We heard about the initial placement of coins. Even if not an experienced venture investor, perhaps there is an investment experience in one such ICO. The original purpose of the virtual currency Bitcoin and numerous "descendants" was to go beyond the existing monetary system, which depends on central banks and trusted third parties. Not surprisingly, crypto-enthusiasts have developed a way to bypass the traditional process of raising capital to finance new projects, which is deeply embedded in banking culture, a truly extraordinary achievement.
Let's look at how quickly ICO took the dominant position in financing block-start-ups and estimate the scale of capital inflows into this new funding instrument. ICO: few transactions, but large sums During 2017 and the first two months of 2018, Crunchbase data recorded 527 venture rounds and ICOs, which resulted in companies attracting financing in Bitcoin, Ethereum and other crypto-currencies.The data below shows how the amount of investment is distributed among the types between traditional venture capital and ICO for blocking systems.
According to Crunchbase, the number of ICOs conducted over the past 14 months is almost two times less than the number of rounds of venture financing announced by the blocking companies related to blocking technology.
But, despite the smaller number of ICOs, these investments on average attract much more capital than the average amount of venture financing. The data below show the difference between the capital drawn by the venture investment method and the amount of funds received through the ICO.
Over the past 14 months, the blockhouse and related start-ups have attracted $ 1.3 billion of venture capital around the world. For the ICO, this figure is $ 4.5 billion.In other words: venture capitalists invest more often, but small amounts of money, investors financing through ICO, invest much larger amounts.But even the first rounds of investment through the ICO look like funding in the later stages.
Block-start-ups conduct the first external rounds of financing as an ICO, but by and large these stages do not look like seed investments, but rather as super-rounds (stages) in the late stages of technological development. According to Crunchbase, here is the list of the largest ICO, closed in 2017:
- Filecoin - $ 257 million
- Tezos received $ 232 million
- Bancor received $ 152.3 million
- Polkadot received $ 140 million
- Quoine received $ 105 million
Some inconvenient facts with which the market should be considered. The Bitcoin.com news website conducted a survey that showed that of the 902 companies that set the goal to conduct the ICO, 142 could not do this even before the funding was closed, and 276 failed after raising funds. The study also identified 113 additional projects that are classified as "scam" after the team ceased to communicate in social networks or the community is so small that the project has no chance of success. The final conclusion of the poll is quite strict: "59% of last year's collective financing events are confirmed by failures, or close to failure."
A small note about the data At the time of this writing, the Crunchbase database regarding traditional venture financing transactions was much larger than the data on the initial placement of coins (ICO). The problem is that there are a number of competing lists of ICO projects, and each of them presents various statistical data. Therefore, the number of ICOs listed is twice as large.