As the ICO space continues to generate headlines, driven chiefly by the ICO boom of 2017 and the early part of 2018, traditional VC firms are making their presence felt in blockchain investment, which may come as a surprise to market observers. New data from Diar published on October 1, 2018, reveals that venture capital has a surprisingly large investment portfolio spread out across some companies scattered across vast areas of the cryptosphere.
ICO’s Waning Influence
At its peak, the ICO boom threatened to fundamentally disrupt the process of capital raising by early ventures, bringing in eye-watering sums of money in just a few months and creating a new class of tech billionaires practically overnight. Since Q2 2018 however, the crypto market downturn has hit the ICO scene, causing a severe market correction as token prices continue to drop with no sign of sustained recovery in sight.
In September 2018, BTCManager reported that about 70 percent of tokens have settled at a valuation below what they were sold at during their ICOs according to Diar research from last month. When compared to their all-time high valuations from December 2017 and January 2018, the vast majority of tokens have shed more than 90 percent of their value.
In addition to their market troubles, some ICOs also face regulatory scrutiny because of the perceived lack of legal incentive to deliver on promises made to investors. Indeed, some ICO projects have failed to deliver on promises made for one reason or the other, and all of this has a net effect of depressing the number of completed ICOs to a one-year low figure.
While this might present a bleak picture for blockchain and cryptosphere investment, Diar’s latest research reveals that venture capital firms have quietly filled the resulting investment gap. Data from Pitchbook shows that between January and September 2018, nearly $3.9 billion was raised by organizations within the cryptosphere from VC firms, which is a massive 280 percent jump from last year.
The data shows that the number of deals has also jumped nearly 100 percent from last year, which means that VC partners are not only investing more money, but they are also investing in more firms across the ecosystem.
Venture Capital Gobbles up Blockchain Investment
According to Diar’s data, the ten largest VC deals within the cryptosphere in 2018 saw a combined total capital value of $1,3 billion. Of these companies, only DFINITY has a native utility token, meaning the rest are traditional equity investments.
Barry Silbert’s Digital Currency Group (DCG) is again the most active blockchain VC investor in the space, closing more than 110 deals during the study period. Next on the VC investment list areBlockchian Capital and Pantera Capital, both of whom cumulatively closed 100 deals.
As expected, Andreessen Horowitz remains the most active traditional VC firm in the space followed by Dangua Capital and Future Perfect Ventures. Angel investors with the most activity in the area include Tim Draper, Naval Ravikant, Roger Ver and Barry Silbert.
The data also shows that approximately 52 percent of all investments were made by entities not exclusively focused on blockchain investing like Andreessen Horowitz, and the US remains by far and away the leading location for VC blockchain investment with 79 percent of the total, leaving China distant second with 12 percent, followed by South Korea and Singapore with two percent each.