ICO Boom Fades While VC Investment In Crypto Startups Jumps 280% In 2018
The total funding of initial coin offerings (ICOs) raised in September 2018 tumbled further to hit a low of $180 million, just 7% of the peak. During this time, venture capital investment in blockchain-focused startups has increased nearly 300% when compared to 2017.
The total funding of initial coin offerings (ICOs) raised in September 2018 tumbled further to hit a low of $180 million, just 7% of the peak. That pales in comparison to the $2.6 billion raised in February or the $2 billion in May.
During this time, venture capital investment in blockchain-focused startups has increased nearly 300% when compared to 2017.
Venture capital investment on the rise
The number of deals has also reduced drastically from a peak of 85 to just 16 last month, with concerns about the regulatory environment and crypto markets suffering huge losses contributing to the supposed ICO death.
Despite the stagnant year for the crypto market, the contrast between ICO crowdfunding and traditional venture capital investments can’t be bigger. While token sales have plummeted over this year, the VC landscape has been on the upsurge.
According to the latest report from the blockchain research firm Diar, startups in the blockchain and cryptocurrency industry have managed to raise close to $3.9 billion through venture capital investments.
These figures represent the approximate amounts raised in the first nine months (or Q1 through to Q3) of 2018. Percentage-wise that represents an increase of about 280% over the amount raised in the whole of last year.
Poor ICO performance shakes investor trust
PitchBook, a company that provides financial data about VCs, reports that there were more blockchain and cryptocurrency-focused VC deals this year than in any other since 2013. Comparatively, this year’s deal count of close to 400 is nearly double that recorded last year.
The report also shows that the increase in the number of VC deals has occurred alongside a gradual increase in the average size of investment or money put into crypto and blockchain investments.
Companies in the crypto industry are also raising much more than last year. On average, a crypto VC was raising $1.5 million. That number has nearly doubled to $2.5 million for 2018.
Diar also reports that each of the ten blockchain-based firms and crypto startups that make up largest VC investments of 2018 raised a total of over $1.3 billion venture capital.
Only one of these top ten firms (DFINITY) has a native utility token. The rest of the companies represent traditional equity investments.
The spike in VC investments is being attributed to the poor performance of ICO tokens, with over 70 percent of them currently valued much lower than at the time of the token sale.
The report also indicates that most tokens have lost over 90 percent of their value since hitting an all-time high.
Diar reveals that the most active venture capital investor is Digital Currency Group, owned by billionaire Barry Silbert. DCG has closed over 110 deals in the crypto industry, while Blockchain Capital and Pantera Capital are second with a combined 100 deals.
Among the traditional VC firms, the most active are Andreessen Horowitz, Future Perfect Ventures, and Danhua Capital.
Additionally, the report names Tim Draper, Roger Ver, Naval Ravikant, and Barry Silbert as the most active angel investors in the industry today.
The U.S. leads as the most active country in VC investments with 79 percent, while China comes a distant second with 12 percent. South Korea and Singapore are third and fourth with 2 percent each.