This story is part of Fast Company\u2019s Most Innovative Companies of 2022<\/a>. Explore the full list of companies that are reshaping their businesses, industries, and the broader culture.<\/em><\/p>\n<\/div>\n The Peninsula Hotel in Beverly Hills has long been a luxurious hot spot for Hollywood machers, who hash out movie deals over single-malt whiskeys. On a chilly-for-L.A. January afternoon (65 degrees), most of the people in the hotel\u2019s rooftop caf\u00e9 are bundled up in puffy jackets under heat lamps. But not Roham Gharegoz\u00adlou, cofounder and CEO of Dapper Labs<\/a>\u2014the company behind the NFT phenomena CryptoKitties and NBA Top Shot<\/a>\u2014who\u2019s in a light pastel hoodie and jeans. The Iranian-born Vancouver resident is here\u2014amid a COVID surge\u2014for the same reason as everyone else: He\u2019s scouting for talent, anyone who\u2019s interested in creating new and exciting blockchain applications for the masses.<\/p>\n \u201cIn Silicon Valley, everyone\u2019s working for these large Web 2.0 platforms [e.g., Facebook]; whereas here, nobody\u2019s really satisfied with how things are. And so the vision of a new way to do things is inspiring,\u201d he says, with a grin. \u201cWe\u2019re putting power back in the hands of creators. That\u2019s the mission, and that\u2019s why I\u2019m here.\u201d<\/p>\n Creators are drawn to Dapper because of its reputation for breaking down the complicated, intimidating world of Web3 (the loosely defined effort to build the next phase of the internet, grounded in principles of decentralization and ownership). The company, which makes and markets nonfungible tokens, created NBA Top Shot\u2014virtual trading cards featuring basketball video highlights\u2014and helped turn 2021 into the year of the NFT. Dapper last year generated $100 million in revenue from NBA Top Shot, which introduced the idea of collecting scarce digital assets to millions of people.<\/p>\n<\/div>\n The company\u2019s early success is the product of Gharegozlou\u2019s vision and patient approach in an otherwise frenetic sector. Conversations with the NBA started in 2018 and were finalized a year later. Top Shot didn\u2019t open up to the public until October 2020. During all that time, Dapper was building its Flow blockchain to handle transactions speedily and its own crypto wallet to facilitate credit card payments, which had never been done before. When Top Shot finally launched, it made NFTs feel accessible to even the noncrypto crowd. \u201cTwo years ago, you felt you needed a PhD in physics to figure out how to create a wallet and purchase an NFT,\u201d says Chris Jacquemin, head of digital strategy at talent agency WME. \u201cDapper successfully crossed NFTs into the lexicon.\u201d<\/p>\n In what has now become crypto lore, when CryptoKitties launched in 2017\u2014by Axiom Zen, Gharegozlou\u2019s pre-Dapper crypto company\u2014it crashed Ethereum. As it turned out, a game that allowed users to buy, trade, and \u201cbreed\u201d NFT cats, couldn\u2019t scale that quickly without clogging the platform. Worse, even though the game\u2019s popularity drove revenue\u2014it made $40 million its first year, with one cat selling for $170,000\u2014the number of people actually engaging, as opposed to just checking it out, was minuscule, due to the intricacies of cryptocurrency. \u201cWe were seeing close to a 2% conversion rate from someone clicking on \u201cI want this cat\u201d to being able to buy the cat,\u201d says Mik Naayem, a Dapper cofounder and its chief business officer, who looks like a soccer player with his athletic build and wild, dark curls pulled back in a headband. Naayem met Gharegozlou at a bilingual high school in Paris before heading off to Columbia University (Gharegozlou went to Stanford).<\/p>\n Based on CryptoKitties, Gharegozlou and company could easily have cashed out in an initial coin offering (ICO), which Naayem says crossed everyone\u2019s mind. Instead, in 2018, Dapper Labs was formed with the mission to build not just NFT games and apps, but also blockchain tools. All of it would be built around the premise of being easier to use than existing apps and platforms. Leading the tech behind the scenes was Dapper\u2019s CTO Dieter Shirley, a chatty, goateed engineer, who first coined the term \u201cnonfungible\u201d token and wrote the ERC-721 protocol, which became the standard contract for NFTs. That effectively made Dapper the birthplace of the NFT movement.<\/p>\n<\/div>\n There was nothing intuitive about the timing of NBA Top Shot. Back in 2018, crypto fell into what came to be known as its \u201cwinter,\u201d as ICO scams and the steep decline in the price of Bitcoin diminished its mainstream appeal. \u201cRoham gave a TED talk<\/a> about NFTs four years ago when the concept sounded crazy to everyone else,\u201d says Chris Dixon, a partner at Andreessen Horowitz, which has backed Dapper since 2018. \u201cI think people sometimes discount the vision that Roham has had,\u201d adds longtime digital innovator Trevor McFedries, who created the tokenized community Friends With Benefits in 2020 and sold his other startup, Brud, to Dapper in 2021. \u201cHis idea is that most things in life are nonfungible,\u201d says McFedries. \u201cRoham saw that and stayed the course, through winter and capital running away, through people calling this thing and saying it was dead.\u201d<\/p>\n Negotiations with the NBA, meanwhile, dragged on for a year as both sides tried to marry the\u2014in many ways, incongruous\u2014idea of taking one of the world\u2019s most iconic, and protected, brands and opening it up to a world in which any person on the street could effectively own a piece of it. The slow pace was also a result of Dapper\u2019s deliberateness with products. It has never rushed to market for the sake of cashing in on a trend. Great focus was put on market research and gathering data\u2014something that persists to this day.<\/p>\n What brought the two sides together was their shared belief in making Top Shot easy to use. \u201cOur main concern was really ensuring that the product was accessible,\u201d says Adrienne O\u2019Keefe, the NBA\u2019s VP of global partnerships and media. To that end, the words \u201cblockchain\u201d and \u201cNFT\u201d did not initially appear on any onboarding steps. And Dapper debuted the Dapper Wallet, which allows people to buy NFTs with their credit cards.<\/p>\n<\/div>\n Gharegozlou calls the credit-card decision \u201ctable stakes.\u201d The real heart of Top Shot is the experience of opening packs of video cards and delighting in their contents. Dapper obsessed over refining the experience. During the process of purchasing an NBA Top Shot video pack, the company created an exciting, even joyful, feeling that closely mirrors the fun of ripping open a pack of trading cards (with \u201cBlockchain\u201d and \u201cNFT\u201d nowhere in sight). Dapper also learned from a generation of digital natives, such as YouTube and TikTok influencers, who wow fans by unboxing \u201chauls\u201d of makeup or toys. \u201cWe looked at where people were spending their time,\u201d Gharegoz\u00adlou says. They noted the popularity of watching users open packs of extra players and soccer kits on games like FIFA Ultimate Team, as well as how people were gravitating to digital communities where they had skin in the game, such as stock trading.<\/p>\n By the time Top Shot launched in closed beta, in May 2020, the world had been overturned by the pandemic, and the NBA had suspended its season. Gharegozlou calls the period his \u201cdarkest moment.\u201d What he wasn\u2019t considering was the suddenly stuck-at-home audience looking for things to do, nor how quickly things would evolve. By October, when it opened up the beta to everyone, the league was playing in the bubble in Orlando in prep for its new season, which kicked off in December. The combination of at-home audiences and NBA excitement led to an explosion of interest in Top Shot. By January 2021, sign-ups jumped from 4,000 to 400,000, sending Dapper into frenzied-scale mode. \u201cWe had one person working on customer support, one person working on doing identity verification,\u201d says Gharegozlou. \u201cWe had to 100x the team.\u201d<\/p>\n NFT fever was officially underway. In March, art by Beeple went for $69 million in a Christie\u2019s auction. In August, a LeBron James Moment went for $387,600. Things tapered off, though, toward the end of the year as newer products centered around avatars (Bored Ape Yacht Club) and games (Axie Infinity<\/em>) entered the more saturated market. Sales of Top Shot Moments on secondary markets soared to about $200 million a month in February and March 2021, before settling down to between $20 million and $40 million a month by the end of the year, according to Mason Nystrom, an analyst for the crypto research firm Messari. \u201cThat\u2019s by no means nothing, considering they take a royalty,\u201d he says. (Dapper takes a 5% fee from secondary sales, which it splits with the NBA and the Players Association.)<\/p>\n<\/div>\n Unlike other trendy NFT projects, Dapper\u2019s partnership with a perennially loved brand like the NBA makes Top Shot an evergreen prospect. As the 2021\u20132022 NBA season gathered steam, secondary sales rose 72% in the first three weeks of January, according to the analyst CryptoSlam, fueled in part by a new ad campaign featuring Kevin Durant. Later this year, a mobile app will launch, and Dapper and the NBA are working on adding more game-like and fantasy-sports elements. \u201cWe\u2019re going to start getting a lot more active about promoting Top Shot as a kind of web experience,\u201d Gharegozlou says. \u201cThrough the players and through influencers, through paid media, through doing more television stuff and just, in general, testing. We want to go mainstream with a lot of the product that\u2019s been currently built before there\u2019s even a mobile app.\u201d<\/p>\n
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