Cryptocurrency startups need to continue to grow and evolve. One important aspect to do so is raising sufficient funding. Despite the success of ICOs, a lot of companies still flock to venture capitalists. The year 2018 has proven to be quite successful in the VC department so far.
VC Funding Remains a Key to Success
The past few years have been rather interesting for cryptocurrency startups. Raising money, while a difficult process, has become significantly easier. That is primarily because of the initial coin offering concept. ICOs have allowed companies to raise billions of dollars over the years. This situation is slowly changing. Regulators all over the world are cracking down on these token offerings. Especially in the US, the SEC is scrutinizing a lot of startups.
As such, cryptocurrency startups have to diversify their approach. It would appear a growing number of them slowly turn back to venture capitalist funding. A new report by Outlier Ventures confirms this renewed trend. VC Investments in startups have surged throughout 2018. A total of $2.85bn has been raised during the first nine months of this year. These figures further confirm VCs are still keen on new ideas pertaining to the cryptocurrency industry.
Especially the third quarter of 2018 has been action-packed. The report indicates 119 deals were concluded during this three-month period. That is remarkable, although not entirely surprised. Most of the VC funding comes from the United States. This further confirms more startups steer away from the ICO business model. Instead, they approach institutional investors and hedge funds directly. That is still the safe bet until proper ICO regulation is introduced on a global scale.
Investors Remain Hopeful
While the cryptocurrency markets go through another fire sale, investors remain confident things will improve. This new wave of VC funding confirms this sentiment. Although the funding seems to increase, that doesn’t automatically improve the success rate for such companies. The majority of ideas may not worth out in the end. Some statistics even predict 90% of concepts will ultimately fail, despite having financial support.
This move also seems to indicate fewer tokens will be created moving forward. Over the years, hundreds if ICO tokens flooded the market. Most of these companies raise Ether during their initial coin offering. A growing number of those companies have allegedly all but liquidated those assets in recent months. That may also be one of the reasons why cryptocurrency markets have seen such bearish pressure throughout most of 2018. Vast sums of crypto assets have been liquidated in quick succession.
The most important aspect of this report is how the funding numbers increase. Compared to 2017, three times as much money has been raised through VC funding already. There is still one full quarter to go before the final tally becomes apparent. As such, the total money raised can easily surpass the $3bn mark when everything is said and done.
Do you think that VC funding will surpass ICOs as the fundraising method of choice for crypto startups? Let us know in the comments below.
Images courtesy of Shutterstock
