This NFT marketplace raised $4.7M from OpenSea and others – now it’s shutting down

The NFT space flourished in March when Formfunction—a Solana marketplace focused on one-of-a-kind, one-edition artworks—announced that it had raised nearly $5 million in funding from prominent supporters. However, just one year later, amid changing tides in the NFT world, Formfunction revealed it was closing up shop.

The company announced the decision todayand wrote that it will close its NFT marketplace on March 29. In a blog post, the founders did not provide much detail about what led to the decision.

“We’re proud of what we’ve built to help creators make a living, and we’re grateful for the support and love we’ve found in this community,” the post said. “This was an extremely difficult decision; However, after much discussion and careful consideration, we have come to the conclusion that we cannot continue to operate Formfunction.”

Decrypt contacted Formfunction co-founder Katherine Liu for further comment, but did not immediately hear back.

Formfunction launched in February 2022 and announced its seed funding of $4.7 million the following month. The round was led by Variant Fund with backers such as OpenSea Ventures, Solana Ventures, Pear VC, Canonical Crypto and Palm Tree Crew Crypto also in the mix. Decrypt also contacted Variant Fund, but have not heard back by the time of publication.

The NFT market has changed dramatically since last spring. At the time, the broader market was generating billions of dollars in organic NFT trading volume each month, with rising prices for “blue chip” projects as Bored Ape Yacht Club and successful NFT coins that yielded tens or even sales for hundreds of millions of dollars.

But demand for high value NFTs fell sharply from May last year as the broader crypto market struggled, producing falling trading volumes and declining asset prices. According to data from DappRadar, monthly organic NFT trading volume remained below $1 billion every month from July 2022 to January 2023.

Sales increased again last month, with DappRadar pointing out sales for over 2 billion dollars— More than double the January figure. However, much of the additional activity from traders comes on upstart Ethereum NFT marketplace Blur who quickly flip assets to provide token rewards. A computer startup, CryptoSlam, has classified such transactions as “wash trade”, although it acknowledged that the activity does not meet the classic definition of laundry.

There is less organic NFT trading happening in the market, but emerging marketplaces have also gained market share by cutting their own platform fees, while reducing the amount of royalties going to artists and creators from secondary sales. And so have the established marketplaces had to follow to remain competitive.

In other words, it is a tougher time to run an NFT marketplace. However, it is not yet clear why Formfunction chose to shut down now.

Just four months ago, in November 2022, Formfunction boasted the third largest weekly trading volume of any Solana NFT marketplace. It claimed to have handled 34,210 SOL in sales that week – worth $491,000 at the time of the tweet. Formfunction takes a 3% cut of secondary selling prices, and a 5% share of primary coins on the platform.

But the Solana NFT pie, across all marketplaces, has shrunk. Solana NFTs generated about $76 million of total trading volume in February 2023, according to CryptoSlamdown over 50% from January – and sharply down from $209m from March 2022 when Formfunction announced the funding.