Venture Capital Flowed into the Crypto Sector in 2018
Just as mass token sales fizzled out, private placements and venture capital moved in to boost the best projects.
Outer Ventures, a European tech investment firm and monitor, has released its Outlier Ventures State of Blockchain Q3 2018 report. One of the main takeaways from the report is that venture capital took over the flagging ICO market, where mass token sales failed to gain traction.
Token issues were, at one point, seen as totally disrupting venture capital with a more direct source of funding projects. However, waning consumer interest, along with regulatory restrictions and investigations, ground public ICOs to a halt. At the same time, quality projects attract independent rounds of funding.
Outer Ventures noted that VC investments in the crypto sector rose from $900 million in 2017 to $2.85 billion. It is uncertain is what part of the funding was in fiat and what part was in crypto. The US market, which was also the largest for ICOs, attracted the most VC funding this quarter.
“As we see the focus of early-stage investment into tokens shift away from tech-savvy retail investors toward VCs, hedge funds and ultimately larger institutional investors, we’re seeing a large growth in new businesses and services enabling the larger institutional investors to enter the space,” said Aron Van Ammers, Founding Partner of Outlier Ventures.
The report compares the VC trend to the ICO sector, which raised just under $1 billion in crypto assets. The sum may have been slashed lower, though, by the most recent crash in Ethereum (ETH) prices. November has seen just around $76 million in ICO funding so far.
Outer Ventures was also slightly optimistic that crypto assets are here to stay, despite the 2018 bear market.
“There is a key difference between the bear markets of 2014 and 2018. The former witnessed governments around the world rushing to issue bans on tokens. The latter has regulators around the world pushing their jurisdictions to explore blockchains as a means to maintain their edge as innovation and commercial hubs,” the firm explained.
Most ICO tokens have lost more than 95% of their value. Crypto-based startups have also suffered from exit scams or failed projects, which has hurt the sector’s reputation. Still, the creation of distributed apps (dApps) continues, with an attempt to bring blockchain-based products to real-life users.