actually we've done a ton of work on Launchpad. So Launchpad is our primary product that's primarily a creator enablement kind of product. Right. Like we want to help our creators have a really smooth and anxiety free way of launching the NFT collection. So that product historically actually has been around since maybe like month two or month three. But we've just done a ton of work under the hood to make that, make that a lot more of a smooth experience. And number two, we've actually started expanding across the user journey for a creator. Like previously, this was a product that only helps creators do launch, but then there is pre launch helping them target specific members in the community. And then post launch we're actually going to move into some features that help creators manage their community or view some stats and analytics to understand how their community is shaping out. So that's kind of the visual vision for that Launchpad and very creative facing product. Secondly, we've been pretty excited to start experimenting with some social features. So we've started launching some really interesting experiments around chat. I think the underlying thesis is almost NFTs. It's inherently a very social experience, but it's also a very emotive experience. There's so much hype at the moment of the Mint, or there's so much hype when a collection is having this insane event and everyone's trading and talking about it. And we really believe that hey, like the best product is the ones that like elicit this emotional connection, right. And emotional feedback from the user. And we want to bring that feeling, that feeling of hype and that feeling of excitement to Magic Eden itself so that it's not just clinical, it's not just transactional. And to Zed's earlier point, we have this underlying product philosophy of creating an immersive experience where a marketplace should not just be a place for simple kind of transactional relationships, but you should have kind of something much more aspirational and much more emotive.

One thing I'll add on just the creator and user side of things is that it's all geared around making it easier. Right. And now that we've done, I think, I think We've done nearly 250 launches on Launchpad instead of a seven month period. We have a lot of repetitions now of the things that create and induce anxiety amongst creators and we want to strip that away. Right. Both from a technical standpoint, but also from a, you know, general go to market standpoint. And then on the end user side, yeah, I think it's simplifying that journey, making it easier for them to actually come in and, and discover NFTs. Because I'd say historically NFTS is a very much like a. You're either all in or you're not in at all.

Right.

It's hard to just be casually casually excited about NFTs. Typically, what we see is users have to be pretty deep into it to really get excited. And I think it doesn't need to be that way. There's a lot of really fun, interesting moments. Like, for example, we have live chat around Launchpad. That's a really fun moment that any user should be able to come and actually just feel that excitement, feel that particular thing that's going on.

Yeah.

And then on the gaming side, there's a lot of really, really interesting things that are happening here. And we are super excited about some of the sheer number of developers that are entering the space to build Web3 games. And we're lucky enough to be at the forefront of that too. So, similar to the thesis we have around creators, we kind of think about game devs as just another category of creator. So what we want to do there is effectively make it as easy as possible for them on their journey. So it's interesting because in traditional game development, you don't really have anything before the actual build cycle of the game, whereas in Crypto and Web three, you. We're seeing a lot of these teams actually launch an NFT collection right as the first step that happens. So we want to be at the forefront of their journey by helping them with their initial go to market NFT launch and then help them with a whole bunch of infrastructure and general dev support and go to market support as they build out their games. So we want to be there for the entire journey and I think Magic Eden is the perfect place for that because, you know, we have a lot of users, these users can be players and these players want to discover games and we can be an amazing discovery portal for all this really, really cool content.

Yeah, I mean, the feedback on the creator side, I know, has been exceptional. You know, while we're talking about Launchpad, I do want to bring up the topic of just like security. And I know personally being close to your journey, like, I developed a lot more conviction around you guys, actually seeing how you responded to some of the, I guess, you know, unfortunate kind of situations that had arrived over time with, you know, in the NFT ecosystem, we certainly have some bad actors. I don't think it's a high percentage of them, but when these things kind of happen, there is an impact on the broader kind of community. And the way you respond to it in that moment is really critical. In my experience or from my vantage point, it seems that Magic Eden actually built trust during those times.

That moment where we got basically scammed by a bad Actor in February this year. I think that's going to live in Magic Eden history forever, to be really honest, and in some ways one of the most trying and challenging couple of weeks in our time, like founding Journey. But also I think I'm kind of grateful for it too, because, well, that should happen, like, excuse my French, but it did lead to a lot of deep process thinking and deep dives into the underlying way that we think about the product and service offering. So I think trust and safety for Launchpad, that's got to be a first class goal for the product and service offering itself. And it's not just like product things that we build in, but it's also processes around identity verification, having a lineage of identity verification, not just at Magic Eden, but having secondary third tiers of partners who also verify those identities. But also it's kind of like a cultural thing. We then implemented a whole bunch of internal processes where we have checks and balances between different teams and different team members to vet for whether this certain project will pass a quality bar and then whether that project would then pass a secondary safety bar. Speaking to your point, Mike, around how we responded to that situation, we got scammed by this arch artists who came up and then there was like a PI issue, effectively like a pretty significant one. But then we decided to do this very crypto native thing, which is called derugging the collection. And it's effectively like in everyday speak, it's kind of like we took over the project, which the scam artists left laying by the wayside and left their holders in the lurch. So we took over it and then we funded that project with 5 to 6,000 sol. And in crypto terms that's called derugging. But in that sense, I also feel that that really speaks to the kind of the culture of Magic Eden, which is to be a really crypto native company and speak to our users and engage to our users. At our level right now, most of our users are fairly crypto native and it's important to take actions that connect with them and that's relevant for them. And if we did maybe like a straight refund or something like that, in that situation, I don't think it would have worked. But because we did this really crypto native action of derogging, taking over the project, it gave all of the holders at that time another chance to rectify their losses or to mitigate their losses. And that was super well received by the crypto community and by our own user base. And I think our user realized, hey, Like Magic Eden is a company that stands with them on their level. And I think that was pretty important for us.

One of the ways we thought about this at the time was that we should always put the users in the community first. And that was one sort of manifestation of that. And I think we continue to operate in that way. And we did some stuff not only around the derugging, which financially just didn't really make sense for Magic Eden at the time, but we did it anyway. But also we actually shut down our launch pad for two weeks and the user there, the creator, we actually introduced them to competitive launch pads because we wanted to make sure that they had, you know, they could continue to have a successful launch on their own timeline. And these are things that may be the best for Magic in. But we'll always pick what's best for the user in circumstances like this. So I think out of this it really crystallized some of the principles we have as a company and we'll continue to live by those.

Yeah, we took two weeks off, two, three weeks off. We did a lot of like, source searching, like, process, product deep dives. Then we relaunched with, like, under the hood, effectively, like a new spirit of how this, like, product works. And then we did 80 launches since then. No scams, no rugs, probably the best safety record in the industry. And then we managed to launch the two most, I think, iconic Solana NFT collections in the last six months, like, ok, Bears and Trippinates. So, yeah, kind of grateful for that experience, actually, to challenge us and elevate us to the next level.

I mean, one of the things that was really notable to me throughout that, like, listening to some of these heated Twitter spaces that Tiff and you guys were on too, was just like, how human you felt and just really how much you actually genuinely listened to the community during those times. Like, there's many different ways where you could have handled it that maybe would have been like, more short term beneficial to Magic Eden, as you called out. But I think, like, at least I felt a genuine sense of like, empathy and actually listening, which I think, you know, has clearly made its way back into the product. But also, you know, how you guys manage community, the infamous Magic Eden intern managing Twitter account and all that.

Yeah.

So, you know, there's one interesting thread here that we could get into around, around the topic of like, decentralization and being community owned. And so, you know, you've publicly stated that you want to be community owned at some point, like when the time is right to decentralized but at the same time, like the role of a marketplace in many ways is to be an aggregator and be like a centralized destination, actually. And so there is a bit of a tension inherent here, like, how do you actually work through this tension of being kind of a centralized destination magic in it.com while also kind of furthering the vision around decentralization and community ownership.

Yeah, to be candid, I think in some ways we don't have an absolutist view right now. So I think right now our view is more that we want to be community driven. Right. And then we'll find a way towards native aspects of decentralization and so on. We want to do things that's more community oriented, more community driven, community owned in some ways, rather than trying to be fully centralized and everything. So we have Magic Dao and so on and so forth. But I think the spirit of it is over the long term, we want to find ways that create the spirit of, like, when Magic Eden wins, the user wins or the community wins, and when the community wins, Magic Eden wins as well. And there could be many, I would say, like tools or instruments for us to get there. Like decentralization could be one. Like there could be various other aspects, but that's kind of ultimately what we want to do, to be always on the side of the community and always on the side of the user and align our incentives that way.

Yeah, I think that's right. I think all these things are very gradual in nature. It is exciting to experiment with it. I think as a team, we like to try new things.

Sometimes, like we're open to new things.

Sometimes to our detriment. We released an NFT collection called the Magic Ticket, which gave our users in the community access to the Magic Dao. And then the Magic Dao, the vision for that over time is that we want that particular community to be more and more involved in some of the core decisions around Magic Eden. And yeah, it's not going to happen overnight. And a lot of these Dao communities are hard to run and that's just the reality. But we do actually want to experiment with it, which is why we started this early. So today there's some things that already happen, which is community votes that enable what goes on to some of the carousels on the homepage. As an example, we try to encourage developers to come and build various products, whether it's like sniping tools, analytics tools in game marketplaces, all through Magic Eden's infrastructure. And then, yeah, the third thing I would say is that we Also just want this community to have fun. Right. Because NFTs, as Jack said, it's really inherently social and a lot of that social activity has happened and really picked up over the course of time through Covid and the Pandemic. And now as people come into more and more in real life events and activations again, we're hosting more and more events kind of through the dao, which is really cool. So we hosted a big event for NFT la. We have another big one coming up, NFT nyc. And these are the types of things that we want our community, the Magic Eden community, to really come and experience and meet other people, meet us. Yeah, it's a really, really important part of us as a team and our culture. So expanding that through the rest of the Magic Eden family, so to speak, is. Is important for us.

And I love the point on experimentation there. Like, I think in some ways velocity of experimentation, velocity of learning is one of the best predictors of company success. And you guys are a great kind of case example of that. I guess I'd be remiss to not kind of spend some time talking about just where we are in the cycle right now. Like, we're recording this today on June 10, 2022, the broader NFT market and really all the chains are undergoing more of a down cycle, yet Magic Eden has actually continued a rapid ascent during that time. And so I think the stats I was just looking at over the last 30 days, like doing almost 5 million SOL in volume across one and a half million of transactions, 250k active wallets over the last 30 days, that's just secondary. What's happening here and how are you guys actually reacting through this down cycle?

Yeah, prices going up and down, that's just part and parcel of crypto. Right? And that just comes with the territory. I think where we are for NFTs, though, is the underlying belief for us was always this thing's going to be like 1000x bigger than what it is today. Right. And the thing that really excited all of our founding team at the start was, and this feels like crypto going mainstream. Previously, when you talk to the average person on the street about crypto, about census algorithms or tokens, you can see their eyes just glaze over. It's like, dude, what are you even talking about? But you start talking about NFTs, it's about art, it's about culture, it's about community, it's about gaming. These are very emotionally relatable topics. So I think in that sense, regardless of where the cycle is with the asset price. The underlying thing is, man, we are so early into a market that has insane headroom to grow because the core property of this is so much more relatable for the average person. And what we need to do is effectively just focus on building great products, making sure the user feels the value from this new primitive on the Internet. And as long as we can build products that like, help people feel the value, I'm sure, like there is insane amounts of growth left.

Yeah, yeah, I'd say on the first point. So, like, at a micro level, what's happening with Magic Eaton, like, you know, yeah, May was our largest month ever, despite all the crazy stuff that was going on in a macro environment. And what was happening was that we actually had a couple of watershed launches that we did. And I think users from other ecosystems, particularly Ethereum, started to take notice of what was happening. And that's, I think, one key thing that's been happening lately. It's Solana has more mind share now than what was the case maybe three, six months ago. That's the first thing. And then the second thing is that we're really excited that no matter what happens in the market, what happens in the cycle, we feel really confident. There's a lot of people building and as long as that's true, then the rest kind of takes care of itself. And I know this because when I joined DYDX, it was actually at the end of 2017, which for those who remember that was the end of the last cycle, and I ended up jumping in and we went into a crazy bear market for two years, two and a half years. That's actually around the time when I first met Jack. And Jack was like, what are you doing in crypto? I was like, no, no, it's going to be good, don't worry. But the reality is, as long as the builders are there, and back then, Solana wasn't even a thing, which seems a little bit crazy to say. Right. So I really believe that these things happen faster than people think. And if you look at the fungible token market, that was nowhere near as big as it is today, three, four years ago, five years ago, and that doesn't feel like very long. So for us it's just stay focused, we're here for a long time and keep our head straight. I think we really think this opportunity is generational and we're really excited to be building in this ecosystem.

I mean, you've mentioned a few times throughout this conversation existing PFP use cases really just Only being tip of the iceberg on kind of where this stuff could go. Like, I very much agree with that. Obviously. I think it would be fun to kind of highlight some examples of projects that you think are starting to illustrate where the future of this could go. Are there any that come top of mind right now that are projects that have either launched in Magic Eden or elsewhere that you feel like are kind of showing a glimmer of where all this stuff could go on like a longer time horizon?

I actually was going to talk about gaming, but I was thinking of Magic Eden first. Kind of think we're like a generalized marketplace, but actually we're not. Our DNA is more to kind of take bets on categories that we think is going to be huge and try to go deep there. So there is a real intentionality why we went into PFPs and digital collectibles and then games, at least just in the gaming sphere. I'm getting more and more excited, right? Basically more and more creators create really engaging games using NFTs in a really new, special way. Just the last couple of weeks, we're talking a lot with the Aurora team who was about to release their new demo. I think it's really cool where they basically created this PFP project where you really feel the sense of identity, this sense of affiliation, but then you get to see it being used live in the game, which I think it's super exciting. The UK Bears story is really cool too. That was really iconic for us. That would be one of the watershed creators that we feel privileged to have enabled and helped launch in May. The project itself is kind of around digital collectibles, but the underlying story is so human and so inspirational. These are folks like Aussies as well. They've been working really hard in the space and they came from this true sense of authenticity. So they were like a lot of NFT projects, the founders will try to overly financialize it, overly hype it and say like, hey guys, you should never sell or something like that. But when we met the project founders in person, they were saying, hey, the most touching thing when we were about to launch OK Bears is they were choosing between Ethereum and Solana. But then they went and actually talked to their community and said, hey guys, could you take some photos of where you are and maybe show the OK Bear sign?

Right?

Like this hand signal that they use to show that they're like affiliate fan of OK Bear. And people sent all these photos of them in kind of like emerging economies or not in the most affluent environments. And then the founders are like, man, we have to choose Solana because yes, we can make a ton more money. We've built this massive brand if we launch Ethereum, but actually we should do something that's really true to our users. Right. We don't want to lock our own fans from being able to access this thing. And then later on when they launched on Solana, they then received all these stories about their holders saying, hey man, I'm so sorry I had to sell my bear, but this was life changing amounts of money for me. I managed to buy a house or I managed to, you know, change or pay off my, my mom's loans or something and it will only be like 50 sold. It was like two and a half thousand dollars or something like that. But those kind of stories is so, so heartwarming. It's like, man, this is having a real, real impact on the community. And also the founders had so much humility to choose the tough path, right. Not the overly financialized path to enable something. I thought that was really cool.

Yeah, really cool.

Yeah.

I think the one thing I'm starting to see, which I think is going to be start to get really fun is these kinds of projects like okay, bears and all of these PFPs is that these are primitives. Right. And people are starting to create token gated content in some way or token gated access in some way. And we're starting to see this where it's like you get access to some perks or you get access to particular set of events, or you get access to particular sets of tooling, which is kind of interesting because it's like flipping the SaaS model in some ways. You buy this NFT, you get access to some type of software and I think that's pretty amazing actually. And some people are building these pieces of software to use on top of Magic Eden or use in other, in other places within the NFT ecosystem. That's something I'm pretty excited about. And yeah, I think lots of creators experimenting with this.

Yeah, I've always felt like the classification of certain projects, just as PFP projects is kind of missing the point given that it's really about kind of what's behind that and what that membership actually yields over time.

Yeah, I think you hit on the nail. I think PFP itself is, yeah, it's like a misnomer, it's like too broad of an umbrella term. There's a bunch of value that sits behind what is the thing that you buy.

Yeah, I feel like you have an exceptionally unique culture and it would be an absolute blast to work there. Maybe you could talk a little bit about, you've talked about the community, but how about internally to Magic Eden? Like what are some of the cultural tenets that you're building the company on? And I guess maybe shameless plug for roles that are high priority and where people could kind of reach out to you guys.

Yeah, absolutely. So we do have four cultural values. User obsession, unity and ownership. Web three over Web two and then champions, mindset. And in some ways, like we were very allergic to calling these things cultural values for the longest time because we didn't want them to sound like empty platitudes or slogans. Right. Like as you often see them in some ways. But we distilled these principles or like values actually through learned experience, but actually through the wins but also a lot of the L's and a lot of the challenges we had to overcome. And I think the one that's most relevant to hiring and how we think about internal team culture is like Web three over Web two. So we want, is we absolutely want to have the world's best. We want to build like an elite team of tech and business athletes who can help us elevate. But in some sense also we also want to be a super crypto native company that embraces crypto culture. And I think right now we're creating this really awesome balance within the company. Or this awesome, maybe not balance. It's like this awesome symbiosis or combination where we have deep functional experts, like people who build super scaled infra at fang. Right. But then we also have folks who are really, really into crypto culture. So they looked at the, the most deep frontier crypto companies. But we've kind of cultivated this culture of deep mutual respect and mutual learning. Like everyone is here to learn something from everyone. Ultimately what we want is to say, hey, imagine we need the lifeblood of our users within the company. That's why we want folks who really understand crypto culture. But hey, we also want to be the biggest NFT marketplace in the world. So you need some deep functional experts.

Yeah, I mean I'll sum it up as just like I think we've been very, very targeted in trying to hire the best talent from both Web2 and Web3. Right. That's really important for us. Two is I think we want to hire people who want to have fun, who find this interesting and also like to win because I think ultimately, make no bones about it, I think we're here for a long time and hopefully we can be the biggest in the space. And yeah, some of the key roles we're hiring for, I think definitely hiring much more for our gaming team. That's like a core area for us, I think, engineers of all kinds, where I think if other, like, while other folks might be slowing down or ramping down in this market, I think we are, we will likely be accelerating our engineering hiring.

Yeah, well, I mean, in so many ways, like, marketplaces are some of the most fun businesses to work on, certainly from a, from a growth standpoint, but really like across the board. I mean, the kind of hybrid of marketplaces and then all this stuff you're kind of yielding in web 3. I couldn't think of too many more exciting businesses to work on if you're interested in marketplaces or kind of crypto writ large. So thank you guys. It's been a good conversation and kudos on all of the momentum. Like, I learn a lot and I'm inspired every time I talk to you guys and so appreciate you making the time. And for those listeners, if you want to hear more stories for entrepreneurs, you could subscribe on SoundCloud, Spotify, YouTube, really, wherever you get your podcasts and also all the Gray Matter contents up on greylock.com so thank you for listening. And that wraps this episode of Gray Matter.

Awesome. Thanks so much.

Thanks. Thanks, Mike.