What Happened to Formfunction & Why Did It Fail?

Formfunction was a Solana-based NFT marketplace where users could create and collect digital art. Launched in February 2022, it raised $4.7 million and conducted $5 million in sales. However, amid a slump in Solana NFT prices and trading volumes, Formfunction announced its closure in March 2023 after just 13 months of operation.

What Was Formfunction?

Formfunction operated a Solana NFT marketplace, enabling users to create and collect digital art. Its unique value proposition lay in its focus on the Solana blockchain, achieving $5 million in sales within 13 months. Notably, it raised $4.7 million in funding and was featured in CB Insights' Blockchain collection.

What Happened to Formfunction?

The story of Formfunction's rise and fall is a compelling narrative of rapid growth followed by unforeseen challenges:

• Initial Success and Funding: Formfunction managed to conduct $5 million in sales within just 13 months of its launch. The platform also raised $4.7 million in a seed round led by Variant Fund and other venture capital firms, showcasing strong initial investor confidence.
• Market Traction Despite Challenges: Despite operating in a bear market, Formfunction achieved significant traction in the NFT space. This early success was driven by its focus on the Solana blockchain, which initially attracted a dedicated user base.
• Downturn in Solana NFT Market: The broader Solana NFT market experienced a significant downturn, with a 75% price drawdown in blue-chip NFTs. This decline in prices and trading volumes severely impacted Formfunction's operations.
• Impact of FTX Collapse: The collapse of FTX in November 2022 exacerbated the situation by causing a sharp drop in the price of Solana (SOL). This further strained the platform's ability to sustain its business model.
• Migration of Major Projects: Notable Solana-native NFT collections like DeGods and y00ts announced plans to move to other blockchains such as Ethereum and Polygon. This migration highlighted the challenges within the Solana ecosystem and contributed to Formfunction's decision to shut down.

When Did Formfunction Shut Down?

Formfunction announced on March 15, 2023, that it would shut down on March 29, 2023. The decision came after much discussion and careful consideration, reflecting broader challenges in the Solana NFT market.

Why Did Formfunction Shut Down?

1. Slump in Solana NFT Prices:

   The broader Solana NFT market experienced a significant downturn, with a 75% price drawdown in blue-chip NFTs since early 2022. This decline in prices severely impacted Formfunction's ability to sustain its business model, leading to decreased revenue and operational challenges.

2. Decrease in Unique Buyers:

   The daily number of unique buyers of Solana NFTs dropped significantly, hovering around 7,000, almost half the amount seen at the start of 2022. This reduction in active users further strained Formfunction's marketplace, making it difficult to maintain a vibrant trading environment.

3. Collapse of FTX:

   The collapse of FTX in November 2022 exacerbated the situation by causing a sharp drop in the price of Solana (SOL). The price of SOL fell over 80% since the start of 2022, adding financial pressure on Formfunction and its user base.

4. Migration of Major Projects:

   Notable Solana-native NFT collections like DeGods and y00ts announced plans to move to other blockchains such as Ethereum and Polygon. This migration highlighted the challenges within the Solana ecosystem and contributed to Formfunction's decision to shut down.

5. Pivot by Founders:

   Formfunction's cofounders and team decided to pivot to a new direction, likely outside the crypto and Solana space. This strategic shift was influenced by the broader market conditions and the challenges faced by the platform, as noted by the head of community and marketing, Magellan.

Lessons Learned from Formfunction's Failure

• Market Volatility: Be prepared for market fluctuations and have contingency plans to navigate downturns effectively.
• Diversification: Avoid over-reliance on a single blockchain or market segment to mitigate risks.
• User Engagement: Maintain a strong, active user base to ensure a vibrant marketplace.
• Adaptability: Be ready to pivot quickly in response to market changes and emerging trends.
• Financial Resilience: Ensure robust financial health to withstand external shocks and sustain operations.
• Strategic Partnerships: Forge alliances with other projects and platforms to enhance ecosystem stability.
• Community Focus: Prioritize community building to foster loyalty and long-term engagement.
• Innovation: Continuously innovate to stay ahead of competitors and attract new users.

We Shut Down Startups

Formfunction's closure underscores the complexities and challenges startups face in volatile markets. If you're navigating a similar situation, Sunset can help you manage the legal, tax, and operational burdens of winding down your startup.

Don't let the stress of shutting down overwhelm you. Book a demo with Sunset today to ensure a smooth and compliant exit, allowing you to focus on your next venture.