Investment in Blockchain and Cryptocurrency companies set to decline in 2019 due to lack of large deals

Over $12.7bn has been invested in Blockchain and Cryptocurrency companies globally since 2014

  • Total investment between 2014 and 2018 grew at a CAGR of 123.4% reaching nearly $7.5bn last year. This record funding was driven by 16 large deals over $50m which make up 48.3% of total capital raised since 2014. In H1 2019, only four deals over $50m have been completed leading to a drop in total capital raised.
  • When large deals over $50m are excluded from the analysis, investment in Blockchain and Cryptocurrency companies has still increased each year since 2015, with 2018’s total accounting for seven times the total investment in 2015.
  • In terms of deal activity, 2018 saw a record amount of deals completed with 228, 1.5x the previous record from 2017. However, H1 2019 has seen a slowing of deal completion with only 64 deals completed in the first half of the year.
  • The sudden drop in investment and deal activity seen in the first half of 2019 can be explained by mounting scepticism surrounding the sector along with volatility in the market and a dampened investor appetite due to fear of Bitcoin crashing again. Further to this, initial coin offerings proved popular at the start of 2018, hence peak investment, however recently the market has collapsed due to cryptocurrency prices taking a dive.

North America, Asia and Europe dominate Blockchain and Cryptocurrency investment

  • There have been 844 Blockchain and Cryptocurrency deals completed globally since 2014, with companies in North America accounting for 38% of these transactions.
  • North America, Asia and Europe are dominant in terms of deal activity with 91% of all Blockchain and Cryptocurrency deals being completed by companies in these regions.
  • In terms of funding, North America dominates, accounting for 61% of total investment over the last five and a half years. Only 2% of investment since 2014 has come from regions outside of North America, Asia or Europe.
  • This is to be expected as most innovation tends to start in North America due to their technologically savvy population and competitive economy which depends on technological progress. This environment lends to early adoption of new technologies such as cryptocurrencies. Asia and Europe also attract a healthy share of investment and deal activity in this subsector as they both offer an environment like North America in terms of technological adoption making them both attractive regions for investors. Also, cryptocurrencies are so popular in Asia due to their ability to circumvent the widespread currency regulations in the region.

Blockchain and Cryptocurrency companies in North America and Asia dominate the top 10 deals in the subsector since 2014

  • The top 10 Blockchain and Cryptocurrency deals since 2014 have collectively raised over $7.0bn equating to 54.7% of total capital raised in the subsector over the last five and a half years. Nine of the top 10 deals from Blockchain and Cryptocurrency companies are companies based in either Asia or North America.
  • The largest deal went to which raised a $4bn ICO, the largest to date, more than doubling the previous record of $1.7bn from Telegram&TON Inc. recently released the first version of their open source blockchain software EOS.IO 1.0. The capital will be used towards a venture partnership for initiation of third-party development on the EOS.IO platform.
  • The largest Asian deal went to Bitfinex, a digital asset trading platform for digital currency traders which accommodates for the booming interest in cryptocurrency trading. Bitfinex raised $1bn in an ICO in Q2 2019.
  • The only deal outside of North America and Asia to make the top 10 was Switzerland-based Bancor with their $152.3m ICO. This ICO attracted 10,885 buyers and the company states that the token capital will be used towards community grants, public bounties, project advisors and future partnerships.

The proportion of Blockchain and Cryptocurrency deals globally valued under $1m has decreased nearly three-fold since 2014

  • The Blockchain and Cryptocurrency landscape has witnessed a shift over the past five and a half years from investors predominately backing deals under $1m, towards backing later-stage deals.
  • The proportion of deals valued below $1m fell by 46.3 percentage points (pp) from 62.0% in 2014 to just 15.7% in 2018, indicating the growing maturity of the landscape. This is also a side effect of the popularity of ICOs in 2017 and 2018, hence in H1 2019 smaller deal sizes are increasing again as ICO popularity decreases.
  • The share of deals above $50m increased by 10.5 pp from no deals in 2014 to 10.5% in H1 2019, with all the transactions in this deal size range being from either Asia or North America.
  • Average deal size has been increasing each year since 2014, with a peak in 2018 of $43.5m. This has dropped slightly in the first half of 2019, however the average deal size has still grown by nearly 15x between 2014 and H1 2019, from $2.8m to $41.6m, as we see the annual investment in Blockchain and Cryptocurrency companies increasing at a higher rate than the volume of deals.

The data for this research was taken from the FinTech Global database. More in-depth data and analytics on investments and companies across all FinTech sectors and regions around the world are available to subscribers of FinTech Global. ©2019 FinTech Global

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