Q1 2019 Analysis and Trends
Equity Investments, Token Sales and Acquisitions
There was a lot of activity in the blockchain and cryptocurrency investment space over the first quarter of 2019. From the information that we have gathered at Techemy Advisory, there were approximately eighty investments made in blockchain/cryptocurrency companies totalling to just north of US$575M. Of these eighty investments, ten were token sales and seventy were equity investments, clearly displaying an increase in traditional investment, compared to token sales. A point to note is that half of the token sales were initial exchange offerings (IEO), which is a new method of selling tokens in partnership with an exchange platform. The highest recorded amount raised in Q1 was by Kakao Corp, who raised $90M in a private token sale for their blockchain platform, ‘Klaytn’. The largest equity raise of the quarter was completed by Figure Technologies, a blockchain-based home equity loan startup that raised $65M in a Series B round.
Twenty-one of the eighty companies that we have identified have not disclosed any financial details about their deals, therefore the following graphs and comments regarding financials are based on details from the fifty-nine companies who disclosed financial information.
As seen in Fig 1, five of the ten companies that conducted token sales were building blockchains or protocols. While eighteen companies that conducted equity raises were in the Trading and Investing sector.
Even though a large proportion of companies that conducted raises in Q1 were in the Trading and Investing sector, they only represent 11.9% of the total funds raised in Q1 which is displayed in Fig 2. Companies building new blockchains and protocols raised 32.8% of the total Q1 funds, which was over $188M as presented in Fig 3. The next largest portion was raised by the Financial Services sector, which represents 20.9% of total funds raised, equating to over $120M. More than half of the capital raised by blockchain protocols and projects was raised in token sales rather than equity raises as displayed by Fig 3.
Six major blockchain/crypto investors were identified to have made investments in Q1 2019: Digital Currency Group (DCG), made six investments, Consensys Ventures, made five investments, Pantera and Galaxy Digital each made four investments and Morgan Creek and Paradigm each made three investments. Other notable investors who made at least one investment in Q1 2019 are Andreessen Horowitz, Khosla Ventures, Science, SPICE VC, Coinbase Ventures, Y Combinator and Founders Fund.
Techemy Advisory recorded twenty-six acquisitions that took place in Q1 2019, with some big names getting involved. There were seven acquisitions in January, eight in February and eleven in March, demonstrating a clear trend of increase in the number of acquisitions.
Coinbase, an American trading platform and premier cryptocurrency exchanges, is among the most aggressive acquirers in the blockchain-crypto space. Coinbase has made twelve acquisitions to date, with two within the first quarter of 2019. First was the marketing data collection startup, Blockspring in January and second was Neutrino, a blockchain-crypto analytics platform in February.
The largest disclosed acquisition deal of the quarter was Kraken acquiring Crypto Facilities for an amount over $100M. We saw social media giant Facebook acqui-hire the team behind Chainspace, a decentralised smart contracts platform. We also saw Bakkt, the long-awaited cryptocurrency platform run by Intercontinental Exchange, the parent company of the New York Stock Exchange, close their first acquisition by acquiring certain assets of Rosenthal Collins Group, a futures commission merchant. Circle, the global crypto finance company closed the acquisition of SeedInvest, a registered broker-dealer, allowing Circle to enter the crowdfunding and tokenisation space. As displayed in Fig 6 the sector that a majority of the acquirers and acquirees are from is the Trading and Investing sector.
By analysing the investments and acquisitions of Q1 2019 we can see a trend emerging. That trend is an increased interest in the Trading and Investment sectors. There were nineteen companies in the Trading and Investment sector that raised capital via equity and token sales. Furthermore, of the twenty-six acquisitions that took place, 65% involved companies from the Trading and Investment sectors (eighteen companies). Of the six major investors that were identified, all six made at least one investment in this sector. DCG made six investments overall and half of those were investments in companies in the Trading and Investment sector.
It is also clear that equity investments are far exceeding token sales, but the rise of the IEO has introduced an interesting method of raising capital via token sales hosted by an exchange. Of the major exchanges, Binance led the charge by hosting their first IEO in January, followed by one in February and March. Bittrex and Huobi are the other major exchanges that have conducted IEOs alongside many smaller exchanges like Cobinhood and ZBG. The rise of security token offerings (STO) hasn’t been as accelerated as was expected. We have only been able to identify a handful that were announced in January.
Outlook for Q2 2019
Due to conversations we have had with exchanges, we can expect a steady increase in IEOs through Q2, with each IEO raising an average of $5M since the method has been proven. Equity capital raising will continue to increase as the year progresses as we have seen an increasing trend from January to March. There were twenty-two investments made in January and thirty-five made in March. We can expect more funds being raised to invest in cryptocurrencies and blockchain technology. STOs can also be expected to increase over the next quarter as the infrastructure continues to be established.
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Disclaimer: This report is provided for informational purposes only and is not intended to provide commercial, financial or legal advice. Nothing in this post constitutes an offer of securities or regulated financial products or financial services to any person.
