VC Fund will invest in NFT swords and other video game items

(Bloomberg) – Venture capitalists typically invest in startups. A new fund from Chicago-based Sfermion will invest in virtual ice swords.

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Sfermion is seeking $100 million for the new fund, which it will invest primarily in non-fungible tokens designed for video games, the company plans to announce in June. It has collected around a fifth of the total so far.

The company specializes in NFTs, accumulating digital collectibles like CryptoPunks and Meebits in the past. Previous backers of Sfermion include Marc Andreessen and the Winklevoss brothers.

The next fund, the company’s third, is called Halliday, named after the fictional creator of the game featured in the book Ready Player One, said Andrew Steinwold, the company’s managing partner. Sfermion will study crypto games and try to determine which NFTs have the potential to generate high demand in the future. For example, if the second level of a game involves defeating a fire-breathing dragon, Sfermion could purchase a large number of Ice Sword NFTs effective against the beast. Steinwold describes Sfermion’s investment strategy as “mini venture capital”.

The video game industry is in conflict over crypto. The biggest game publishers showed interest, but many customers strongly opposed it. These players see NFTs as a dull economic instrument and another way for companies to make money from them.

The NFT fund is not a get-rich-quick scheme for Sfermion, Steinwold said. The company plans to hold on to NFTs until the games gain popularity and the value of the assets appreciates. With certain gaming NFTs, Steinwold said the company can earn an annual return of 5% to 40%, for example, by allowing them to be used in tournaments. The decentralized autonomous organizations BlackPool and Yield Guild Games use similar techniques.

In the crypto world, enthusiasts argue that venture capitalists wield too much control over the market by grabbing tokens that give them influence over the management of decentralized platforms. Sfermion will keep tabs on how many NFTs it buys and what percentage they represent of the total asset supply, Steinwold said, with the aim of not accumulating outsized influence.

Going forward, Sfermion plans to create two additional NFT funds: one focused on virtual lands and the other on consumer categories like collectibles, fashion and music, Steinwold said: We’re in the early stages of developing these metaverse economies, and there’s a lot to learn.

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