We have analyzed around 2.3k Blockchain companies backed by 1.5k investors through about 2.5k conventional and alternative funding instruments to determine distinctive Blockchain Investment trends and market sentiment as well as to understand what type of investors are interested in Blockchain investments.
In 2018 Blockchain firms experienced a drastic increase in both conventional equity fundings and Token Generation Events. Investors still see Blockchain startups as an attractive investment target. The number of completed conventional funding deals roughly being equal to TGEs after the 2017-2018 hype period. After-the-hype investment increase shows that Venture Capital investors still see Blockchain startups as a high-margin investment. However, they do not yet feel comfortable and only experiment with emerging financing techniques. In total, Blockchain startups have raised nearly $31.6 billion through traditional funding instruments and Token Generation Events since 2014 and YTD (1Q'19).
The rise of the Token Generation Events share is caused by the Blockchain investors' interest in experimenting with new alternative funding methods. TGEs become more regulated and less fraud contagious, thus, showing a rise in the investors' confidence and market saturation/maturity. Blockchain startups, however, do not yet show making it to the growth stage with issues of the product market fit and demand validation not being yet resolved.
Early stage Venture Capital deals form the major part of traditional funding types in terms of the total capital invested in Blockchain companies ($2 billion in 2018 only, that is 40% of total invested amount last year). The proportion of funding types is maintained to Q1 2019. The main contributors to the ratio shift are Robinhood’s Series D ($363 million) and Coinbase’s Series E ($300 million) deals.
An increase in the average Later stage VC cheque ($289 million) also indicates significant investment funds and institutions being interested in the field. To compare, the median deal size of later stage VC-backed IT companies amounted to $11.5 million in 2018, according to Statista.
A general downward trend in both indicators (number of deals and amount of capital invested) shows that Blockchain investors still treat Token Generation Events in a cautious manner relying more on conventional funding. It appears that more time is needed for investors to take TGEs as the main funding method, considering the hype consequences and a notorious dispute on the Blockchain regulations.
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 only a little less than 30% of companies meeting their hard cap requirements in 2018.
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 ($8.2 billion) is four times larger than the top 10 Conventional Fundings in total ($1.9 billion).
The major part of the gainers is Blockchain infrastructure developers specializing in Blockchain platforms for dApps (Ethereum, NEO, Lisk, 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 CAGR. 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 mirrored in the rapid development of general IEO platform features.
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 obliging to accommodate immediate token listing, scam protection and promotion.
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 raising $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 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%. Till then Binance had grown into 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.
As of April 2019, LATOKEN's IEO platform is the leader in terms of the number of offerings; however, none of the 30 offerings was completed so far. Probit IEO is accountable for the majority of completed deals (13 offerings). 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 who purchases made with their native token PROB.
The average funding amount via all IEO platforms is near $5 million and near two average completed deals. The pioneer of the IEO market Binance Launchpad takes the lead in the number of completed offerings that have disclosed funding amounts. The platform has already accumulated $26.6 million for IEOs listed there. All the largest deals so far were closed via Binance’s IEO Platform, except for TOP Network (Huobi Platform).
To sum up, we may conclude that emerging tech investment shows signs of maturity and saturation. The deal amounts keep breaking new highs and more sophisticated investors enter the market. Moreover, the Blockchain investors begin to rely on alternative funding instruments despite ongoing regulation disputes heavily. In the modern scenario there are not only Venture Capital, Private Equity, Mergers and Acquisitions, and IPOs, but also Blockchain Crowdfunding, TGEs, IEOs, as well as Blockchain Investment Funds, and Crypto Investment Funds.
TeqAtlas comprehensive database consists of the deals made by Blockchain companies, that have got funded or been sold since the inception of Blockchain and YTD (1Q'19). Data includes Angel / Seed, Early Stage VC, Later Stage VC, TGEs (Token Generation Events), 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 deals total amount is likely higher than reported here.
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