Cryptocurrencies and Initial Coin Offerings (ICOs) have caught attention of the mainstream media last year, helping bring more people to the new wave of decentralized computing, and well, decentralized money. The venture capital (VC) industry played a role in this, helping startups set up their operations and proceed to grow.
Sure, some companies decided to crowdfund their projects with ICOs, but for other – they were looking for the “good ol'” VC money and advice, which could bring their businesses to the next level.
This is the story about VC investments in the blockchain and crypto space.
VCs don’t give up on the industry
Despite the sharp fall of the price of Bitcoin and government’s willingness to add put some regulation in place, the VCs kept backing the industry. In fact, 2018’s venture fundraising totals alone are over 40 percent of the way to 2017’s high water mark, according to Crunchbase data. And that’s only around two months since the start of the year!
Like any other tech investments, those made in decentralized computing companies come with risk, which is arguably higher in this space than in others. The lack of regulation, however, hasn’t stopped VCs from “doing their thing,” with most of them having nothing against buying equity during the dip. Quite the contrary.
Crunching the numbers
In order to get to these insights, Crunchbase went through its vast database of companies to identify those in bitcoin, Ethereum, blockchain, cryptocurrency, and virtual currency categories; as well as those with keywords such as “digital currency” and “utility token.” After some de-duplication and more work, they ended with a dataset of just over 2,900 blockchain and blockchain-adjacent organizations that were used in the analysis.
As we noted above, despite ICOs – many companies are still willing to get to the VC office for a talk, and an eventual funding round.
Last year, the biggest deals were those made by Coinbase ($108.1 million Series D), Chinese ASIC chip manufacturer Canaan Creative ($43.45M), and by the multisignature bitcoin wallet provider BitGo ($42.5M Series B).
In comparison, 2018 started with a $75 million Series B closed by secure hardware wallet-maker Ledger, $18 million invested in the seed round of Russian blockchain-for-cargo-tracking platform QUASA, and $10 million invested in SF-based Harbor Platform, among other large rounds.
Diverse investors, global reach
Crunchbase has also found that among investors putting money in blockchain- and crypto-based companies are both investors and generalist accelerator programs, like TechStars and Plug and Play. The report goes on to suggest that for every Andreessen Horowitz on the list, there are several more vertical-specific venture firms that have seemingly gone all-in on blockchain technology. These include the likes of Digital Currency Group, Blockchain Capital, Node Capital, Medici Ventures, Digital Finance Group, and Polychain Capital.
In addition, the findings show several global hotspots for the blockchain technology. In addition to the U.S. — which is unsurprisingly leading the way — a small but growing percentage of companies are choosing to locate themselves in countries with friendly attitudes toward blockchain and cryptocurrency innovation.
The two that stand out here are Singapore and Switzerland, each of which are home to (at least) four percent of the startups that raised venture funding over the last fourteen months. Also, Hong Kong is also emerging as a “good place to be” for Chinese firms leaving that country in the wake of regulatory crackdown; and so do Japan and Malaysia…
So what this information tells? For one, we reaffirm our belief that blockchain is here to stay, and that 2018 will likely become the new record-breaking year for all parties involved in decentralized computing. Good days ahead…