Meet the Chinese Australians who turned an NFT startup into a unicorn in nine months

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When Sidney Zhang flew from Melbourne to San Francisco, hoping to succeed in the tech world of Silicon Valley, his parents thought he was “crazy”.

Especially when his first cryptocurrency company “caught up like a dumpster fire” and he found himself living on a boat for a few weeks.

At one point, due to San Francisco‘s rental market costing a fortune, he secretly lived in a coworking space – convincing others that he had just arrived early and left late.

But everything changed for Mr. Zhang after the company he co-founded became a “unicorn” last week.

He is now the CTO and co-founder of Magic Eden, a US-based company that provides an online marketplace for non-fungible tokens (NFTs).

The company raised $130 million ($188 million) last week, bringing its valuation to $1.6 billion ($2.3 billion).

This gave Magic Eden its coveted unicorn status – a private start-up with a valuation of over $1 billion ($1.4 billion).

Mr. Zhang found his feet in technology after starting several degrees in more traditional fields – law, international relations, accounting – before obtaining a degree in finance and undertaking a master’s degree in computer science.

But he also turned down what might have seemed like a more stable job with Australian financial services firm Macquarie Capital.

From Glen Waverley to Silicon Valley

Sidney Zhang says his parents thought he was “crazy” to pursue a career in start-ups.(Provided)

Despite the tech entrepreneur’s new life in San Francisco, Mr Zhang said when he thinks of home, he thinks of Glen Waverley in Melbourne’s southeast.

Arrived in Australia at the age of 15, he lived in a house his parents owned while continuing to work in China.

“It was quite free and really different from China. For the first time, I had a lot of time to pursue [my] hobby,” he told the ABC.

Mr. Zhang taught himself how to program, which he described as an “early inspiration” for his future interest in tech start-ups.

In high school, Mr. Zhang met Jack Lu, now the general manager of Magic Eden, in a math class.

The two quickly developed a close friendship and “always knew” they wanted to “do something in tech.”

At the age of five, Mr Lu immigrated to Australia with his parents, who “made many sacrifices” leaving behind their established careers in China.

Mr Lu said he was “inspired” by his father, who “had a sense of adventure and wanted to explore new opportunities”.

Jack Lu and his parents in front of a traditional Chinese building.
Jack Lu says his parents made many sacrifices to start a new life in Australia, inspiring him to explore new opportunities in another country. (Provided: Jack Lu)

Mr Zhang said the experiences of independent living in Australia enabled him to “take a leap of faith” and move to San Francisco in 2013 where, he said, the entrepreneurial culture and tech market were more “rooted” than in Australia.

“[San Francisco] was the right place. It was the tech capital of the world and everything was happening,” Zhang said.

However, it was sometimes difficult. When he arrived in Silicon Valley, Mr. Zhang “didn’t know anyone,” so he emailed start-up CEOs en masse asking for jobs.

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Similar to Mr. Zhang, Mr. Lu wanted to “be immersed” in “lots of exciting things happening in Silicon Valley” and moved to the United States in 2017.

He had held several jobs before getting the “front row seats” in the NFT and cryptocurrency space.

Mr. Lu said his parents were worried at first about his efforts, but they showed him their support nonetheless.

Now, Mr. Lu’s parents “were both very happy” and his father regularly follows crypto news.

“The future of art and culture”

For just nine months, Magic Eden has been a major market for NFTs – unique digital assets such as art or music, stored on the blockchain, which is a form of decentralized digital ledger.

The collections page on the Magic Eden NFT Market
The collections page on the Magic Eden NFT Market.(Provided: Magic Eden)

NFTs must be purchased with cryptocurrency, which is also stored on the blockchain.

“NFTs are the future of art and culture,” according to the company.

“And, we see ourselves as stewards of the NFT space.”

Dr. Vy Nguyen, researcher at RMIT Blockchain Innovation Hub, said Magic Eden was one of the “pioneers” of Solana, one of the fastest blockchains in the world.

A woman smiles in a professional portrait
Vy Nguyen says those who invest in crypto should have “financial and technological knowledge”.(Provided)

Magic Eden now accounts for around 90% of the Solana blockchain’s NFT trading volume.

“This represents a huge opportunity for investors,” Dr Nguyen said.

However, Magic Eden’s surge comes amid what some analysts are calling a “crypto winter,” a sharp decline in the value of cryptocurrencies as investors close their wallets.

The world’s best-known cryptocurrency, bitcoin, saw its value plummet from over US$60,000 ($86,000) in November to below US$20,000 ($28,000) – its lowest level since 2020.

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Play the video.  Duration: 3 minutes 19 seconds

Bitcoin’s value plunges below $20,000 for the first time since 2020.

Some cryptocurrencies have seen their value drop even more dramatically.

Dr. Weiping He is a Financial Markets Researcher at Monash University School of Law and a Fellow of the Monash Blockchain Technology Center.

A repeat offender

She said the drop in crypto’s value reflected broader economic trends and a “very bleak” investment environment in general.

However, she said, it was clear that some investors — like Electric Capital, a tech venture capital firm — were still “capable of investing in” Magic Eden.

The company’s ability to raise $188 million reflects investors viewing Magic Eden as “capable of providing better services,” Dr. He said.

“So that probably partly explains the growth of this particular company,” she said.

“It’s really about whether there’s a market for the products they’re selling.”

The risk of NFTs and cryptocurrency

Magic Eden has simplified the process of performing cryptocurrency transactions on its platform, which might be confusing to a layman, said RMIT’s Dr Nguyen.

“You don’t really need to know much about blockchain and cryptocurrency to be on the platform,” she said.

However, Dr. Nguyen said, anyone wanting to get involved in blockchain should have both “financial and technological literacy” and be aware that a young company like Magic Eden still faces many future challenges.

A bear market refers to a decline in investment prices of more than 20%.

Consumer groups in Australia say there must be stronger protections for those who spend their money on cryptocurrency exchanges, especially to protect against the collapse of crypto exchanges.

“In Australia, there is almost no consumer protection for people who invest in digital currencies or cryptocurrencies,” said Patrick Veyret, policy adviser at Choice, a consumer advocacy group.

Patrick at his computer at his work desk.
Choice’s Patrick Veyret says more consumer protections are needed for people who invest in cryptocurrencies. (ABC News: John Gunn)

“If suddenly an exchange collapses, [and] we have seen a number of exchanges in Australia collapse, there is no recourse for assistance or compensation for people who have invested their money.

“This applies to all crypto assets, whether it’s…trading NFTs or buying bitcoins.”

The future of Magic Eden

Magic Eden’s team is primarily based in the US, but has a “fairly large” team of around 15 people in Melbourne, the company’s second international hub.

“I always try to come back [to Australia] when I can.”

Lu said he was “optimistic” that the company will continue to grow, despite market conditions.

Dr Nguyen said the next challenge for the company would be to “build a sustainable community”.

“Because without it it’s actually not viable to sustain market activity,” she said.

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Watch Four Corners’ survey of the hype behind cryptocurrencies.

Read the story in Chinese: 阅读中文版

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