There are two dominant narratives about Dapper Labs and its wildly popular product, NBA Top Shot.

One is about a world-beating company ballooning to a $7.5 billion valuation and is poised to grow its dominance of the mushrooming sports NFT collectible space. The other is about a company that hoodwinked its customers into a viral product that has seen its value tank by 75% in two short months.

Neither is really accurate, but Dapper Labs’ investors have something that the Top Shot collector concerned about their wallet may not: Time.

Top Shot, where collectors can buy and sell video moments from the NBA season, is undoubtedly the darling of the NFT boom. The app has raked in more than $700 million in sales in 2021 and has more than 515,000 accounts that have participated in their marketplace in some form, according to NFT tracking site CryptoSlam.io.

But Dapper acknowledges its regrouping as it onboards new employees to meet winter's feverish demand. Sales have fallen off a cliff.  For the moment, it’s cutting into their bottom line.

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I joined NBA Top Shot in January on a whim and got hooked instantly. It was a polished product, even in beta, that combined my lifetime penchant for collecting and excitement about the NFT space.

I watched the community (and my account) grow with the boom in sales and new users through February and into March. And I’ve tracked the market near-daily, watching it slowly bleed out since then, along with much of the NFT space — its rabid community growing more unnerved day by day.

That downturn has real implications for Dapper Labs. Dapper takes a 5% cut of every sale on the NBA Top Shot marketplace, which CEO Roham Gharegozlou said accounts for the majority of sales for the product.

The short-term on Top Shot is bleak. 

Analysis shows Dapper’s average cut of the more than 1.3 million transactions on the marketplace in May was $1.50, down from more than $9 in February. The number of transactions has remained relatively unchanged since.

According to CryptoSlam.io, the NBA Top Shot marketplace had $40.8 million in sales in May, down from $224 million in February and $80 million in April.

New user growth has also slowed. Dapper added fewer than 50,000 users who obtained their first moment in May, despite more abundant packs and multiple drops of free cash to spend on the marketplace. 

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And while Gharegozlou argues otherwise, analysis shows many of Top Shot’s largest accounts and earliest adopters have sold significant portions of their collection, outweighing others adding to their accounts.

A spokesperson for Dapper declined to comment on the majority of this story. 

All of that said, the outlook beyond the next few months on Dapper Labs and NBA Top Shot looks considerably brighter. 

The company raised $305 million at a reported $2.6 billion valuation through Coatue Management in March, bringing in NBA icons Michael Jordan and Kevin Durant and crypto mainstays like a16z. Reports indicated Dapper immediately began another round of fundraising with Coatue, this time at an eye-popping $7.5 billion plus valuation.

Gharegozlou told Crypto Investor the company has hired more than a dozen vice presidents in recent weeks, added a total of 67 employees in 2021. Its website lists more than 60 open positions. 

Notable hires include David Feldman, Dapper’s newly minted Senior Vice President of Marketing, who joins from the National Football League. Senior Vice President of Communications Jackie Rubin, joined in May from Hasbro-owned Entertainment One. And Georgiana Mirea, a veteran of American Express and Northwestern Mutual, was promoted to Senior Vice President of Digital Product Management.

While sales have cooled considerably, NBA Top Shot still dwarfs most other NFT collectibles in average weekly volume. Last week, among the worst for NBA Top Shot since January, there was $5.5 million in marketplace sales. That more than triples their next nearest competitor in the sports collectible market, Sorare, which focuses primarily on European soccer. 

The weekly sales are higher than the combined marketplace activity on NBA Top Shot from July to December of 2020. 

Dapper has grown far beyond NBA Top Shot and its previous NFT darling, CryptoKitties. Its blockchain, flow, is hosting myriad other projects being built by companies like Samsung, Warner Media Group and the estate of Dr. Seuss. 

The company is also developing a Top Shot-like experience for the Ultimate Fighting Championship (UFC), which could debut in some form later this year.  

But Dapper is undoubtedly in a building phase, which may not pay major monetary dividends to its collectors in the near term.

NBA Top Shot remains in beta, and Gharegozlou has said a wide-release (and wide marketing) hinges on Dapper improving user experience, including its planned game Hardcourt and implementing instant withdrawals, a major pain point for customers in recent months.

About 250,000 accounts, or nearly half of active accounts, have been passed through Dapper’s KYC checks and been granted access. While data is thin on turnaround times on withdrawals, users have indicated they have come down considerably from the 2 to 3 weeks they were earlier this spring.

I conducted three withdrawals from my account during the reporting of this story as a test. The first two were processed in four days and the third, enacted Sunday, took just 24 hours.

Gharegozlou said 99.9% marketplace stability was non-negotiable as well. Here too, the platform has seen improvement. In February and March, the marketplace was not operational 50% of the time some weeks. Marketplace maintenance has been far more sporadic in recent months, but work likely still needs to be done.

But here again, while a collector may be impatient, Dapper Labs has time.

The NBA season is quickly coming to a close and will have a typical several month offseason, unlike last year’s COVID scrambled season where just a month separated seasons.

That likely gives Dapper time to work toward necessary improvements to the platform while interest in the league is low. While it engaged in some minor marketing, it seems unlikely the company would use much of its war chest during the offseason, so users unhappy with their account value may well be in for a long summer.

Gharegozlou said “economic fixes” for collectors and other infrastructural elements are priorities in the coming months, both a sign Dapper will continue to engage its existing customer base and that a new user push isn’t likely on the horizon. 

Disclosure: As noted in the story, Crypto Investor Senior Reporter Stephen Stirling has been an NBA Top Shot user since January 6, under the account "Steef." 

There are two dominant narratives about Dapper Labs and its wildly popular product, NBA Top Shot.

One is about a world-beating company ballooning to a $7.5 billion valuation and is poised to grow its dominance of the mushrooming sports NFT collectible space. The other is about a company that hoodwinked its customers into a viral product that has seen its value tank by 75% in two short months.

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