As the crypto industry sees a decline in initial coin offerings (ICOs) amid regulatory concerns and major losses across token markets, traditional VC investment is once more on the rise.
In its latest report, blockchain research group Diar reports that blockchain and cryptocurrency-focused startups have raised nearly $3.9 billion through VC investments in the first three quarters of the year – that up 280 percent when compared to the whole of 2017, it says.
Based on data from Pitchbook, the report indicates that number of deals also nearly doubled this year.
VC investment in blockchain/crypto (Source: Diar/Pitchbook)Alongside the increase in VC deals, the average size of crypto and blockchain investments has increased by over $1 million in 2018. Ten of the largest blockchain and crypto investments in 2018 saw the recipient companies raise more than $1.3 billion in total venture capital. While one of the firms has a native token (DFINITY), the rest represent equity investment, says Diar.
Median VC investment in blockchain/crypto (Source Diar/Pitchbook)Explaining why it believes VC has seen a sudden spike in popularity among startups seeking funding, Diar says that 70 percent of ICO tokens are now valued lower than during their respective sales. Further, “the majority of tokens have dropped in price by more than 90 percent from their all time highs,” it said.
The research company also cites regulation and issues with the ICO projects themselves as further reasons for a drop in popularity of token-based fundraising, saying:
“Non-equity ICOs are not only scrutinized by the regulators but the founders also have very misaligned incentives as there is no contractual obligation to deliver a product – a reality that to date seems to be the case with few launches, and even less adoption.”
The amount being raised through ICOs, as well as the number of projects successfully completing token sales, “is now approaching a one year low,” according to the report.
Dollars image via Shutterstock