Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
Investment Trends
in Review
This report will explore how various forces have shaped the current
blockchain landscape. Specifically, we’ll take a data-driven look at
venture, corporate, and initial coin offering investment trends,
and offer some insights into blockchain’s immediate future. (Note
that blockchain is the term we’ll use as a catch-all encompassing
this ecosystem.)
I
Table of
Contents
II
Report Initial Coin Offerings
Initial coin offerings have raised more than $2B in 2017 YTD.
Highlights
More than 250 ICOs have taken place since January 2016,
with total ICO deals and funding increasing at a faster clip than
traditional equity deals and dollars.
Corporate Investment
Corporate investment is set to rise in 2017. The number of unique
active corporate investors has hit a high of 91 in 2017 YTD, and
is closing in on the number of active venture capital investors
participating in equity financings.
III
Initial Coin We define initial coin offerings as sales of tokens or coins
offered by blockchain companies looking to raise funds, typically
denominated in major “gateway coins” bitcoin and ethereum.
Offerings Tokens are subsequently traded on cryptocurrency exchanges, and
rise or fall in value nominally based on the company’s projected
product, consumer traction, and/or speculation.
1
On a quarterly basis, total funding raised by ICOs surpassed
total funding raised via traditional equity financing for the first
time in Q2’17. This trend continued in Q3’17, with total equity
funding to blockchain companies staying more or less stagnant
quarter-over-quarter as their ICO counterparts grew 75% over the
same period.
2
Over-Capitalization
Importantly, teams holding ICOs are adamant that they do not
represent securities offerings — which would put them on the
wrong side of the law — and instead market their coins or tokens
as part of an entirely new asset class altogether.
3
Token logic notwithstanding, many of these companies could run
the risk of mismanagement after receiving such large sums in
such a short time.
In Q3’17, all tech angel and seed deals totaled $1.4B, while ICOs
totaled roughly $1.3B. In the same quarter, tech angel and seed
deals hit 1,600+, while the number of ICOs rose to about 150.
4
5
Venture & Equity Venture investing has shifted over time, with VCs first backing
companies exploring bitcoin as currency, then focusing on private
Investment
blockchain providers catering to financial services and other
verticals, and today investing in the token economy.
Trends
Continuing roadblocks in the sector include cryptocurrency
price volatility, regulatory setbacks — such as New York’s 2015
BitLicense — and scaling issues.
VC Funding Trends
The recent boom in cryptocurrencies and ICOs has had a material
effect on the number of blockchain teams looking for financing,
with traditional equity deals on track to set a new record of 188 in
2017, up from 138 in 2016.
The growth rate for equity deals and VC-backed deals is slower
than the growth rate of ICOs. The highest annual growth for
total VC-backed deals came in 2014, when deals grew 180%
year-over-year.
6
Taking a closer look at deal share by stage, traditional equity
investment to the sector seems to be maturing, with seed / angel
equity deals decreasing to 50% of the total in 2017 YTD, down
from 57% in 2016 and 72% in 2015. Meanwhile the proportion of
later-stage deals (Series D and later) this year is staying consistent
with 2016 figures.
At the same time, given that ICOs currently account for the vast
majority of blockchain seed deals, the sector is seeing a substan-
tial uptick in seed-stage companies that are not represented in
equity financing data.
7
Notable later-stage equity deals in 2017 include Coinbase’s $100M
Series D, Blockchain’s $40M Series B (with participation from
Digital Currency Group, Google Ventures, Lightspeed Ventures, and
Mosaic Group, among others), and Bitfury’s $30M Series C, backed
by China Credit Limited Holdings.
8
In comparison, of 1,098 tech companies we tracked that raised
seed rounds in the US in 2008 – 2010, 46% raised a second round
of funding. An additional 14% went on to raise a fourth round of
funding, versus blockchain’s 2%.
9
VC Investor Trends
Looking at VCs and investments, the number of active VCs with at
least one blockchain investment in a given year has hit 95 in 2017
YTD, setting them on pace to hit 120 by the end of the year. This
suggests VCs are showing renewed interest in the sector, after
dropping steeply in 2016.
Digital Currency Group leads the list of top VCs by total blockchain
portfolio companies, making well over 100 investments to 75+
blockchain companies. This includes investments in 3 of the 5 most
well-funded companies in the space: Coinbase, Circle, and Ripple.
10
Other blockchain companies on the most well-funded list are
Bitmain and Canaan, which focus on cryptocurrency mining, and
21 Inc. and BitFury, which have pivoted away from mining to offer
other services.
Investments by Category
VC investment in blockchain can be loosely categorized
into 5 areas:
11
1. Cryptocurrencies & ICOs
Polychain Capital and MetaStable Capital are two such funds that
have received lots of attention from venture investors. MetaStable
has received investments from Sequoia Capital, Union Square
Ventures, and Founders Fund, while Polychain has received
investments from Andreessen Horowitz and Union Square
Ventures, among others.
2. Bitcoin-Correlated Investments
12
3. Payments & Remittance
13
Indeed, many portfolio companies that focused on payments
have pivoted.
14
4. Alternative Use Cases
15
5. Private Blockchains
16
Corporate Corporate investors have traditionally invested into private
blockchains and joined consortia, but they are increasingly starting
to experiment with public blockchains like Ethereum.
Investment More corporates are starting to invest in the sector, with the
Trends
number of active corporate investors rising to a new high of 91 in
2017 YTD. This number had fallen in 2016, following a 2015 high of
89 (which was largely due to R3’s Q4’15 consortium-building round,
which saw participation from 35+ financial institutions). Notably,
the number of active corporate investors is closing in on the same
metric for VCs, which has seen 95 active investors in 2017 YTD.
17
Corporate Investment Trends
Since 2012, corporates have participated in 140+ equity
investments totaling nearly $1.2B. Corporates have been active
investors in the sector’s most well-funded companies, participating
in multiple rounds to companies including Coinbase, 21, and Circle.
18
Overstock.com CEO Patrick Byrne is an outspoken blockchain
advocate and has built out an internal blockchain venture and
development team, Medici Ventures, to explore the technology. The
firm — which is the third most active corporate investor — recently
announced the launch of T Zero (t0), a blockchain-based trading
platform for capital markets.
19
Financial Services Activity
Big banks and financial services firms were the first corporate
players to make direct blockchain investments en masse —
unsurprising, given how Bitcoin’s underlying technology lends itself
(both technically and in popular thought) to financial services.
Citi has partnered with Nasdaq and used its portfolio company
Chain’s blockchain technology to address liquidity challenges in
private securities transactions, while JP Morgan Chase is partner-
ing with SWIFT on a blockchain proof-of-concept for cross-border
payments (which is also seeing participation from Wells Fargo). JP
Morgan Chase is also working with blockchain developer AMIS to
expand its own in-house blockchain, Quorum.
20
21
Consortia
Consortia fall somewhere between private enterprise blockchains
and public blockchains. In practice, consortia bring select organi-
zations from the same vertical onto a distributed database with
less centralized control than a private blockchain — a cooperative
neutral ground for traditionally competitive companies.
Hyperledger
22
In July 2017, Hyperledger announced a production-ready
blockchain, Fabric 1.0, and in August announced an expanded food
safety trial with Walmart, Unilever, Nestlé, and Dole, among others.
23
The EEA diverges from Hyperledger in its governance. Microsoft
and the EEA plan to utilize the public Ethereum blockchain, and
have little say in its technical development. IBM, Linux, and other
members of Hyperledger’s steering committee, on the other hand,
exert direct control over Hyperledger.
24
Ripple
25
R3
26
Looking As a whole, blockchain is still in its nascent stages.
Venture investors are still looking for real blockchain usage beyond
speculation, as most teams exploring blockchain use-cases have
been hard pressed to find users. This is an immediate requirement
for the sector to mature.
Judging from the data presented in this report, though, the future
seems bright, as investment in blockchain technology evolves in
new and innovative ways. As the landscape evolves, the future of
investment in the space will likely take on forms yet to be imagined.
27