The Investment Case for LimeWire

April 2022

NFTs are reshaping the entertainment industry. Over the span of 18 months, they have transitioned from near total obscurity to near universal recognition, with celebrities like Justin Bieber, Steph Curry and Jimmy Fallon all proud owners of Bored Apes (a leading NFT collection). Increased adoption has run alongside continued innovation in NFT capabilities. What started out as overpriced JPEG pictures, is evolving into digital assets that can house multi-media content, complex contracts, and intellectual property. One of the most interesting and applicable sectors for NFTs to disrupt is the music industry. This month, we are going to dive into the NFT marketplace LimeWire, one of our latest Fund 4 investments. We will explore what the platform does and why it is well placed to bring millions of new users to crypto.

LimeWire is not a new company. For anyone who was downloading pirated music in the early 2000s, LimeWire may sound familiar. The company started out as a file sharing platform and was shut down by a court order in 2010 due to copyright infringement. At its peak the platform had over 50 million monthly active users and was a household name alongside the similarly fated Napster. Despite a decade with no operations, there are still thousands of daily searches for LimeWire. It is this brand awareness that the new LimeWire team has leveraged as they launch their NFT platform.

The platform

Sticking to its roots, LimeWire remains a platform for music lovers. It allows musicians to upload both visual and audio content in an NFT tokenized format. A digital wallet is integrated into the platform and customers can store their NFTs either on the website or can withdraw to their own wallets.

LimeWire sits at the intersection of web2 and web3. In web3, there are many complexities associated with self-custody, private key management, and on-chain transactions. LimeWire has decided to abstract this away from the user, instead offering users the familiar web2 model of directly purchasing items with credit cards, PayPal, or bank transfers. The website’s NFTs are purchasable in over 20 cryptocurrencies. For crypto-savvy users, self-custody remains an option. On the backend, LimeWire mints its NFTs on Algorand, one of the leading smart contract platforms with a market cap of over USD5bn. Assets withdrawn from the marketplace can be used in the broader Algorand ecosystem and will also be bridgeable to other chains in the future.

There is a clear value proposition for both artists and their fans. Artists can engage directly with fans, through community channels that allow artists to post content and reveal their latest NFT drops. The NFT holding fan can access ‘unlockable content’ like special announcements, pictures, music, and real-life rewards. LimeWire has contracts in place with some of the most popular musicians in the world, with many more agreements in the works. In aggregate, these musicians have tens of millions of fans.

The team

The founders of the new LimeWire platform are brothers Paul and Julian Zehetmayr. They are serial tech entrepreneurs with over 7 years of experience building businesses together. Successful projects that they have launched include Eversign, MobFox, ZeroSSL, and Invoicely. These businesses are microservice APIs that simplify complex, recurring processes like currency and file conversion. In total, the suite of products is used by more than a million customers globally. The broader team includes experienced marketers, creatives, and salespeople from businesses like Bitpanda and Eversign. LimeWire’s advisory board includes the managers of Wu-Tang Clan and FISHER, the CEO of Algorand, and other crypto and music industry insiders.

The token

LimeWire charges a 10% commission on primary sales and 2.5-10% on secondary sales in its NFT marketplace. The platform is governed by the protocol’s token, LMWR, which serves multiple roles. Holders of the token will receive weekly dividends commensurate with the size of their investment. Token holders will also receive discounts when using the platform as well as perks like invitations to exclusive events, early access to certain NFT collections, and merchandise. As the platform matures more functionality surrounding the token will be released.

LMWR holders will also have governance rights over the platform and how it operates. LimeWire will host a weekly chart where token holders can vote to feature artists. Through the LimeWire Foundation, LMWR holders can also vote to give small grants to artists. Lastly, token holders will be able to vote on community proposals to update the marketplace.

The opportunity

The market for NFTs exploded in 2021. While artists were a huge beneficiary, the NFT marketplace OpenSea was arguably the biggest winner. In January 2022, OpenSea transacted almost USD5bn of volume which netted it over USD100m of fees. In January, the company also closed its latest funding round at a USD13.3bn valuation. OpenSea to date has focused on art NFTs deployed on Ethereum, but there is much to explore beyond this.

There is a wide array of crypto exchanges today, focused on different geographical regions and with different unique selling points. The same will be true of NFT marketplaces in the future. While OpenSea is the leader today, there is room for competitors and many verticals within NFTs are waiting to be serviced. Given LimeWire’s roots in the music industry, it makes sense for the platform to begin by focusing on this segment of the market. Should it become the dominant player in the music NFT space then there is tremendous upside.

We are excited by the potential of LimeWire to bring millions of new users into the crypto ecosystem. Following its recent marketing push around the relaunch, over 4 million email addresses have been whitelisted for the platform. This early traction may encourage a positive flywheel to take hold: artists will come to the platform to interact with fans, leading to more fans coming to the platform for the artists. A network effect could take hold as the marketplace scales, with both artists and fans wanting to interact on the single largest NFT music platform. This will drive revenue to the platform, giving it more money to spend on marketing and customer acquisition.

At CMCC Global we look to invest into projects that have a clear edge. While there are many upstart NFT marketplaces today, few have an edge quite like LimeWire. It boasts a team with a track record, a globally recognised brand, early partnerships with renowned musicians and the vision to build a usable platform for both crypto-newbies and crypto-natives. We look forward to supporting the team as they go to market and once again become a household name.

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