In 2017, Initial Coin Offerings (ICOs) became increasingly popular within the blockchain industry. ICOs overtook IPOs and other venture capital fundraising means as the preferred choice for blockchain-based startup enterprises.
Many developers and entrepreneurs seem to prefer to skip the arduous task of convincing venture capitalists, seed investors, and banks to invest in their projects. Instead, they take their ideas to the general public and raise millions of dollars in funding.
ICOs are a testament to the disruptive potential of blockchain technology and cryptocurrency. In fact, ICO is a realization of one of the fundamental philosophies of the blockchain; a system that is no longer reliant on banks and other third-party financial intermediaries.
According to CrunchBase, the total value of recorded venture funding for blockchain-based startup enterprises in 2017 was $900 million. Within the first 2 months of 2018, more than a third of that figure has already been raised by venture capital funding for blockchain-based projects.
With $375 million in known venture capital funding so far in 2018, experts are confident that figures for 2018 will surpass that of 2017. Despite these impressive figures, they are significantly lower than the figures raised by ICO campaigns.
Considering the whole of 2017 and the first 2 months of 2018, CrunchBase reports that venture capital funding has amounted to $1.3 billion for blockchain-based startup enterprises. For ICOs, the total amount raised during this same 14-month review period currently stands at $4.5 billion.
This means that ICOs have raised three-and-a-half times more funding for projects than convertible notes seed, Series A, Series B, angel investors and all other venture capital fundraising vehicles.
With the popularity of the cryptocurrency market continuing to skyrocket, it could well be that the degree of ICO domination in the blockchain fundraising circuit might continue to increase.
Looking back at the figures presented by CrunchBase, the fact that venture capital funding campaigns have outnumbered ICO campaigns by more than a ratio of 2 to 1 makes the ICO dominance even more impressive.
During the 14 months in review, of the 527 known funding campaigns captured by CrunchBase, 68 percent were funded via venture capital funding while the remaining 32 percent was by ICOs.
What this means is that even with less half of the number of venture capital funded projects, ICOs have been able to surpass venture capital funding for blockchain-based projects by a factor of more than 3.
It is even possible that CrunchBase is likely undercutting the ICO figures. This is due to the fact that the available data sets for venture capital funding campaigns is a lot more detailed and streamlined than its ICO counterpart. There are a number of ICO listing services on the internet and the figures do not necessarily tally across the board.
The infant nature of the market also contributes a level of opaqueness that makes neigh-accurate accounting potentially problematic. However, as more data becomes available, the true degree of the ICO dominance in the blockchain fundraising space will become more apparent.
Feature image by Ben Boothman