If you feel left behind by the red-hot real estate market, don’t worry, you may have another chance—virtually at least.
Although you may not want to wait too long.
Last week, banking giant HSBC made headlines when it agreed to a partnership with The Sandbox, a San Francisco-based startup, to acquire a plot of virtual real estate in its metaverse. That announcement came on the heels of JPMorgan Chase creating a lounge in Decentraland—a different metaverse world—that even featured a picture of CEO Jamie Dimon just last month.
While other brands also have opened stores or showrooms in different metaverses, when banks—normally not the quickest of adopters—move in, it may be time to take notice.
“I get calls every day from brands, companies, artists, athletes, retailers, banks, investors—every segment—looking to get into this space,” said Julia Schwartz, co-founder, chief strategy officer and head of product at Everyrealm.
The New York-based company—which closed a $60 million Series A led by Andreessen Horowitz at a valuation of “hundreds of millions”—buys and develops land in metaverses. The company currently is invested in 25 different metaverses—including large, well-known ones such as Decentraland and The Sandbox—and took part in the largest known virtual real estate deal late last year when it closed on $4.3 million for land in The Sandbox.
Time to buy?
That’s far from the only big deal in the space. In November, Toronto-based Tokens.com announced it bought land in Decentraland for about $2.4 million worth of cryptocurrency.
In fact, according to investment and analytics firm MetaMetric Solutions, real estate sales on the four major metaverse platforms reached $501 million in 2021 and are projected to reach nearly $1 billion this year.
“We are very excited about the realm,” said Schwartz, whose company just this week added several celebrities including The Weeknd, Will Smith, Nas, Paris Hilton, Gene Simmons and others.
One thing to understand before becoming a land baron in the digital realm is there are parameters to buying and developing land in different metaverses. While it’s easy to imagine a metaverse has “unlimited” land, the truth is the creators issue white papers with descriptions that tell those interested in joining the community how many parcels are available.
Schwartz said it is possible for meteverses to expand their virtual land, but once created it is then governed by the DAO—decentralized autonomous organization—or community that supports it. Any expansion plans would need to be agreed on by the group, she said.
Those parcels of land—which can now go for hundreds of thousands of dollars each depending on the metaverse—also can face different types of zoning-like restrictions concerning what can be developed on those parcels.
Schwartz likens developing land in the metaverse to how companies like TikTok, Instagram and Netflix differentiate themselves. While those companies have a platform, it is the content they produce that makes them popular. Developing land in the metaverse is a type of content-creating strategy.
“We want to do what Netflix did for streaming services,” she said.
What to buy?
Many of the same guiding principles in real estate are applicable to buying land in the metaverse.
“We borrowed practices from the real estate industry,” Schwartz said. “Although it is important to remember you are investing in tech—not real-estate. You are investing in societal shifts.”
When investing, Everyrealm examines comps and recent parcel sales. And the old real estate axiom of “location, location, location” also matters, as places like entry points and where people gather virtually are more valuable.
There also is the question of which metaverse to invest in.
While Everyrealm owns parcels in 25 different metaverses, Schwartz said the company currently is following about 300 metaverses in total looking at opportunities.
Parallels to social media
It also is important to remember what you are actually buying—and not buying.
“The metaverse is not intended to replicate the real world,” Schwartz said. “The best metaverse experiences are ones you can’t replicate in the real world. The metaverse can be used as an alternative tool.”
To that point, many brands, large banks, real estate agents and other businesses are already looking at the metaverse—and real estate in it—as a way to reach different communities and people. That’s not dissimilar to how social media eventually morphed into a pseudo-advertising platform.
However, Schwartz believes the decentralized nature of the space will keep the metaverse a place where communities dictate its future, but she does note there is increasing interest from investors—just as institutional investors eventually embraced crypto and other technologies Web3 is helping to shape.
She adds more risk-averse businesses may shy away for a while awaiting word on any potential regulations in the space, but for now remains bullish on the future.
“Our (Series A) round was significantly oversubscribed,” she said. “There was a ton of interest from a lot of people—hedge funds, Layer 2 players, celebrities … We’re excited to continue to look at opportunities to buy land and develop content.”
By: Chris Metinko I Crunch Base I March 25, 2022