#BlockchainCBI
Blockchain In Review
Investment Trends And Opportunities
#BlockchainCBI
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@arieh313
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Intelligence Analyst, CB Insights
Arieh Levi is an Intelligence Analyst at CB Insights, where he
focuses on Fintech, Financial Services, and Blockchain. Arieh's
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Arieh previously held roles in healthcare and financial services, and
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@rhhackett
Reporter, Fortune
Robert Hackett is a staff writer at Fortune where he covers
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Before Fortune, Hackett served at Nautilus Magazine, TED
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Cornell University and journalism at Columbia Journalism School.
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Blockchain Report & Article
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What is Blockchain?
Blockchain Venture & Equity Investment
The Rise of Initial Coin Offerings
Blockchain Corporate Investment
Key Takeaways and the Road Ahead
Q&A
Table of Contents
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Source: Dilbert.
What is Blockchain?
A Three-Minute Primer
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Blockchain Venture & Equity Investment
A Shifting Landscape
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Since 2012
650+ equity deals
have closed for over
$2B
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Early investments in the
sector explored bitcoin's
outlined purpose
Wallets, exchanges, and
remittance platforms
allow consumers to send
bitcoin across borders
and watch their
transactions settle on the
blockchain in real time.
Early investments focused on currency and trading
WALLETS & MONEY SERVICES
EXCHANGES & TRADING
Equity funding (excluding ICOs)
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Howard Marks
Founder, Oaktree Capital Management
"Think about the fact that the price of Bitcoin has risen
more than 350% so far this year and 3,900% in the last
three years. To the degree people argue that Bitcoin is
a currency, then (a) why is it so volatile? and (b) is
that desirable? You might want to consider whether a
real currency can do that, or whether speculative
buying is determining Bitcoin's price."
Use case as currency gives investors pause
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Startups pivoted as
certain use cases see
little traction
Coinbase initially
promised "instant
payments, simple
transfers, and
widespread adoption."
The company's branding
has since shifted to
emphasize its exchange
and trading platforms,
primarily for investment.
Coinbase homepage shifts from currency to investment
2013 2017 YTD
January 2013
January 2017
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Early blockchain startups
failed at a higher rate
than other sectors
Of 103 blockchain
companies that received
seed or angel funding in
2013 2014, only 28%
managed to raise
additional funding, and
just one company made
it to Series D.
Blockchain vs. tech rate of follow-on equity funding
Equity funding
100%
28%
11%
2%
100%
46%
28%
14%
Seed/Angel
1st Follow
2nd Follow
3rd Follow
2013 - 2014 Blockchain Cohort
2008 - 2010 Tech Cohort
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BIG BANKS CONSIDER USING BITCOIN
BLOCKCHAIN TECHNOLOGY
September 17, 2015
FOR THE CURIOUS BUT UNCOMMITTED,
A BLOCKCHAIN IN A BOX
December 8, 2015
2015: Bitcoin bad, blockchain good
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As the sector matured,
VCs turned to private
business blockchains
Expanding beyond
bitcoin, private
blockchain providers
looked to build enterprise
blockchain and
distributed ledger
solutions, first for
financial services, and
then moving to other
verticals.
Sector matures, focus moves to private blockchains
ENTERPRISE & GENERAL
BLOCKCHAIN SOLUTIONS
CAPITAL MARKETS &
FINANCIAL SERVICES
Equity funding (excluding ICOs)
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Brand-name investors
have placed far-ranging
bets on blockchain
Investors have since
placed blockchain bets
across payments, ICOs,
and alternative use cases,
such as digital rights
management
(MediaChain) and
commerce (OpenBazaar).
Select brand-name investors and blockchain investments
Equity funding (excluding ICOs) 2012 2017 YTD (10/08/2017)
Note: LP placements into cryptocurrency hedge funds (e.g. MetaStable) are not considered equity funding.
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2017 should see highest
number of equity deals
After a weak 2016,
investors are returning to
the sector en masse,
driven in large part by a
run-up in cryptocurrency
prices and a substantial
increase in the number of
companies looking to
raise funding.
Blockchain VC-backed deals vs. equity deals
Equity deals (excluding ICOs) 2012 2017 YTD (10/08/2017)
2
20
54
61
57
59
6
50
143
165
138
144
77
(Full-year run rate)
188
(Full-year run rate)
2012
2013
2014
2015
2016
2017 YTD
Blockchain VC-Backed Deals
Blockchain Equity Deals
Note: VC-backed deals include participation from at least one VC-type investor (VC, Growth Equity, or Super Angel).
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After mega-deals,
dollars should also rise
in FY 2017
While some have
pronounced the death of
traditional blockchain VC
due to ICOs, equity deals
and dollars should rise
this year.
Total funding has been
boosted in large part by
mega-deals to Coinbase,
R3, and Digital Asset
among others.
Blockchain annual global financing history
Equity funding (excluding ICOs) 2012 2017 YTD (10/08/2017)
$98
$357
$525
$545
$640
6
50
143
165
138
144
2012
2013
2014
2015
2016
2017 YTD
Disclosed Funding ($M)
Deals
$831
(Full-year run rate)
188
(Full-year run rate)
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Blockchain-specific
firms are the sector's
most active VCs
While the sector has
matured, the top
investors (by number of
portfolio blockchain
companies) remain
blockchain-focused VC
firms, like Digital
Currency Group,
Blockchain Capital, and
Pantera.
Most active VC blockchain investors
2012 2017 YTD (10/08/2017)
Rank
Venture Investor
1
Digital Currency Group
2
Blockchain Capital
3
Pantera Capital
4
Draper Associates
5
500 Startups
5
RRE Ventures
5
Fenbushi Capital
8
Andreessen Horowitz
8
Plug and Play Ventures
10
Liberty City Ventures
10
Union Square Ventures
10
FuturePerfect Ventures
Note: VCs in orange focus specifically on blockchain.
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The sector is maturing,
with more deals at
later stages
A steady decline of the
proportion of early-stage
equity deals may indicate
that blockchain like
other emerging
technologies is
moving from creation, to
crowding, to
consolidation.
Blockchain annual global deal share by stage
Equity deals (excluding ICOs) 2012 2017 YTD (10/08/2017)
100%
70%
71%
72%
57%
50%
14%
17%
8%
21%
20%
2%
2%
4%
7%
5%
2%
1%
1%
1%
1% 1%
14%
10%
13%
14%
21%
2012
2013
2014
2015
2016
2017 (YTD)
Seed / Angel
Series A
Series B
Series C
Series D
Series E+
Other
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Deal share grows
outside of top countries
As the sector has
matured, teams looking
for equity funding have
outgrown the top ten
countries, highlighting
the technology's inherent
bend toward borderless
development.
Blockchain annual deal share by country
Equity deals (excluding ICOs) 2013 2017 YTD (10/08/2017)
0%
10%
20%
30%
40%
50%
60%
70%
80%
2013
2014
2015
2016
2017 YTD
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Blockchain Venture & Equity Investment
Conversation and Q&A
@cbinsights
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The Rise of Initial Coin Offerings
Ethereum and Tokens
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THE NEW BLOCKCHAIN TREND THAT
COULD TRANSFORM BUSINESS
October 18, 2017
HOW BLOCKCHAIN AND ICOS ARE CHANGING
THE FUNDING GAME FOR STARTUPS
September 24, 2017
2017: Forget blockchain let's talk crypto
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Initial coin offerings
Blockchain
startup seeks
cash,
announces an
ICO
ICOs embed
value in the
protocol, and
reward:
(1) investors
(2) developers
(3) users
The startup
exchanges
"utility tokens"
for cash
Tokens are
traded on
exchanges
1
Investment
of money
2
In a common
enterprise
3
With an
expectation
of profits
4
From the
efforts of
others
Is your token a security?
The Howey Test
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Since January 2016
250+ ICOs
have closed for well over
$2B
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Fred Wilson, October 2017
Partner, Union Square Ventures
"We have a good thing going with the equity
based model but we understand that we have
to adapt and react to changes in the market
and we are doing that, fairly aggressively, with
tokens."
The disruption of VC?
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ICOs growing at a much
faster rate than
equity deals
Over 250 blockchain
teams have completed
ICOs since January 2016,
with more than 55% of
them raising during or
after July 2017.
Cumulatively (since
January 2016), the
number of ICOs should
surpass the number of
blockchain equity deals
in October 2017.
Ethereum price vs. cumulative blockchain equity deals, ICOs
2016 2017 YTD (10/04/2017)
$15
$388
$391
$292
30
130
190
250
93
157
259
282
Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 ETH/USD
Completed ICOs (cumulative)
Blockchain Equity Deals (cumulative)
Sources: CB Insights, TokenData, CoinSchedule, EtherScan.
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Blockchain startups turn
to ICOs for funding, as
capital floods sector
Total funding raised by
ICOs surpassed total
funding raised via
traditional equity
financing for the first
time in Q2'17.
Year-to-date, ICOs have
closed more than $2B in
funding, with many ICOs
still ongoing and
hundreds more
scheduled.
Blockchain equity funding vs. ICO funding
Q1'16 Q3'17
$179
$161
$122
$83
$130
$248
$259
$12
$21
$21
$39
$38
$757
$1,327
Q1'16
Q2'16
Q3'16
Q4'16
Q1'17
Q2'17
Q3'17
Blockchain Equity Funding ($M)
ICO Funding ($M)
Sources: CB Insights, TokenData, CoinSchedule.
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Tokens offer immediate
liquidity, differ from
traditional VCs
Brand-name VCs have
invested into
cryptocurrency hedge
funds (as both LPs and
GPs) and tokens directly.
Over 70 cryptocurrency
funds have sprung up
since the start of 2017,
many with venture funds
as investors.
VCs invest in tokens, cryptocurrency funds
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ICOs span the spectrum
Teams holding ICOs are
building decentralized
blockchain applications
across verticals, ranging
from asset management
to social networks to
prediction markets.
134 blockchain startups with ICOs
Closed ICOs greater than or equal to $500K, 2014 2017 YTD (09/08/2017)
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THE SEC FILED FRAUD CHARGES
AGAINST 2 'INITIAL COIN OFFERINGS'
October 1, 2017
TEZOS RAISED $232 MILLION IN A HOT COIN
OFFERING, THEN A FIGHT BROKE OUT
October 19, 2017
Cause for alarm?
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"Token logic" louder than over-capitalization concerns
$1,186
$1,316
$1,232
$1,197
$1,434
$1,279
$1,406
$12
$21
$21
$39
$38
$757
$1,327
Q1'16
Q2'16
Q3'16
Q4'16
Q1'17
Q2'17
Q3'17
Tech Angel & Seed Equity Funding ($M)
ICO Funding ($M)
$158
$70
$51
$63
$52
$183
$73
$12
$21
$21
$39
$38
$757
$1,327
Q1'16
Q2'16
Q3'16
Q4'16
Q1'17
Q2'17
Q3'17
Blockchain Early-Stage Equity Funding ($M)
ICO Funding ($M)
Blockchain early-stage equity funding vs. ICO
Tech angel & seed equity funding vs. ICO
Q1'16 Q3'17
Q1'16 Q3'17
Note: "Blockchain Early-Stage" includes Angel, Seed, and Series A.
Sources: CB Insights, TokenData, CoinSchedule.
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Steven Peikin
Co-Director, SEC Division of Enforcement
"As with any kind of newsworthy
event, roaches kind of crawl out of
the woodwork and try to scam
money off of investors."
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Self-regulation could
rein in runaway ICOs
The SAFT proposes a
forward contract;
accredited investors
purchase securities that
convert into tokens once
the network is functional.
SAFT: The Safe Agreement for Future Tokens
October 2, 2017
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The apple might not fall
too far from the tree
Ignoring the critics, if you
had bought $100 of
bitcoin on January 1,
2011, it would be worth
upwards of $1.7M today.
While ICOs catch the eye
of scam artists and
regulators alike,
decentralized token
technology is certainly
innovative, and perhaps
fundamentally disruptive.
Annual Bitcoin "obituaries"
2010 2017 YTD (10/18/2017)
1
6
1
15
28
39
28
58
2010
2011
2012
2013
2014
2015
2016
2017 YTD
Bitcoin Obituaries
Source: 99Bitcoins.
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The Rise of Initial Coin Offerings
Conversation and Q&A
@cbinsights
#BlockchainCBI
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Blockchain Corporate Investment
Private Blockchains and Consortia
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Since 2012, corporates have participated in
140+ equity deals
closing for over
$1.2B
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Financial services firms
express the most
interest in blockchain
Since mid-2014, more
than 50 of the world's
largest financial services
institutions have made
direct investments in the
sector.
Financial services firms invest early in blockchain
Equity deals Q2'14 Q2'17
Note: By date of first investment.
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After 2016 dip, record
number of corporates
invest in sector
The number of active
corporate investors at
91 in 2017 YTD is
closing in on the same
metric for VCs, which
has seen 95 active
investors in 2017 YTD.
Blockchain annual active investors by type
Equity deals 2012 2017 YTD (10/08/2017)
3
18
89
69
91
6
40
100
113
90
95
2012
2013
2014
2015
2016
2017 YTD
Corporate & CVC
Venture Capital
Note: Corporate & CVC includes diversified financial institutions, investment banks, and merchant banks.
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Corporates continue to
make direct blockchain
investments
Corporate participation in
blockchain equity deals
and funding is set to rise
in FY 2017.
Blockchain annual corporate participation
Equity funding (excluding ICOs) 2012 2017 YTD (10/08/2017)
Note: Corporate & CVC includes diversified financial institutions, investment banks, and merchant banks.
$3
$75
$375
$390
$327
1
4
20
33
43
42
2012
2013
2014
2015
2016
2017 YTD
Corporate Participation ($M)
Deals
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Top corporate investors
invest in far-ranging
applications
Google comes in second,
with 6 investments that
span data storage (Storj),
financial services
(LedgerX), and merchant
services (Veem).
Most active corporate blockchain investors
2012 2017 YTD (10/03/2017)
Note: Corporate & CVC includes diversified financial institutions, investment banks, and merchant banks.
Investor
Rank
Select Companies
Orb
R3
Ripple
Kraken
Coinplug
Veem
Wirex
bitFlyer
1
Storj Labs
Blockchain
Ripple
LedgerX
Buttercoin
Veem
2
Settlemint
Factom
Ripio
Symbiont
Bitt
Peernova
3
Digital Asset
R3
Axoni
Cobalt
Chain
4
Digital Asset
R3
Axoni
Circle
5
2012 - 2017 YTD (10/03/2017)
Note: Goldman Sachs has since left R3.
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William Mougayar
Author, The Business Blockchain
"[Consortia] are hard. Pulling diverse companies to
work together is not easy. You need disciplined
processes, persistence, patience, a tolerance for some
politics and lots of maturity."
Consortia present promise and peril
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Indy
Hyperledger members and notes
Iroha
Fabric
Burrow
Sawtooth
Lake
About
Modular blockchain
Governed by the Linux Foundation
Permissioned/private blockchains
Use Cases
Five modules allow for range of custom
use cases
Supply chain and logistics
Road Ahead
Pilots and proofs-of-concept
Incorporation of smart contracts
Interoperability with other consortia and
blockchains, most notably ethereum
Note: Members listed are not exhaustive of consortium's members.
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48%
27%
21%
3% 1%
North America
Europe
Asia
Unknown
South America
About
Largest open-source alliance
Connecting corporates with blockchain SMEs
Native cryptocurrency, ether (ETH)
Permissionless (questions of scalability, privacy)
Use Cases
Generic platform allows for cross-vertical cooperation
Hybrid blockchains (public-private)
Supply chain/logistics
Road Ahead
Structuring alliance governance
Launch of seven working groups
Standards-setting
Note: Members listed are not exhaustive of consortium's members.
Source: Enterprise Ethereum Alliance.
Enterprise Ethereum Alliance members and notes
EEA members by continent
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About
Enterprise 'global consensus ledger' software for cross-
border payments and remittance
Native cryptocurrency, ripple (XRP)
Geographic consortia (e.g. Japan)
Use Cases
Interbank transfers and payments
Retail remittances
Supports any token/unit of value
Road Ahead
Building out administered geographic consortia
Custom enterprise software offerings
Distinguishing between XRP and Ripple
Ripple investors and notes
Note: Investors listed are not exhaustive of consortium's members.
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About
Corda distributed ledger technology
Smart contracts incorporating legal contracts
Permissioned, private
Working with regulators, leading financial institutions
Use Cases
Financial services
Relatively closed ecosystem and non-modular
architecture leave little room for experimentation
Road Ahead
Interoperating with other consortia and
blockchains
Rolling out Corda and continuing development
A red line denotes an
investor that has since left
the consortium.
R3 investors and notes
Note: Investors listed are not exhaustive of consortium's members.
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Key Takeaways
The Road Ahead
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Key Takeaways:
Initial coin offerings have raised more than $2B in 2017 YTD.
Total ICO deals and funding are increasing at a faster clip than traditional
equity deals and dollars.
Mega-deals push equity funding up, but growth slows as ICOs take hold.
Traditional equity deals and funding could see their highest annual totals
ever, although the number of teams raising via ICOs is increasing faster.
Corporate investment is set to rise in 2017.
The number of unique active corporate investors has hit a high of 91 in
2017 YTD, and is closing in on the number of active venture capital
investors participating in equity financings.
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Key Takeaways:
ICOs look to remain the financing method of choice for blockchain startups.
On a quarterly basis, total funds raised by ICOs surpassed total funds
raised via traditional equity financing for the first time in Q2'17.
More VC firms are investing in cryptocurrency hedge funds and tokens directly.
Brand-name investors placing bets on top ICOs could signal institutional
interest in this most recent wave of blockchain innovation.
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Venture investors are still looking for real blockchain usage beyond speculation.
Users are necessary for the sector to mature beyond speculation.
Teams holding ICOs have yet to seriously collaborate with regulators to develop
strong legal frameworks. Without uniform self-regulation, state bodies will
have to step in.
Corporate investors will have to take a hard look at their blockchain bets. With
recent successful pilots thrusting the technology back into the spotlight,
corporate investors will continue to seek concrete solutions through
direct investments and consortia memberships.
The Road Ahead:
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Blockchain In Review
Conversation and Q&A
@arieh313
@rhhackett
@cbinsights
#BlockchainCBI
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CBInsights.com
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