Are ICOs Dead? Blockchain Project Funding From Venture Capital Investment Is Up 280% This Year


If you participated in the cryptocurrency market in 2017, you heard about Initial Coin Offerings (ICOs). ICOs were so hot in 2017 that everybody was talking about them and a lot of people were investing. 2018 came and the dreams and hopes of many investors went down the drain, though. As the market crashed, most startups struggled to offer meaningful results.

Are ICOs dead in 2018? We can look at a recent research made by Diar to determine that. According to this research, there is a big decrease in ICO volume recently due to regulatory concerns around the world, so major VC investment is on the rise in this market.

Diar reports that crypto startups have raised nearly $3.9 billion USD via venture capital investment in 2018 during the first three quarters of the year. This is nearly 280% up when compared to all of 2017. The average size of crypto and blockchain investments is also on the rise of $1 million USD this year.

Why Is Venture Capital Investment So Popular Right Now?

According to Diar, the main reason for the spike in popularity of VC investment was because 70% of the tokens sold last year are now less valuable than they were when they were launched. Most of the tokens lost more than 90% of their value, meaning that the investment of the backers was basically thrown away, so now ICOs look more like a bad investment than before.

Another issue appointment by the company was that the regulation of many countries prevents ICOs from happening. In fact, not only non-equity ICOs are scrutinized by regulators but they have misaligned incentives as there is no contractual obligation to deliver any product for the investors after all. Because of all these issues, the reports state that the ICOs are reaching a one year low.

Venture capital deals, differently from the crowdfunding-like process of ICOs, is regulated and has protection for the investors. This way, it is less attractive to invest in tokens right now.

From The Top Ten Companies, Only One Has A Native Token

The major shift that the market has seen with the fall of ICOs and the rise of VC investment is that fewer tokens are being created. The largest 10 projects financed this year amounted to over $1.3 billion USD in VC investment and only one of these companies actually has a token of their own.

Now the investors are looking into more solid investments that hyped tokens that become worthless as time passes. Here is a list of the highest investments:

  • Bitman ($400 million USD), led by Sequoia Capital;
  • DFINITY ($163 million USD), led by Andreessen Horowitz, Hashed and Polychain;
  • Basis ($133 million USD), led by Bain Capital Ventures;
  • R3 ($122 million USD), led by Bank of America, SBI Holdings, HSBC;
  • Circle ($110 million USD), led by Bitmain;
  • Seba Crypto ($104 million USD), led by Black River Ventures, Summer Capital;
  • Ledger ($77 million USD), led by Draper Esprit;
  • Paxos ($65 million USD), led by RRE Ventures, Liberty City Ventures and Jay Jordan;
  • Uphold ($57.5 million USD), led by Hard Yaka;
  • Figure ($55 million USD), led by Ribbit Capital, DCM Ventures.

While this data may look grim for ICO enthusiasts, it is at least clear that the funding money did not simply disappear. Instead of that, it only went “legit” as a way to protect the investors from scammers and from bad projects.

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