VC Firms Shifting to Seed and Series A Investing

Venture capital firm Outlier Ventures has released a report on the state of blockchain investing in 2018, in which they say that venture capital investments into the blockchain space so far in 2018 total $2.85 billion, an increase of 316% over the $900 million figure reached in the entirety of 2017.

The report also points out the trend of VC firms making their investments into blockchain companies at earlier stages than ICO pre-sales, which were previously their preferred stage of investment. Many blockchain-focused projects are avoiding token sales or even issuing a token altogether due to various hurdles and uncertainties:

“Legal expenses, marketing costs and community building efforts are part of the reason why startups that don’t necessarily require a network or token have been avoiding token generation events completely. Until we see a recovery in Bitcoin’s price, it is likely that the model of token generation events that took center stage in 2017 would never return.”

Even though estimates about concrete numbers vary, virtually all available data shows a strong decline of ICO-funded projects in general. The amount of funds that are flowing into ICOs is decreasing, and it is becoming extremely common for ICO-issued tokens to be trading below ICO price after they are listed on cryptocurrency exchanges.

The Future of Utility Tokens

Outlier Ventures still see a considerable amount of potential in this space, however, as they believe tokens issued by startups with well-designed token economy models will start to have more functionality than merely being a mechanism that facilitates fundraising for startups. So far, the utility token model has struggled to gain traction, and most tokens are still primarily used for speculation on secondary markets rather than deriving their value from use on their respective platforms.

According to Outlier Ventures, governments across the world are also warming up to the possibilites presented by blockchain technology: