Blockchain Startups Move From Coin Offerings to Investment for Funding
Almost 3000 new Blockchain companies have been created in the UK since 2008, but there is a move towards funding rather than initial coin offerings (ICOs).
According to research by MMC Ventures, 2700 Blockchain companies have been created in the UK since 2008 and in the first 10 years, only 9% were funded by investors and the majority by raising capital ICOs. However, the ICO funding model has become increasingly difficult due a crash in crypto prices, so companies are shifting to equity finance and placing a greater emphasis on company fundamentals.
The MMC Ventures report Crypto Winter or Crypto Spring? Reasons to be Optimistic on the UK’s Blockchain Ecosystem showed that between January 2017 and December 2019, UK Blockchain companies raised £1.2bn via ICOs, compared to £525m invested in equity. However, in an environment where entrepreneurs were focused on the token price rather than the business proposition, few were interested in creating long-term value, and a large number of ICOs were determined scams.
Since 2019, UK Blockchain startups have attracted £168m in equity funding. Report author Asen Kostadinov said that while capital may be less abundant than it was during the ICO bubble, resources are being deployed more efficiently and targeted at fundamental areas of the technology stack.
He said: “The growing share of ‘live’ Blockchain, or ‘Blockchain-inspired,’ deployments suggests we are seeing the first signs of maturity in the technology. While it took the internet approximately 30 years to become ‘usable’ by businesses, Blockchain has made that transition in a third of the time.
“At MMC Ventures, Blockchain will continue to be an area of research and investment focus. We back entrepreneurs that are changing industries at the most fundamental level and we believe that applications of Blockchain technology in the enterprise will have that kind of transformative impact in the coming years.”
Along with a rise in Blockchain adoption in the financial services sector, supply chain management is a core use-case for Blockchain technologies, while 11% of Blockchain businesses come from the media and advertising sector, where Blockchain enables efficient traceability via digital asset management and micropayments.