Meta Platforms Inc. — formerly known as Facebook Inc. — Apple Inc. and Microsoft Corp. are all investing heavily in virtual environments known as the metaverse. Those looking to own “real estate” or start businesses related to the metaverse, just like in the real world, often need loans and financial assistance and guidance.
The metaverse is a term that describes a version of online interaction in which traditional messages and video chats are supplemented by virtual scenes and images, giving users opportunities to customize interactions online.
For now, this reality is largely contained inside a headset or on a computer screen, allowing users to experience spaces such as virtual office buildings, shopping malls and event spaces.
Bloomberg Intelligence estimates that the metaverse will be an $800 billion marketing opportunity by 2024. Bloomberg forecasts that the primary market for online game makers and gaming hardware could exceed $400 billion, while live entertainment and social media make up the remainder.
Meta is expected to invest $50 billion in its metaverse in the next few years, developing virtual reality glasses and robotic arms to connect users in the real world to the virtual one.
Small businesses
While the big companies are building the gadgets and the framework for the metaverse, smaller companies are looking for ways to create experiences and sell products to virtual visitors. So how does a company find the funding to invest in a virtual storefront, office building or event space?
Unlike snagging a URL for less than $100 during the early days of the internet, getting started with “land” in the metaverse can currently cost between $20,000 to $40,000, at a minimum. Many entrepreneurs and small-business owners will need loans to stake their claim in this new virtual space.
There will be many legal questions about financing that will arise out of the metaverse. It’s an area of law that has piqued the interest of Tom Ara, partner at DLA Piper, which maintains branches downtown and in Century City.
Ara is advising clients on the future of Web 3.0, or the metaverse. The first iteration of the internet some of us may recall was basic web pages and email. Web 2.0 emerged with the advent of social media.
Ara believes major questions for the third age of the internet revolve around how the metaverse will be governed and how it will be accessed.
“Zoom, Microsoft Teams, those are already a version of the metaverse,” Ara said. But as the space grows and real money gets involved, there will be issues that arise around “how you control it in a legal way.”
This needs to be a safe place for business and consumers.
Brandon Johnson
TerraZero
“People will want to know if there will be connectivity between the metaverses built by different companies,” said Ara. “Will you be able to take your virtual identity across metaverses? Will headsets cross metaverses?”
Many of these questions remain unanswered. Ultimately, Ara observed, “People want to be where their friends are.”
For business entrepreneurs who want to set up shop in the metaverse, it’s currently a gamble as to where their customers will hang out in virtual reality. But for those who want to take a little risk, there are companies out there willing to usher them in.
‘Metaverse mortgages’
In January, Vancouver, British Columbia-based TerraZero Technologies Inc., which has a U.S. subsidiary in Century City, announced that it completed one of the first-ever “metaverse mortgages” with one of its clients in an Ethereum-based metaverse platform called Decentraland.
How does it work? Prospective clients can go online to the TerraZero platform, explore offerings and listings, including land size, location and applicable prefabrication build elements in their metaverse of choice.
“We don’t lend for speculation,” Dan Reitzik, chief executive and founder of TerraZero, told the Business Journal. “It’s more of a small-business loan.”
Reitzik explained that their first metaverse mortgage client told him, “This is what I’m going to build and this is how I’m going to make money.”
When a client signs the mortgage contract, the land NFT (nonfungible token) is held with TerraZero as the registered owner until the loan is paid back based on the agreed-upon terms.
TerraZero grants the client deployment rights, so the client can build in the metaverse, organize events, run digital storefronts or host an internal company office. Clients make monthly payments until the mortgage is paid off, and then the NFT is fully transferred to
the client.
TerraZero did not disclose how much the client paid on a down payment nor the interest rate, but did note that it was a two-year mortgage.
Currently, any user can connect a crypto wallet to the Decentraland app and visit the world to look around for investment opportunities. The world is populated with music venues, parks and casinos.
Property in metaverses is finite and, much like cryptocurrency, there is only so much that can be issued, so there is value in its scarcity. However, there is no limit to the number of metaverses that can be built. Both crypto and NFTs are volatile assets, but in certain circumstances have proven to be very lucrative. Investors and major companies like Nike Inc. and Sotheby’s have been seeing some success with NFT sales and the metaverse.
At the moment, the metaverse works on cryptocurrency.
“In reality, 98% of consumers have never had a crypto wallet,” Brandon Johnson, chief experience officer at TerraZero, said.
He noted that there will need to be a way for consumers to use their regular credit cards to encourage wider adoption of money spending in the metaverse.
“This needs to be a safe place for businesses and consumers,” said Johnson.
