Written by Livia Roschdi and Thomas Meier, Signature Ventures, May 2019
- The number of Blockchain VCs increased fivefold between 2013–2016 and quadrupled between 2016–2018
- The majority of Blockchain VC investors is located in the US with most investors being general Tech VCs, while Germany comes second with most investors being specialized Blockchain VCs
- The development of the global Blockchain landscape seems to follow the Bitcoin hype cycles in 2013 and 2017
Aim of the Study
The German and Austrian Blockchain landscape is active and thriving as the chainDE registry has recently reached the 200 mark (current count: 201 startups). This prompted us to broaden our scope and look beyond familiar borders to explore the global Blockchain investment landscape.
Key Questions of Interest
- Who are the big Venture Capital (VC) players in the global Blockchain investment landscape, and which startups/portfolio companies (PCs) did they invest in?
- What is their strategy/investment focus, where are they located and since when are they active?
- Which Blockchain industry sectors received most investments, and which sectors remain potentially underfunded?
- What is the geographical distribution of the Blockchain startups? Which startups received the most investments, and when were they founded?
In order to approach these questions, we collected data for a descriptive analysis of VC fund portfolios.
Selection of Venture Capital Firms and Compilation of Portfolio Companies
We compiled a list of 172 VC firms, who are invested in Blockchain startups, by consulting online lists and databases (e.g. non-restricted data provided by Crypto Fund Research). Within this selection, 91 Blockchain-dedicated VCs (i.e. funds with an exclusive investment focus on Blockchain equity and token investments) and 81 non-exclusive Tech VCs (i.e. funds with a broader technology investment focus including Blockchain) could be differentiated. When analyzing Tech VC portfolios, only Blockchain investments were considered. Proceeding from these 172 VCs, 128 fund portfolios could eventually be analyzed according to seven defined Blockchain categories/sectors and 31 sub categories (cp. table 1). 44 firms did not provide accessible portfolio information on their online channels (i.e. website, LinkedIn, Facebook, Twitter) and could therefore not be included in further portfolio analyses. The evaluation of 128 VC portfolios brought together a list of overall 1,520 single investments in 881 unique portfolio companies, which were attributed to defined Blockchain categories. This dataset provides a comprehensive overview over the Blockchain investment landscape, highlighting the VC investors on one side and their respective Blockchain portfolio companies on the other.
The Blockchain categories were based on the Pitchbook Blockchain Market Map (originally six main categories and 26 sub-categories), which was extended by one main category (7: Research, analytics & emerging technologies) and five sub-categories (3f energy; 3g content management; 6c media & video; 7a research, education, analytics, news, events; 7b artificial intelligence, neural networks, cloud computing). The aim was to capture and describe the Blockchain ecosystem according to its various sectors of industry applications whilst providing two levels of evaluation differing in specificity (broad = main categories, fine = sub-categories)
1. Blockchain Investors
1.1 Number of Blockchain VCs Increased Fivefold between 2013–2016
Of the 172 VCs which are invested in Blockchain startups, 91 were Blockchain-dedicated VCs and 81 were general Tech VCs (cp. Chart 1). When comparing the founding years of both fund types, Blockchain VCs experienced a significant increase since 2013. While Tech VCs have consistently grown over the years, Blockchain-dedicated funds only started to emerge in 2013 (4 funds), but increased fivefold within the next three years until 2016 (x4,7; 19 funds), and quadrupled over two years until 2018 (x4,3; 83 funds); cp. Chart 2. While the actual numbers of specialized Blockchain investors and tech generalists are nearly equal, specialist funds didn’t appear until much later, but grew exponentially before surpassing Tech VCs in 2018. If the trend continues, Blockchain investments may be made predominantly by specialized investors, who might have a deeper knowledge of the yet nascent but maturing technology.
1.2 The Majority of Blockchain VC Investors is Located in the US
In our selection of VC funds, 49% are located in the Americas, 27% in the EMEA region and 22% in the Asia-Pacific region. While Tech VCs are the dominant Blockchain investor type in the Americas (56%), Blockchain-dedicated VCs head the Blockchain investor landscape in the EMEA region (55%) and Asia-Pacific region (79%); cp. Chart 3.
When taking a closer look within the economic regions, it does not come as a surprise that most VC funds are headquartered in the US (96% of the Americas), followed by the top countries within the EMEA, Germany (34% of EMEA) and Great Britain (30% of EMEA). The Asia-Pacific region is headed by China with Hong Kong (53% of Asia-Pacific) as the top investor, followed by Singapore (18% of Asia-Pacific); cp. Chart 4.
1.3 The Majority of the Largest VCs are Blockchain Dedicated VCs which Diversify across all seven Blockchain Categories
The majority (47%; 7 VCs) within the top 15 funds in terms of portfolio size (i.e. number of PCs) is made up of US funds, while Singaporean funds make up 26% (4 VCs) forming the second largest group (cp. Chart 5). Only one European fund made it into the top 15 (Carnaby Capital, UK). With the exception of Boost VC, all funds are specialist Blockchain-dedicated funds. While categories 1–3 make up more than 50% of the top six fund portfolios, all 15 funds diversify across all seven Blockchain categories, except for Kryptonite 1 and Alchemist.
1.4 US Investments Dominate Each Sector of the Global Investment Portfolio
The global portfolio comprises 1,520 single investments in 881 unique portfolio companies. The highest number of global investments by simple count was made in sector 2, ecosystem. Here, specifically sector 2c, which comprises infrastructure and & application development, made up 88%. Sector 4, exchanges & trading, came in second, with a sector focus on 4g, crypto exchanges & trading (47%) before 4d, marketplaces (25%). Investments in sector 3, enterprise blockchain solutions, focused on 3a, financial services, which amounted to 53% (cp. Chart 6).
Investments of the Americas region, which are largely made up of US investments, hold the absolute majority within all sectors, but only hold a simple majority in sectors 2 and 7.
2. Portfolio Companies
2.1 Portfolio Companies Founded during the Past Three Years Make up 57% of the Global Portfolio
Overall 881 unique portfolio companies could be identified, while only 841 could be analyzed according to their founding years. In 2012, only 20 PCs had been established. The number rose to 358 in 2016 and reached a peak with 293 companies established in 2017, followed by additional 186 in 2018 (cp. Charts 7, 8). Overall, approximately 57% of the portfolio companies were founded between 2017 and 2019.
2.2 The Development of the Global Blockchain Landscape Seems to Follow the Bitcoin Hype Cycles in 2013 and 2017
Taking into account the sectors of the PCs together with their respective founding years, the development of the global Blockchain landscape can be traced from 2009 onwards (cp. Chart 9). This seems to have happened in two cycles: The emergence of Bitcoin in 2009 first triggered the development of infrastructure and applications (category 2). During the first hype in 2013 and 2014, a demand for exchanges and marketplaces for the trading of cryptocurrencies (sector 4) and enterprise banking solutions (sector 3) can be detected. While enterprise solutions continually grew throughout 2015 and 2016, a second hype cycle in 2017 saw a sharp increase in all sectors, led by sectors 2 (ecosystem), 4 (exchanges) and 3 (enterprise solutions).
The two hype cycles seem to correlate with Bitcoin price rallies, which may have supported the development and expansion of the entire Blockchain sector. The first Bitcoin hype built up during 2013, when the BTC price culminated at around USD 1155 in Dec 2013. The community experienced a second more recent hype during 2017, with bitcoin nearly scraping past the USD 20,000 mark in Dec 2017.
2.3 US PCs Make up 44% of All Unique PCs
Mirroring the distribution of VC fund headquarters, a large number of the portfolio companies are located in the Americas, specifically in the US (385 PCs) with a prominent hub in the greater Silicon Valley area (cp. Chart 10). European forerunners are the UK (46 PCs; hub in London) and Germany (36 PCs; hubs in Berlin and Munich), while Singapore (83 PCs; hub in Singapore) and China with Hong Kong (59 PCs; hubs in Shanghai and Beijing) are leading the race in the Asia-Pacific region. Only 22% of all portfolio companies are located in the EMEA area, which may suggest that European startups are underfunded.
Considering the sector-specific distribution, US PCs make up nearly 50% of each sector, while Asian-Pacific PCs have a focus on application development (nearly 40% of sector 2) and gaming (40% of sector 6); cp. Chart 11. European startups make up approximately. 20% of each sector and are more evenly distributed with a slight focus on research, analytics and emerging technologies (sector 7).
2.4 US PCs Attracted Most Investors
Five portfolio companies managed to obtain funding by more than 10 VCs (cp. Chart 12). Ripple (San Francisco-based, sector 1e) leads the list of funding with 13 companies, followed by Abra (San Francisco-based, sector 1d) and Filecoin (Palo Alto-based, sector 2b) with each 12 companies, and 0x Protocol (San Francisco-based, sector 2c) and Coinbase (San Francisco-based, sector 1d) each 11 companies (cp. Table 2 for VC investors). While 13 PCs are located in the US (mostly San Francisco, Boston and New York), the EMEA region is represented only by Polkadot (Manchester, UK) and Dfinity (Zug, Switzerland). One-third of the top 15 PCs can be attributed to sector 2c, infrastructure and application development. At least two of the top three Blockchain investors Digital Currency Group, Pantera Capital and Boost VC are invested in the top five PCs (cp. Table 2).
Summary of Results
While Blockchain technology is slowly but continuously maturing, the number of specialized funds is rapidly growing as more and more experts in the field emerge. The US are the leading country when it comes to the number of Blockchain investors, while Tech VCs are still the dominant investor type. The majority of Blockchain PCs are also located in the US, which may be attributed to a home bias of US investors (i.e. US investors have a tendency to invest in domestic equity). The top Blockchain investors are mostly Blockchain-dedicated funds, with US funds Digital Currency Group, Pantera Capital and Boost VC leading the list. PCs which received the most investments are also US-located (Ripple, Abra, Filecoin, 0x Protocol, Coinbase). Looking at the EMEA region, Germany is leading the list of investors with a majority of Blockchain-dedicated VCs, while the UK is the home of the majority of European Blockchain startups. In addition, Switzerland seems to be a popular location for PCs due to its crypto-friendly tax regulation for companies. Looking at the Asia-Pacific region, China is the top Blockchain investor with a nearly evenly balanced amount of Blockchain-dedicated and Tech VCs, while Singapore attracts the most PCs. With its liberal regulatory rules and a good infrastructure, Singapore provides an ideal hub for Blockchain developers.