WoW Pixies – Really Investing in Web3

A few days ago I bought five NFTs from the WoW Pixie NFT collection for a total of 0.919ETH, or about ~$2825. I’m so excited.

My Opensea Profile

I have bought/received about 50 NFTs over the past 6 months as I have experimented in the space, but these five WoW Pixies feel like the first time I’m really investing in Web3 as opposed to purely speculating.

Let me lay out a bit of context in how my thinking around NFTs has evolved, and then I’ll explain why I like the WoW Pixie NFT/DAO.

My NFT path: Memes > Discords > Communities > DAOs

When I wrote a piece about Memes last June, I was trying to wrap my head around the WallStBets and Dogecoin boom. I was doing very well personally with my Bitcoin/ETH investments but I was seeing these memes explode in value, and I was trying to understand whether this was a pure bubble or if something more fundamental was happening. Rereading that piece today it is shocking to me that I didn’t mention NFTs at all, despite being cognizant of what was happening with Cryptopunks at that time. 

Later in the summer (August 2021) I decided to allocate 1 ETH as an experiment to the NFT mania to see what it was all about. I saw a project that was mid-mint, Mad Banana Union, and jumped aboard, enjoying the art, the unknown nature of what traits I would receive from my Mint, and theorizing that a banana project could (in some unknown way) be a beneficiary of all the interest in Ape related projects. I’m not going to lie, there was a week where I thought I was going to be very rich! I minted a banana with a rare trait that in the heady days of late August had a “floor price” above 1 ETH, and apart from that flipped a couple of bananas for 0.3ETH and 0.4ETH that I had minted just days before for 0.04ETH (+gas). 

An important aspect to the NFT buying process for a collection like the Mad Bananas is joining the associated Discord channel, with special forum chats for those who verify their ownership of the relevant NFT. As a first time NFT-er I became entranced at the buzz in the Mad Banana channel, and bought all the hype as to where this project was going. I felt like I learned an immense amount about what drives project growth besides the art itself, including the value of the core team, the viability and vision of the project roadmap, and the strength of engagement amongst the early adopters. 

Unfortunately, I got greedy and when the initial hype started to fade I thought I was able to pick up some bargain bananas, when in reality the project was proving to be more of a dud than the Next Big Thing. I decided to step back when the “Special Edition” bananas were unveiled and everyone (myself included) was disappointed at how they turned out. I probably walked away slightly down from my initial investment, and I was left holding ~20 worthless jpegs of bananas, but I wasn’t so mad at myself. 

After a few months in which I messed around buying a couple of 1/1 NFTs because I genuinely liked the art, I came to realize that what was happening with the Bored Ape Yacht Club was incredibly valuable. They were crossing the threshold to creating real community. As I had said in my piece about memes:

“If memes have utility and attention is currency, then community is the end goal. Creating a true sense of belonging in the 21st Century is both the hardest and the most valuable product any person/company/organization can offer.”

I briefly contemplated selling essentially all my ETH to be able to buy 1 BAYC in October, around the same time I published this tweet, but decided it was an irresponsible decision ¯\_(ツ)_/¯ but I couldn’t escape from the fact that BAYC were bootstrapping a vibrant community with a real product roadmap and Web3 tokenomics meant that we could see the rise in value of this community in real time. 

Around Christmas I had built up enough conviction to invest in a “Blue-Chip” NFT project and took the plunge to buy 2 World of Women NFTs for 1.99ETH and 2.1ETH, respectively, by far my biggest investments in the NFT space. I wanted to rejoin a Discord channel and feel that vibrancy of the community again, and I hoped that WoW, as an established and celebrated project, would create value in the same way that BAYC has done.

My WoW #6624. I call her Luna (original, I know).

Fortunately, I absolutely nailed this bet on the head. The Discord is full of energy and ideation around opportunities for WoW and WoW members, and the project has established itself as the preeminent Women-led NFT project. The roadmap includes licensing agreements, a WoW community art fund that is buying world class art from female artists, a WoW gala for WoW holders, and the expansion of the WoW universe with the forthcoming announcement of the Galaxy of Women (a new collection which all WoW holders will be able to mint for free). My only regret is paper-handsing one of the WoWs I held for 3ETH. Fortunately I still own one WoW which today is worth ~10ETH. 

WoW Pixies DAO

All of that brings me to WoW Pixies, today’s investment. WoW Pixies is different to a regular NFT project in that it’s explicit purpose is to raise funds to form an Investment DAO which invests in other NFT projects led by women.

From their Whitepaper:

The DAO is set up so that our community holds the power via your Pixie NFT. 1 pixie = 1 vote.

Whilst most project teams will keep 95% of the mint amount to themselves, we have designed the DAO so that 80% of mint, as well as 75% of our secondary transaction royalties go straight to fund our DAO. This means that the team holds significantly lower proceeds and power, making it decentralised and community-driven.

The mint was successful and today there are 5,555 WoW Pixie NFTs in existence, with a floor price of 0.145ETH. Since inception, the team has bought into 5 NFT projects and have successfully acquired a Royalty Club WoW NFT, which pays out royalties based on the secondary sales of the entire WoW NFT project on a monthly basis.

The interesting aspect of this NFT/DAO project is that it is much easier to evaluate through traditional financial metrics, and it looks like a Web3 version of a VC fund investing in Web3 startups (NFT community projects). 

WOW Pixie Valuation & Outstanding Assets:

You can open and make a copy of the Sheet here.

My thesis

So basically if you buy a WoW Pixie today you are buying 1/5555 of an investment collective for 0.145ETH (~$450) at an 800ETH (~$2.3mm) valuation. The investment collective has existing NFT assets of around 300 ETH (very much dependent on how you value the WoW Royalty NFT), 85 ETH of dry powder, and monthly income of ~15ETH.

If we looked at a valuation of the assets after 12 months of income at a steady 15 ETH, assuming no appreciation/depreciation in the underlying assets, then the DAO is trading at approximately a 40% premium to the value of its underlying assets. Obviously the NFT world is anything but stable, but as a snapshot I think that’s probably a fair estimate of the current premium to underlying asset value. 

So why would I buy into an organization at a premium to the value of its underlying assets? 3 main reasons: access, scale, and team.

Access: The beauty of forming a public investment collective with serious firepower available to deploy is that you gain access to projects and project team members that I as an individual would not be able to attain. I recently witnessed this in action in the Pixie Discord channel; the community raised flags regarding its proposed investment in the Crypto Chicks NFT project, but was able to get a lead member of the Crypto Chicks team in less than an hour to walk through and assuage our concerns before we deployed 15 ETH to sweep the floor of their project. Similarly, the Pixie DAO has already provided its members with White List access to new NFT projects pre-mint, again a function of being part of a group with serious clout collectively. This type of access is valuable and is something that should serve to the benefit of the Pixie DAO as a collective, and to the individual DAO participants.

Scale: Being a small part of a big collective allows me to gain exposure to both rarer NFTs and a broader array of NFTs than I could on my own. The Royalty Club World of Women NFT is worth somewhere between ~150-300ETH alone depending on how the WoW volumes keep up, and the DAO has both the funds and the access to buy NFTs that would be out of my reach. The NFT game is similar to the VC game – you want to be able to make many bets in the hope that one or two bets “payback the fund”, as there’s a decent chance the rest flop, no matter how good they might look while investing. While I may have found my “payback the fund” NFT in the form of my one WoW, there will be many more winners and losers and the Pixie DAO will hopefully allow me to participate in a much wider range of NFT projects than I would be able to alone. Furthermore, many NFT projects that have found success are looking for ways to expand their universe to a broader set of owners, and to reward existing holders (similar to the BAYC > MAYC expansion). The Pixie DAO is well placed to capture more of this upside by owning various NFTs within each project, offering the DAO the potential to sell some NFTs for liquidity/profit-taking while retaining positions in those projects.

Team: as investing in an early age startup, it’s hard to evaluate the DAO/product in its current form. Much of the Due Diligence revolves around the quality of the team. In the case of the Pixie DAO, the core team has moved quickly and achieved their roadmap 1.0 goals in less than a month (most importantly in acquiring the Royalty WoW at a reasonable valuation), and have already formed relationships with many of the prominent women’s led NFT projects. The Discord channel is full of NFT noobs and experts alike asking relevant and interesting questions, and I full good about the issues being raised to enhance value for the entire DAO. I believe that the collective will be able to outperform my personal decision making.

Learning Opportunities & potential connections: While not a primary reason to buy into this NFT project currently trading at a premium to its underlying assets, I feel like I have already learned a ton from other Pixie DAO members regarding DAO governance and NFT investment strategy. These Discord channels feel like forums where you can establish real relationships and build credibility even as an anon, and I have learned more about the space in 3 days in this Discord than in any prior NFT forum. 

Thanks for reading. If you are interested in buying into the WoW Pixie DAO, all you need to do is buy a Pixie from the Opensea collection (just buy the cheapest one available – 1 pixie = 1 vote), join the discord, and verify your ownership. Let me know if you have any questions and definitely let me know if you’re joining the Pixie DAO crew :)

P.S. While writing this blog, the floor price on the Pixies dropped (as it did across almost all NFT projects, so I decided to pick up a sixth pixie!!)

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