When researching potential investments one of the most important factors a VC firm will look at is Total Addressable Market (TAM). TAM is a critical metric that represents revenue opportunity for a product or service, typically indicative of the product’s underlying potential. The sweet spot professional investors look for is when a product or service is growing revenue fast, but still has a much larger TAM. I believe this is exactly where RTFKT sits right now. An ecosystem that is accelerating revenue gains exponentially through new releases like Nike Dunks, but also has by far the largest TAM in NFT’s, significantly larger than that of Yuga Labs/Bored Ape Yacht Club. Let’s talk about why they have the largest TAM and why they have the greatest opportunity to onboard by far the most new users into NFT’s.
NFT’s are collectibles, not art
NFT’s are not art. They are premium luxury collectibles. A vast majority of NFT holders are not in it for the art. They are in it to invest and collect digital goods and show them off. It’s very similar to that of the luxury fashion space. People don’t buy Balenciaga hoodies for the shape or material. They buy it for the Balenciaga logo. RTFKT is the most uniquely positioned NFT project to capitalize on all of these markets. Their entire ecosystem was built from the ground up with these markets in mind, and then their acquisition by Nike only turbocharged this. Before releasing their flagship collection Clone X, RTFKT was actually the first to the NFT digital clothing space. Long before the NFT explosion of Spring 2021, they were creating and releasing digital sneakers, jackets, pants, and even toilets on Superrare. What good is all of these collectible goods if you don’t have an avatar to wear them or a place to store them? On December 12th 2021 they released their biggest collection ever, Clone X. Clone X represents the avatar that will eventually wear all of these digital goods. On December 25th 2021 they released the RTFKT Space Pod, a place to store your digital goods and NFT’s. People largely buy NFT’s to collect and show off. RTFKT is catering to this.
December 13th was the biggest news of them all. Nike, by far the largest apparel company in the world, has acquired RTFKT. In 2021 Nike made over 44 billion US dollars in revenue. They control the culture, and now that had their own digital luxury goods ecosystem. Every year billions of dollars is made by sneaker and fashion resellers on platforms like StockX. Now imagine this- you buy an NFT and it’s linked to a super limited physical good, let’s say a Nike Air Force One. This will probably catch the attention of the market making billions off super limited sneakers. Well this is exactly what RTFKT is doing. Over this past weekend everyone who owned an RTFKT Space Drip got a custom pair of Air Force Ones. Slowly and surely, the multi billion dollar sneaker reselling market will take notice. Not only is RTFKT positioned to address a vast majority of the NFT market, they are well positioned to address a market that single handedly creating billion dollar companies like StockX. This TAM is MASSIVE.
Nike will grow the NFT market exponentially
The most hyped sneaker release over the last decade was the Travis Scott Air Jordan 1. This was a sneaker release that consisted of 50,000 pairs that had collectors all over the world fighting to get their hands on one of these remixed original Jordan silhouettes. They are now selling for THOUSANDS on the sneaker reselling market. On April 22nd 2022 RTFKT/Nike released the first collection of digital Nike sneakers in history- the Nike Dunk Genesis. This collection is less than half the size of the Travis Scott Jordans, a grand total of 20,000 pairs. They’re currently selling for the same price as the Jordans. Nike has hinted several times that physical sneakers will be coming to holders. They’ve also hinted revolutionary screen technology will be built into every sneaker. Now imagine what happens when the multi billion dollar sneaker reselling market catches wind of this. Millions of people who never made a crypto transaction before will all of a sudden be researching how to buy an NFT. RTFKT had the largest TAM in NFT’s before Nike acquired them. By adding on the largest sneaker and apparel brand ever into their ecosystem, they’ve also gained the largest TAM outside NFT’s
Gamers don’t care about NFT’s
The subsection of NFT holders who are also into collectibles and luxury goods is massive. The subsection of NFT holders who also are gamers is significantly smaller. Don’t believe me? Look at the comment section of this Gamestop NFT article on IGN (the largest video game media company in the world). The sentiment is beyond negative. Almost every comment talks about how NFT’s are a scam and this is a desperation move by Gamestop. The general gaming market just doesn’t understand NFT’s or their value. We are years away from even the NFT education phase for gamers, let alone mass adoption. This is why I’m largely concerned about Bored Ape Yacht Club. By releasing OtherDeeds they’ve showed their hand. They’re creating a video game. They’re creating a product for a market that is not even close to understanding what an NFT is. I’m worried that the entire Bored Ape ecosystem value is now tied to that video game. If the utility of a Bored Ape is a skin in a video game, and that video game flops, will that Bored Ape still be worth hundreds of thousands of dollars? If nobody cares about mining resources in a slime island, will people still pay tens of thousands of dollars for the Otherdeed? The TAM for Yuga is significantly smaller than RTFKT. On top of that, there’s a tremendous amount of risk their market won’t even enjoy their product when it releases in what will probably be years.
I also believe RTFKT is in position to penetrate the Asian markets most effectively. Currently the Asian NFT market is much smaller than North American NFT markets. In 2021 Nike’s revenue in Asia increased by 11% to 1.4 billion dollars. They have the brand name to attract Asian collectors. On top of that RTFKT is partnered closely with Takashi Murakami, one of the most popular artists in the world and an icon in the Asian markets. RTFKT is set up to be a global powerhouse brand.
The future of digital is….physical
I don’t believe the future of NFT’s will only be pure digital goods. I believe the truly valuable NFT’s in the future will be attached to physical goods as well. Physical goods will be tokenized to ensure their authenticity and digital goods will have physical counterparts to ensure their value. With RTFKT now having the largest apparel manufacturing company behind them, they will be well positioned to produce physical goods with all their NFT’s. I’m not talking about black hoodies and t shirts with skater logos like every other NFT merch release. I’m talking high quality apparel and luxury goods that are only possible by having manufacturing facilities all over the world like Nike does. In a short period of time Nike will be able to produce millions of sneakers and large collections of clothing to match their NFT’s. This is logistical power no other Web 3 company has. By putting emphasis on Forging RTFKT is showing their hand, they plan on producing physical goods for their NFT’s (forging is their name for turning NFT’s into physical items). What has more intrinsic value- an RTFKT NFT that is connected to a physical pair of sneakers or a JPEG of a monkey?
No other company in Web 3 has the infrastructure, logistics, roadmap, or vision to address a larger market than RTFKT at the moment. The TAM is so large I see this as possibly the biggest asymmetrical investment in the space. While Clone X is already a pricey collection, the potential market that they can penetrate is significantly larger than any project larger than them. I didn’t write this article to convince you to spend thousands on an NFT. I wrote this article to show you my thought and research process when I make NFT investments. I believe there isn’t enough content in the NFT space taking the perspective of traditional investing. I believe there are many wins to be had in NFT’s by removing emotion and using traditional investment logic when doing your research.
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