PitchBook's latest research note covering crypto assets provides an update assessing financing sources for blockchain companies, on top of examining the effects of token sales on venture financing trends and a primer on consensus mechanisms.
• Venture capital (VC) investment in blockchain startups increased considerably in 2017 to $911 million, an 88% jump from 2016. Nearly one-third of VC equity deals in 2017 were in “hybrid” or “protocol” companies that issue their own tokens, as opposed to “centralized” companies that have a more traditional structure.
• In December 2017 alone, investors poured 50% more into token sales (ICOs) than VCs invested in the space over the course of the entire year, and 3x more than all blockchain-related VC deals in 2016.
• While Ethereum will continue to be a nexus for development, other Turing-complete platforms like Cardano, RChain and others will also attract developers looking for increased scalability and security.
• In response to regulatory action on ICOs, early-stage investors will demand equity in addition to rights to discounts on tokens as a hedge against regulatory action on ICOs.