(Bloomberg) — Mark Shininger is a like a lot of millennials who played with Pokémon cards during grade school. He traded the collectibles with his friends and competed with his brothers for the shiniest, most powerful characters—until eventually he tired of the hobby, stowed the cards neatly in boxes and grew up.
Then last year as the pandemic wore on, Shininger began hearing about vintage Pokémon card sales, sometimes reaching into the hundreds of thousands of dollars. So the 24-year-old mechanical engineer from Random Lake, Wisconsin, dug up his old collection of Pikachus and Charmanders. He logged the creatures into a spreadsheet and turned his childhood passion into a $4,500 side hustle.
“I kept them because I thought one day these might be worth something,” he said. “I was right.”
A lot of twenty- and thirty-somethings are coming to a similar realization. Fueled by nostalgia, new ways to sell online and a surplus of free time during the pandemic, the value of certain Pokémon cards has skyrocketed in recent months. In 2020 overall trading card sales climbed a record 142% on EBay, and Pokémon led the pack, averaging five card sales a minute—more than even baseball cards. That momentum has continued into this year. EBay listings of Pokémon cards were up 1,046% in the first quarter.
The new Pokémon gold rush has fueled a mini-explosion of entrepreneurial activity. Individual collectors like Shininger have been able to make a small killing selling cards online—even as Target Corp. suspended sales of packs after a rash of parking lot thefts. There’s been an influx of business to new platforms that help collectors unload their wares. And authentication services have received too many requests to keep up. One of them, the Certified Collectibles Group, sold a majority stake to Blackstone Group Inc. last week at a $500 million valuation.
Analog Pokémon cards are an unlikely sensation for the internet era. The whimsical franchise, first introduced in 1996 as a pair of video games for Nintendo Co.’s Game Boy, has demonstrated remarkable staying power, bringing in tens of billions of dollars over the decades. Now managed by the Pokémon Co., partly owned by Nintendo, the franchise has been helped along by Pokémon Go, the breakout augmented reality game that’s generated more than $5 billion, including $1 billion in the past year alone, according to estimates by research firm SensorTower. The craze also fits neatly into the larger cultural trends of millennials gravitating toward brands they remember from childhood and an internet-fueled surge in collectibles like non-fungible tokens, or NFTs.
Night Ventures General Partner Ben Mathews believes the “nerdcore collectibles” industry is having a moment. It’s piqued the interest of his firm, the venture capital arm of parent company Night Media, which is seeking to invest in new ventures that tap into the Pokémon influencer zeitgeist. “Give it VC funding and it’s off to the races,” he said.
VCs have already jumped into Pokémon-related deals. Earlier this week, startup Collectbase Inc. raised a funding round led by billionaire Peter Thiel. The company makes software that allows collectors to scan, price, organize and track the value of their card collection, similar to a stock portfolio, and then sell on EBay. The company's mobile app Cardbase started in sports cards and expanded to Pokémon this spring, following months of intensifying requests, said Anas Salem, one of the site's two German founders.
"Pokémon cards are getting crazy in the U.S.” he said, adding that he thinks that a similar mania could soon take hold in Europe, where “the market just needs more tools and education."
In the U.S., live auction startup Whatnot Inc. has raised a total of $75.4 million, and in May was worth more than $500 million, according to data from research firm PitchBook. Whatnot auctions feature personalities specializing in Pokémon, fashion, food and other categories. The result is what one investor, Andreessen Horowitz General Partner Connie Chan, calls “shoptainment.” It’s popular in Asia, she said, and poised to grow in the U.S.
Whatnot increased its gross sales tenfold to more than $100 million during the past year, thanks in large part to homebound Pokémon fans with extra cash. Chief Executive Officer Grant LaFontaine said the overwhelming majority of his site’s users are millennial men with disposable incomes, many of whom used their Covid stimulus checks to buy Pokémon cards. Gross sales on Whatnot spiked between 50% and 100% on the day Covid stimulus checks arrived, according to LaFontaine.
“Overnight the prices doubled or tripled. Influencers move markets.”
Another big boost came when YouTuber Logan Paul started purchasing vintage sealed box sets of Pokémon packs for upwards of $300,000. He then opened them live and auctioned off individual packets for as much as $1 million a pop, creating a ripple effect throughout the Poké-economy. “Overnight the prices doubled or tripled,” LaFontaine said. “Influencers move markets.”
It also helped when Paul wore his $1 million mint-condition Charizard card on a diamond encrusted necklace to his boxing match with Floyd Merriweather.
At trading card site Alt Platform Inc., CEO Leore Avidar said he’s recently seen an “exponential” increase in Pokémon card trading cards, with demand now regularly outstripping supply. Alt has raised $30.7 million from investors to date and was valued at $104 million in March, according to PitchBook data. The startup pitches itself as an investment platform for rare cards, and a few offerings on a recent day ranged from a $275 Charizard to a $25,000 holographic card of Chansey, a kindly Mexican salamander.
“Pokémon has become so hot that it is difficult to keep on the site,” said Avidar, who added that the past three months have been particularly brisk. “Users here are snapping them up as soon as these cards become available.”
If the Pokémon craze continues, new startups will surely join the fray. Night Ventures’s Mathews said his firm is looking to pair YouTuber and Pokémon expert Leonhart with a tech executive and then bankroll their efforts. The result, Mathews said, would be an event-driven site that would be hosted on a soon-to-launch platform called Rare Candy.
Leonhart, a former attorney whose real name is Lee Steinfeld, said he already makes about double his lawyer salary by streaming Pokémon events on YouTube, and he’s eager to expand his platform to auctions. One of his more famous clips from last year features him opening a first edition pack and pulling out a holographic Charizard card valued at $55,000. The video garnered 2.2 million views.
But what goes up must come down, and some fear that the surge in demand for Pokémon could eventually turn into a glut in supply. Right now, the number of professionally authenticated cards is artificially low. That’s because the major companies evaluating Pokémon cards were overwhelmed with submissions from homebound customers during the pandemic. Certified Collectibles Group has been racing to keep up, and Professional Sports Authenticator suspended accepting new cards in March while it rented more space, hired hundreds of new workers and tackled the backlog. Beckett Grading suspended normal operations in June.
Authentication companies determine the value of a card based on its rarity, picture clarity, placement and other factors, with the best cards earning a grade 10 and the poorest a 1. While ungraded cards can still have value, earning a rating from a certified group acts as a multiplier. Once the authenticators come back online with expanded capacity, the new supply will hit the Pokémon card resale market and could potentially upend it. “Going from a population of 50 to 300 can really crater the value” for individual owners of those cards, said Whatnot’s LaFontaine.
For some collectors, though, it’s not all about the money. Shininger put the proceeds of the cards he’s already sold toward a down payment on a condo. But he’s still holding onto about 100 vintage, high-value cards in a special binder and has no immediate plans to sell them.
“It’s a lot of sentimental nostalgia,” he said. “It reminds me of my childhood.”
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