CB Insights blockchain report: Bitland ranks second in the "most funded company"

2018 was the year of blockchain liquidation, and as Bitcoin and Ethereum prices plummeted, many projects were forced to shelve or stop. But in 2019, it showed signs of recovery. Since January 2019, the total market value of cryptocurrency has doubled (although still only about one-third of the peak level). How will the future develop?

Recently, CB Insights, a well-known venture capital research institution, released the report "Blockchain Trends In Review 2019". The Institute of Financial Technology of Renmin University of China (WeChat ID: ruc_fintech) compiled the core content of the article. This report is data-oriented and focuses on risk. Investment trends such as investment and corporate mergers and acquisitions explore how various forces shape the current blockchain landscape and provide insights into the future of the sector.

 

Venture capital and equity investment trends

As time goes by, the trend of venture capital is constantly changing. Initially VCs supported the exploration of Bitcoin as a currency company, and then focused on private sector providers in other vertical sectors for financial services, and now prefer to invest in the CIS economy.

VC financing trend

With the end of the second quarter of 2019, it is expected to invest only $1.6 billion in 454 transactions this year, a sharp drop from the $4.1 billion invested in the blockchain last year. However, equity investment in 2019 may exceed the total investment in 2017, and the number of companies promoting private transactions in 2017 is small, and it can be said that there is not so much bubble frenzy.

In a phased manner, traditional equity investments are increasingly flowing to start-ups, and the share of seed/angel and A-round equity transactions jumped from 80% in 2017 to 88% in 2019. At the same time, the proportion of medium-term transactions (B, C series) is relatively stable, while late transactions (D, C series) are almost none.

More and more early deals indicate that the blockchain is still a very new category. As the emerging technology sector matures, the share of the A and B series in total transactions tends to expand. But so far, there is no indication that this will happen.

Finally, in terms of geographic location, the US has 40% equity financing. This is followed by China (15%), the United Kingdom (8%), Singapore (4%) and South Korea (3%). It turns out that Asia is a hotbed of start-ups, and China has several of the most well-funded blockchain companies in the world.

Mergers and acquisitions

The degree of decline in the participation of enterprises in the blockchain has even exceeded the overall stock market trend. So far, there were only 96 M&A transactions in 2019. At current operating rates, corporate M&A transactions will be 36% lower than the 302 in 2018.

VC investment trend

On the list of the most active investors, many of the top companies are early investors who are friendly to the blockchain, reflecting the financial bias. The top ranked list is encrypted investment companies such as Digital Currency Group, Pantera and Polychain, leading edge technology accelerators (2nd in Boost VC), and venture capital firms with professional blockchain practices (a16z) .

Ranked first is the Digital Currency Group, which invested early in the blockchain sector. So far, the company has supported four companies in 2019, including a $65 million Series B financing for Figure Technologies. The company's other transactions in 2019 included multiple rounds of financing for Livepeer, DeFi provider Staked and the encrypted futures exchange CoinFLEX.

Boost VC, the leading edge technology accelerator led by Adam Draper, has invested in nearly 50 blockchain companies over the past five years. Recently, attention has been paid to the decentralized DNS service Unstoppable Domains, which predicts the market Guesser and the encrypted portal ramp Amun.

Blockchain Capital is also one of the longest-established blockchain venture capital firms, ranking third among the most active venture capital firms.

In addition, many blockchain investors based in China have entered the field in a big way. For example, in the past five years, Febushi Capital has invested more in blockchain companies than the backbone of Pantera and Polychain.

Bitmain is the second largest blockchain company after Coinbase (which is also the largest in China) with a financing of US$450 million. Bitmain has been focusing on listing on the Hong Kong Stock Exchange in 2019, but reports of difficulties and losses due to falling demand have caused its IPO application to expire. Previously, investing in VC investment in the blockchain found that many top investors were still investing in the winter of 2018.

 

Well-funded company

The most funded companies in the sector, many of which are exchanges or companies that provide infrastructure technology. The most funded company is Coinbase, which last raised $300 million in October 2018. Headquartered in China, Bitmain is close behind, raising $450 million. Ranked third is tZero, the encryption division of Overstock.com, which specializes in DLTs in financial technology. Also striking is Bakkt, an encrypted exchange supported by ICE (the parent company of the New York Stock Exchange). The company is awaiting approval by the CFTC (US Commodity Futures Trading Commission) for bitcoin futures trading, which was recently approved by LedgerX.

Future trends

In 2019, there is also uncertainty in the blockchain, but there is also an undercurrent of cautious optimism. The ICO era is nearing its end, and venture capital is falling from a strong high. Tokens and cryptocurrencies currently account for only a fraction of their peak market capitalization.

But speculative activity and trading volume in key currencies such as Bitcoin and Ethereum have surged in recent months. With the recent actions of blue chip companies such as Facebook, JP Morgan and Visa, corporate profits in this area have also picked up.

The recent heat may be largely due to the relationship between Facebook and Libra. The goal of the project is closer to Venmo, not a new bitcoin, and is designed to provide a stable currency for customers with no bank accounts worldwide.

Facebook has signed an agreement with partners from payments, online car, e-commerce, venture capital and blockchain startups to launch the Libra project.

The project seems to have encountered some legal obstacles and regulatory review, but the interests of the company is a huge vote of confidence cast on the blockchain space.

Mike Novogratz, founder of crypto hedge fund Galaxy Digital, said Facebook's plan is part of the reason for the recent rise in bitcoin: (investors) are excited about Facebook. Because Uber, Mastercard and Visa said they also want to participate in the cryptocurrency world. He added that the entire project completely legalized the idea of ​​cryptocurrency.

In addition, Bloomberg's Tyler Cowen believes that cryptocurrencies provide a safe haven in political instability, trade turmoil and future wealth taxes.

For all of these and more reasons, the blockchain space seems to be reborn. This may also be good news for start-ups. Due to the high level of technology in this area, startups are well positioned to help large companies and institutions enter the field.

In 2019, it is worth noting whether this newly discovered optimism will translate into a significant rebound in the VC sector.

Source | Institute of Financial Technology, Renmin University of China

Original | CB Insights

Compilation | Qi Qingwu