Blockchain Investment Trends (1H 2019)

  • TeqAtlas
  • Aug 1, 2019
  • Research

There are some barriers to more significant investment in blockchain technology worldwide. According to the insights we have received while conducting the research on Emerging Technologies adoption by SMEs, the main challenge companies face with emerging technologies is the lack of knowledge. Most of the blockchain companies have just entered the market, however, they have a substantial potential to disrupt it, which makes them an attractive investment target.

We have analyzed around 2.5k Blockchain companies backed by 1.8k investors through 2.5k conventional and alternative funding instruments to determine distinctive Blockchain investment trends (like TGEs, IEO Launchpads) as well as to understand what type of investors are interested in Blockchain adoption.

Investors still see Blockchain startups as a high-margin investment

From 2014 to 1st half of 2019 Conventional fundraising and Token Generation Events combined amounted to $32.3B funding into Blockchain sector worldwide. It can be seen that after 4 consecutive years of growth and record yearly funding of $15B in 2018, the value of capital raised during TGEs has since decreased to $2B in 1H 2019. Nonetheless, it's still twice more than the traditional funding total value during the same period ($1.2B in 1H 2019). The total value of venture capital investments has noted a steady upward trend during the period under observation, reaching a value of approximately $9.2B.

Total Capital Invested to Blockchain Firms

Deal activity for Blockchain companies

In terms of the deal activity, the total number of investment rounds into Blockchain companies reached 478 transactions in 2017, 910 in 2018, and 268 during the first half of 2019. Interesting though, the total number of traditional funding rounds (including private equity) almost equals the amount of TGEs since 2018. Taking into account the total funds raised by Blockchain companies in 2019, the average TGE accumulates nearly 26% more money for the startup than the average Venture Capital round as of now.

Blockchain firms compeleted deals

Blockchain investors experiment with new ​alternative funding methods

This chart illustrates the completed deal share by stages, including TGEs. At the 2019 halfway point, 56% of all deals were closed by this alternative fundraising instrument. Early-stage Venture Capital deals form the major part of traditional funding types in terms of the total capital invested in Blockchain companies (34% of total deals closed by Blockchain companies in 1H 2019). Together with angel rounds, this figure goes up to 41% of the total amount of completed deals by blockchain companies worldwide.

Completed deal share by stages (including TGE)

Early-stage Blockchain companies attracted $2 billion of VC capital in 2018 only

This chart illustrates the value of the Blockchain investment deals by stages from 2014 to the first half of 2019. The value of Blockchain deals increased overall with fluctuation during the period displayed. Early-stage Blockchain investments peaked in 2018 when investments amounted to more than $2 billion.

Blockchain equity funding by stages (excluding TGE)

The Average Value of Deals by Stages

The fact that the average Later stage VC cheque peaked in 2018 to $289 million, indicates that the major investment funds and institutions being interested in the field. To compare, the median deal size of the later stage VC-backed IT companies amounted to $11.5 million in 2018, according to Statista. This data shows that the average deal amount is increasing at all stages during the period under observation.

Average value of deal by stage

The downward trend in the TGE popularity monthly and quarterly

A general downward trend in both indicators (number of deals and amount of capital invested) shows that Blockchain investors still cautiously treat Token Generation Events. It appears that more time is needed for investors to take TGEs as the primary funding method, considering the hype consequences and a notorious dispute on the Blockchain regulations.

TGE funding in Jan 2018 - Jun 2019 by Month
TGE funding in 2017 - 2019 by Quarters

Roughly 36% of Blockchain startups now meet the hard cap during TGE

Startups often fail to adequately evaluate the amount of capital needed for the project (target range often accounts for up to 100% of the lower target), resulting in more than 64% of the Blockchain companies not being able to meet their HardCap during the last two years. Nevertheless, in comparison to the last year, the percentage dropped 13 points.

Blockchain Firms that met hard cap target

Largest fundraising events since the Blockchain inception

EOS.IO TGE alone ($4.2 billion) is larger than the top traditional funding deals in total ($1.9 billion). The total amount of the top 10 TGEs ($9 billion) is almost five times larger than the top 10 Conventional Fundings in total.

Among the largest by funding value Blockchain VC-backed companies worldwide is Bakkt. This company has raised $182.5M to build out the global digital assets platform and bitcoin futures product. The company is owned by Intercontinental Exchange (ICE), which is best recognized as the parent company of the New York Stock Exchange (NYSE).

Largest VC Deals and TGEs

Blockchain infrastructure developers bring their investors the biggest ROI

Among the top 10 biggest TGEs by return on investment are Blockchain infrastructure developers specializing in Blockchain platforms for dApps (Ethereum, NEO, Stratis, Ark, and Factom), IoT infrastructure providers (IOTA) and Blockchain interoperability developers (Cosmos Network). The projects have created massive value for the Blockchain community, which is reflected in continuous positive CMGR.

Binance, in particular, introduced the IEO funding model that is gaining popularity among other exchanges due to its emerging monetization opportunities. Given that, tokens play the core role in the funding process that is mirrored in the rapid development of general IEO platform features.

Top 10 Biggest TGEs by Return on Investment

+800 VC firms already capitalize on Blockchain adoption

According to Blockchain's got talent report conducted by TeqAtlas Research Team, Digital Currency Group dominates in the number of deals, 32 deals ahead of the next two investors combined (Pantera Capital and Blockchain Capital). The major part (8 out of the top 10) of the most active blockchain investors is located in the US. More than half of all investors are Venture Capital firms.

The most active investors in Blockchain

The Majority of Investors is Focused on the FinTech blockchain startups

The financial sector has been one of the quickest to invest in Blockchain, with over 150 deals of the completed by the most active in this field investors. Not only attracts FinTech a lot of investors but also the investors are ready to back the startups with substantial amounts, meaning they treat FinTech rather as a serious investment target and not just as a side project to diversify the portfolio.

The most active investors industry focus

Most active investors participate largely in Angel/Seed rounds

The major part of companies within investor's portfolios is funded through Angel/Seed rounds (except for TaaS, the crypto investment fund that is currently inactive) implying on the prevalence of conventional funding instruments.

Most Active investors stage focus

Growth in popularity of the IEO platforms

After a considerable slowdown in ICO funding in the second half of 2018, an already established pool of retail investors did not want to abandon the field. Exchanges have accumulated a significant user base. The market ​needed​ a new concept of the coin offering; subsequently, the Initial Exchange Offering (IEO) was introduced. The idea is not much different from ICO with major distinctions shifting the most of crowd sale issues to exchange that is obliged to accommodate immediate token listing, scam protection, and promotion.

Top 9 IEO Platforms

IEOs gain momentum at the 2019 halfway point

Till then Binance had grown into one of the biggest cryptocurrency exchange in the world and has been announcing a new token offering on Binance Launchpad every month starting 2019. The first one was BitTorrent IEO that was sold out in a matter of minutes. Fetch.AI and Celer Network followed right after with quite similar success. Many exchanges either have introduced IEOs already by March 2019 or have announced such plans.

Top 15 IEOs

ProBit's IEO platform is the leader in terms of the number of IEOs listed

As of July 2019, ProBit's IEO platform is the leader in terms of the number of offerings. ProBit IEO is also accountable for the majority of completed deals - 41 offerings. This figure was around 13 offerings as of April 2019. Since the first IEO (Spin Protocol) back in February the platform has gained huge success and was voted the best IEO exchange mostly due to its exclusive bonuses. These bonuses allow for users to get more of their favorite tokens including even higher bonuses for those whose purchases were made with their native token PROB. ProBit is followed by the LATOKEN's IEO platform; however, none of the 30 offerings listed was completed so far.

Number of IEOs by Funding Status

The total funding amount attracted by IEO platforms is $185M

$36.6 million of this total amount was accumulated on the Binance Launchpad, the pioneer of the IEO market. Binance Launchpad takes the lead in the number of completed offerings that have disclosed funding amounts. The average funding amount via all IEO platforms is nearly $2M with nearly 7.5 completed deals on average.

Disclosed Amount of IEOs by Platform

The first IEOs took place back in 2017 when Binance created Binance Launchpad to facilitate GIFTO and Bread crowdfunding campaigns that successfully reached set goals having raised $3 million and $6 million respectively. Back then, IEOs did not see a high share of Blockchain investors’ interest due to the ICO funding model being sufficient enough and straightforward. The second half of 2018 has brought a significant change in the regulatory landscape as well as the ICO market drop by more than 90%.

Conclusions

While VC funding reaches Dot-Com high in the U.S., Chinese tech company valuations are more expensive than ever, and SoftBank announces another multi-billion dollar fund, Blockchain investment trends meanwhile show signs of maturity and saturation. The deal amounts keep breaking new highs and more sophisticated investors enter the market. Moreover, Blockchain investors begin to rely on alternative funding instruments despite ongoing regulation disputes heavily. In the modern scenario, there are not only VC, PE, M&As, and IPOs, but also Blockchain-based Crowdfunding, TGEs, IEOs as well as Asset Tokenization.

Methodology

Our comprehensive database consists of the deals made by active Blockchain and Blockchain adjacent companies, that have got funded or been sold since the inception of Blockchain and YTD (July 2019). Data includes Angel / Seed, Early Stage VC, Later Stage VC, TGEs (Token Generation Event), Private Equity, and Other Deals. Early Stage VC deals include Series A, B, and C, while Later Stage - all above Series D venture deals.

All data excludes the following: upcoming TGEs, failed TGEs, TGEs that collected less than $100K, deals with undisclosed amounts. Please note that TeqAtlas’s deal data is subject to reporting delays, especially for seed-stage and TGEs. Accordingly, actual Deal totals are likely higher than reported here.

About TeqAtlas

TeqAtlas is the Market Intelligence Provider that drives and eases scouting of emerging technologies for SMEs. Our goal is to encourage tech professionals all over the world to adopt modern solutions and wide-spread digitalization.

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