The ICO world is booming. Thanks to a new study by CoinDesk Research, we have further insight into why it’s booming.
CoinDesk recently completed a Spotlight Study on blockchain token sales, or ICOs. They surveyed 400+ blockchain entrepreneurs, investors, and developers to gain insight into one of the world’s most exciting – and mysterious – markets and applications.
What can we learn about the world of blockchains from this study? Here are some of the key points:
ICO Funds Approach Total Venture Capital Funding
The popularity of ICOs continued to gain traction in 2016, as the total funds diverted to ICOs was close to half (48%) of the industry’s total venture capital funding. The total venture capital funding in the industry was reported at $496 million, while cumulative ICO funding was $236 million.
Some see ICOs as the “end” of institutional investors and venture capital spending. One important thing to note is that a large portion of this capital ($152 million) was invested in a single, failed project (the DAO).
CoinDesk’s research indicates that venture capital funds are starting to take note of the change. In fact, many have started to consider issuing tokens of their own. Blockchain Capital is one VC fund that has considered selling and issuing their own blockchain tokens, for example.
Meanwhile, VC funds have started to invest in companies in a different way. They participate in ICOs. Polychain Capital is one institutional investor that invested significant capital in tokens in 2016.
There’s A Growing Familiarity With ICOs
Several years ago, the word “ICO” was unknown. Today, it’s a common term in the cryptocurrency world. As you may have guessed, CoinDesk’s research showed that 83% of surveyed participants who were familiar with cryptocurrency were also familiar with ICOs. Approximately half of those surveyed (47%) had participated in a token sale.
One surprising result from the study was that 29% of entrepreneurs with no ICO experience “had seriously considered or attempted” an ICO.
Meanwhile, nearly all investors (91%) who had participated in a previous ICO claimed they would participate in future ICOs.
Another noteworthy stat from this portion of the study was that participants had significantly greater experience investing in blockchain assets like bitcoin and ether more than traditional investment commodities – like gold and silver.
The Advantages Of ICOs
What’s the advantage of ICOs over traditional fundraising and angel investments?
Only about a quarter (26%) of those surveyed believed that companies could have raised VC funding as an alternative to their token sale. Nearly half (44%) believed that conventional fundraising efforts would not have been successful.
In other words, ICOs give companies an opportunity to raise funding in situations where they would not normally be able to attract VC funding. Instead of relying on conventional VC infrastructure – with all its pros and cons – companies can use ICOs as their own fundraising vehicle.
The Death Of Institutional Investors?
Some people believe that ICOs are the death knell for institutional investors and VC firms. Others, however, believe the industry will adapt. Nearly half of all respondents (45%) believe token sales are an opportunity for institutional investors, while a quarter (27%) believe retail investors would continue to dominate token sales.
CoinDesk’s Research section provides great insight into the worlds of blockchain technology and cryptocurrency.