Q3 2019 Analysis and Trends
From the information that we have gathered at Techemy Advisory, there were approximately 143 investments made in blockchain/cryptocurrency companies totaling to US$632.5M a 68% decrease compared to Q2. A point to note is that Q2 had a few very large raises with contributed a large portion of the total amount raised. Of the 143 investments, 22 were token sales and 121 were equity investments. There were more equity investments made compared to Q2 and slightly less token investments. Of the twenty-two token sales, twenty were IEOs, two more than Q2. This confirms our hypothesis from the Q2 report that there will be a fairly consistent number of IEOs rather than a significant increase. The highest recorded amount raised in Q3 was by Icertis, which raised $115M in a Series E round. There was a 26% decrease in equity capital raised compared to Q2.
45 of the 143 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 98 companies who disclosed financial information.
As seen in Fig.1, the Blockchain sector and Other category both had twenty-four companies raising capital. The “Other” category had the largest number of equity raises at twenty-four, and consisted of companies in fourteen industries including Supply Chain, Data, Property, Ticketing and more. The Trading & Investment sector had the most companies raising equity capital in a single sector at nineteen. The Blockchain sector had the most companies conducting token sales. Eight companies from the Blockchain sector conducted token sales, which is more than companies that did equity raises in the Cryptocurrency, Enterprise Solutions, Financial Services and Gaming sectors.
Even though a large proportion of companies that conducted raises in Q3 were spread across various industries and grouped as “Other”, they only represent 12.6% of total funds raised in Q3 as seen in Fig 2. The Blockchain sector represented just under a quarter of all capital raised, while the Trading and Investment sector, the sector with the most companies conducting equity raises represented only 12.2% of all capital raised. As seen in Fig 3, 30% of capital raised in the Blockchain sector was by token sales.
A few of the major blockchain/crypto investors were identified to have made more than one investment in Q3 2019 as seen in Fig 4, Fenbushi Capital and NEO Global Capital (NGC) made ten investments each, Coinbase Ventures made six investments, Binance, Morgan Creek Capital, Multicoin Capital, Arrington XRP Capital, and HashKey made four investments each. BlockVC, Kenetic Capital, and Polychain made three investments each.
There were a range of other crypto/blockchain investors that made at least one investment in Q3 and they include, Xpring, ConsenSys, Bain Capital Partners, gumi Cryptos, Hashed, Dragonfly Capital Partners, NEM Ventures, Coinshares, Medici Ventures, Winklevoss Capital, Pantera Capital, Alphabit Fund, and Placeholder. A few well known investors such as Union Square Ventures, Lux Capital, Arrington XRP Capital, Hashkey Group and Fenbushi Capital among others took part in the Blockstack token sale, which raised $23M from public and private investors.
Q2 2019 also saw many traditional Venture Capital firms and institutions make investments, as seen above in Fig 5. Fidelity made two investments directly, and three investments via its subsidiary Avon Ventures. Tier one Venture Capital firms, Andreeseen Horowitz and Kleiner Perkins made two investments each, while Nomura and Naspers Ventures also made two investments each.
Techemy Advisory recorded twenty acquisitions in Q3 2019. Two more than Q2 and six less than Q1. The month of September had ten acquisitions which is the most for a month since March.
Of all the acquisitions made in Q3, only two disclosed financial details. Jeffery Berns, the CEO of Blockchains, a blockchain incubator and investment company, acquired Kirkwood Bank of Nevada for $28M and Coinbase acquired the Institutional Custody Business of Xapo for $55M. 50% of all acquisitions in Q3 were in the Trading & Investment space, while the remainder were split between various different sectors including Copyrighting, Banking, Mining and Financial Services. Compared to Q2 there were 6 more acquisition in the Trading & Investment space
As can be seen in Fig 7 a few of the biggest names in crypto made acquisitions in Q3. Kraken, acquired Interchange, an accounting, reconciliation and reporting service provider for cryptocurrency hedge funds, asset managers and fund administrators. Bittrex acquired Tradedash, a trading tool that offers customers a customisable trading experience. Binance acquired JEX, a crypto-asset trading platform offering spot and derivatives trading services. Ripples Xpring, acquired Logos Network, a startup developing payments solutions focused on speed and scalability and Ripple acqui-hired Algrim, a Iceland based crypto trading firm and experienced developer of crypto trading platforms.
Of the $78M raised in token sales $53M was raised via IEOs. There were twenty-three IEOs recorded of which eighteen publicly disclosed financial details. The amount is 38% less than the recorded amount for IEOs from Q2. IEOs from seven exchanges were recorded for Q3. The largest recorded IEO was conducted on Binance by Perlin, which raised $6.7M by selling 86.5M tokens through a lottery. The largest recorded token sale was Blockstack’s SEC-qualified token offering and Asian strategic round. This token sale collectively raised over $23M from more than 4,500 individuals and entities.
Q3 saw four successful STOs, three in July and one in September. Collectively they raised $7.2M, which is a 95% decrease compared to Q2, but Q2 had on STO which raised $100M on its own. The average amount raised for STOs after discounting outliers is approximately $2.4M per offering. Q3 saw many new offerings being announced, as well as major partnerships to bring more tokenised property offerings. The largest STO recorded by Techemy Advisory for Q3 was by BTG Pactual, a South American investment bank, which raised $3.3M from retail investors for REITBZ, a real estate fund.
Outlook for Q4 2019
In our outlook for Q3 2019, we expected a steady stream of IEOs and equity capital raising with no major changes, and an increase in STOs and STO announcements and M&As. All of these expectations have come to pass, apart from an increase in recorded STOs, but there was a significant increase in announcements around partnerships and progress of security token exchanges. For Q4 we expect IEOs to continue steadily, but potentially decrease in occurrences and amounts raised. Equity capital raising might decrease slightly as we are closing in on the end of the year, but M&A activity should remain the same. There may also be an steady number of STOs being held and announced, many of the partnerships announced in Q3 will begin execution. We can continue to expect institutional participation in the investment space as we saw in Q3.
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.
