Blockchain, Bitcoin Venture Funding Set to Drop for First Time

© Can Stock Photo Inc. / SantaGigFinancing for blockchain and bitcoin startups slid 16% in the first nine months of 2016 to $429 million, putting the sector on pace for its first annual drop since 2012, CB Insights reported. Deal activity fell 7% to 92 equity financings.

CB Insights first began reporting on blockchain and bitcoin venture capital investments in 2012, at the time, 100% seed capital.

Seed deals fell below 60% for the first time in 2016 while Series A more than doubled to 21% from a year earlier.

The numbers parallel a trend noted by Primary Venture Capital in the third quarter among fintech seed financings in New York — fewer deals but larger investments.  CB Insights reports:

The top 5 largest blockchain and bitcoin rounds in 2016 YTD accounted for $264M in funding, almost 62% of all funding to companies in the space over the period. Four companies including Blockstream, Ripple, and Digital Asset Holdings have raised over $50M in separate financing rounds in the year to date.

Funding also made its way further along the series alphabet, with Circle Internet Financial raising $60 million, led by Baidu. The company uses blockchain technology for instant payments and is going toe-to-toe with Tencent and Alipay.

In a webinar for clients earlier this year, CB Insights noted the rocketlike growth of blockchain and bitcoin fundings: Between 2009 and 2013, these startups raised $93 million; between 2014 and the first quarter of 2016 that number had increased tenfold, to $993 million.

The mix of funding is changing as well, with a sharp division between those backing bitcoin companies versus blockchain applications beyond the world of payments. In 2015 through 1Q 2016, two-thirds of deals were blockchain infrastructure and applications. The mix of investors is also reconfiguring itself, keeping in step with the rest of the fintech world as corporates from JP Morgan to Goldman Sachs and NY Life take a more active interest.

 

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