3 Ways Entrepreneurs Can Expand Their Financial Portfolio Using NFTs NFTs are the way of the future, and it's important for entrepreneurs to diversify their holdings.
By Ashley Armstrong Edited by Ryan Droste
Opinions expressed by Entrepreneur contributors are their own.
Entrepreneurship is a risky business. In fact, 90% of all startups fail within 10 years, but that doesn't stop those who want to chase their dream of becoming their own boss. Without risk there can't be any substantial gain.
The problem is that inexperienced entrepreneurs often make the mistake of putting all of their money into a single asset, and should that asset fail, they will lose it all. This is especially true for startups as they require consistent reinvesting into the business to help it grow.
How can you have your company stand out from the rest and avoid failure?
Entrepreneurship is an investment, and the best investors understand you never place all of your eggs into one basket. Success comes from diversifying your financial portfolio so that if one investment fails, you still have others to rely on which can help you begin a new project.
As an entrepreneur, you still want your investments to help your company grow. One such way to do so is by investing in NFTs (non-fungible tokens) as they not only diversify your financial portfolio, but they can also help your company get recognized and become a household name. A win-win situation.
NFT investing for exclusivity
Everything that a brand sells is meant to be an exclusive for their valued customers, a one-of-a-kind item not available through competition. However, providing a truly exclusive item can become a difficult endeavor when competing with a multitude of similar items, counterfeits and copycats out there who are ready and willing to take your one-a-kind idea and make it their own.
The very definition of an NFT is non-fungible — this refers to an asset that is solely unique with no other asset holding equal value. By attaching an NFT to your product or brand, you make it truly exclusive to your consumer as there is nothing else like it out there.
Using the power and reach of the internet, brands can increase their exclusivity by selling personalized digital items (NFTs) such as digital artwork, tweets, TikTok videos and more, allowing them to craft a one-of-a-kind digital connection with their consumers.
This does not only apply to digital companies as even physical product companies like Taco Bell and Charmin are finding ways to increase their exclusivity with NFTs by incorporating digital assets into their product lines. Charmin released a collection of digital toilet paper on March 17, 2021, dubbed NFTP (Non-fungible Toilet Paper) with all proceeds supporting the Direct Relief charity. Taco Bell partnered with NFT marketplace Rarible on March 7, 2021 to mint 25 digital art pieces that were each labeled as a "transformative taco" with the owner of an original NFT receiving a $500 Taco Bell gift card to spend at any location.
Both companies listed above, along with several others, are using NFTs to reach their consumers in the digital space. This increases their brand awareness across all platforms. Increased brand awareness leads to increased recognition and, of course, sales — which is what every entrepreneur strives for.
Related: 3 Strategies Entrepreneurs Can Incorporate to Build Brand Awareness
Potential for passive revenue stream
NFT sales can currently range anywhere from 15,000 to 50,000 NFTs per week, according to data collected by NonFungible.com. This may have led you to believe they are only a one-time revenue boost, with each sale causing you to reinvest in new NFTs to continue creating revenue.
However, NFTs have the potential to also create a passive income for your company and/or business due to their underlying technology which allows for options that go beyond simply selling for a profit.
Some examples of how to use NFTs to generate passive income:
NFT Royalties. As an entrepreneur, you are probably familiar with and may even already implement the use of royalties in your business model. To put it plainly, one person pays another for the right to use and sell the product. This can apply to physical products, technology, intellectual property and even resources.
With the technology behind NFTs, the creator can set individual terms that impose royalty fees whenever their NFTs change hands on the secondary market, thereby creating a passive income beyond the original sale.
For example, the creator could set an indefinite royalty fee of 5%. Upon the original sale of the NFT, and each and every time the digital artwork is resold, the creator will receive 5% of the sale price.
Due to the nature of digital transactions surrounding NFTs, creators use self-executing computer programs that auto enforce contractual agreements. This allows the creator to avoid the legal process of enforcing and tracking royalty contracts, as well as the manual tracking of payments, as the process is fully automated.
By creating an NFT for your business or organization, you can create a passive income through the use of royalties that is totally automated. This allows you to focus on other aspects of your business that require your attention.
NFT Renting. NFT rentals are a relatively new concept that is gaining momentum as a passive income stream for NFT owners. Using blockchain protocols, owners and creators of NFTs can rent out their digital artwork to interested parties for a set period of time and price while ensuring that they do not lose ownership of their assets.
The reasoning behind someone being willing to rent an NFT is vast and includes everything from the inability to afford a valuable NFT to wanting to show off the latest trend as their profile pic on social media. Museums and art galleries are also recognizing the value behind digital art, and rentals can encourage creators of NFTs to feel more comfortable serving these venues.
NFTs are also becoming a go-to for businesses and organizations to use as early access tokens, exclusive content, merchandising and concert events as they require an individual to hold an NFT in order to gain access to the above. Someone may be more interested in renting an NFT to receive early access or to gain entry to an exclusive concert instead of purchasing one outright.
Entrepreneurs who are looking to expand their portfolio into assets that have the potential to yield a passive income should consider the options available through renting NFTs.
Related: 17 Passive Income Ideas for Increasing Your Cash Flow
NFT investment for charitable and humanitarian goals
With more entrepreneurs and businesses wanting to make a positive difference in the world around us, NFTs are fast becoming a reliable and trendy way of raising funds for charitable organizations and social projects.
This allows the entrepreneur/business to increase their brand recognition by supporting worthwhile causes, increases public awareness of how that organization is committed to making positive change, and allows for a charitable-donation tax deduction for a business.
All of the above can work to increase overall revenue streams, which of course is an entrepreneur's ultimate goal.
Related: This Is Why It Pays to Be Charitable Year Round
There are several opportunities for entrepreneurs to diversify their portfolios while expanding their brand name, increasing both passive and immediate income streams. Remember that keeping all your eggs in one basket is a risky endeavor, so consider investigating how NFTs may help expand your financial portfolio today.
