The Top VCs for Blockchain Startups in the US

PitchBook: “Despite the ICO craze of 2017, cryptocurrency startups are still landing venture capital funding” (Clark 2017). According to PitchBook Platform, global VC interest in the sector is increasing; 2017 brought an unsurprising record amount of venture capital that totaled more than $1 billion to startups in the sector (1. Clark 2017). Based on PitchBook’s data, over the last two years, 179 US investors have participated in at least one VC for a crypto startup. For example, Bitwise raised $4 million from Khosla Ventures, General Catalyst and others for its cryptocurrency index fund, while BitGo, which helps businesses integrate cryptocurrencies into their financial systems, secured a $42.5 million Series B led by Valor Equity Partners and BitPay, bitcoin payments provider, raised a $30 million Series B that was led by Aquiline Technology Growth (1. Clark 2017).

According to PitchBook here are there top eight VC investors:

1) Digital Currency Group- NYC2) Pantera- San Francisco3) Hard Yaka- San Francisco4) Blockchain Capital- San Francisco5) Andreesen Horowitz- Menlo Park, CA6) Union Square Ventures- NYC7) Draper Associates- Silicon Valley8) Boost VC-San Mateo, CA

CoinDesk: (This information was from 2015) With more than $800 million invested in bitcoin and blockchain technology startups from 2012-2015, it is safe to say that venture capitalists are “certainly captivated” (2. Rizzo 2015).

In 2014, more than $380 million was pledged to startups from investments, which is impressive, but what that number didn’t convey was how many seed to late-stage firms were making bets on the new wave of innovators that were aiming to take bitcoin and blockchain technology forward. According to CoinDesk’s Bitcoin Venture Capital data, it indicated that nearly 200 VC firms had invested in bitcoin companies, this total excluding various private deal that were kept out of the public eye for “as-yet announced stealth projects” (2. Rizzo 2015). Out of those investment firms, there were clear leaders that emerged, their investment deals and ideals influencing the wider ecosystem (2. Rizzo 2015).

Top VC Investors of 2015 According to CoinDesk Data:

1) Khosla Ventures- Menlo Park, CA

In 2015, they raised $400 million to fund next batch of seed investments, some of which could’ve ended up being devoted to blockchain or bitcoin (2. Rizzo 2015).

2) AME Cloud Ventures- Palto Alto, CA Founded by Yahoo founder, Jerry Yang. AME boasts three of the best-funded

startups in its portfolio: BitPay, Blockstream, Ripple Labs, as well as Blockcypher and blockchain identity solution. Despite their public investments, however, both Yang and his firm remain quiet about both their investment strategy and opinions on bitcoin (2. Rizzo 2015).

3) Lightspeed Venture Partners- Menlo Park, CA Back in October of 2014, this VC investor backed a $30.5 million funding round

for bitcoin wallet provider, Blockchain, the funding then the largest in the space, arguably set the stage for even bigger rounds at the top of 2015 (2. Rizzo 2015). “Overall, Lightspeed has made an interesting investment in an array of bitcoin and blockchain companies either directly or through its subsidiaries, backing BlockScore, digital asset exchange Melotic and China-based bitcoin exchange BTC China. Lightspeed also made a key early investment in bitcoin-focused incubator Boost VC in May 2013” (2. Rizzo 2015).

4) RRE Ventures- NYC This is another firm that has remained quiet with its praise, numbers-wise, that

is. Let’s start with their bitcoin exchange in 2013 with itBit, RRE has since invested in bitcoin mining firms, including: 21 Inc; merchant payment processor BitPay; API specialists Gem; hardware wallet provider Case; Mirror and Ripple Labs. Perhaps its most noteworthy investment is blockchain technology firm Chain, which is led by CEO and RRE partner, Adam Ludwin (2. Rizzo 2015).

“RRE's investments are noteworthy given their variety, though most of these startups are focused on fundamental aspects of the bitcoin ecosystem, whether it be machine-to-machine payments or blockchain-based smart contracts” (2. Rizzo 2015). Nevertheless, in 2015 when CoinDesk published this article, it was thought that these investments could come to form only a fraction of what's next for the firm, for it had raised $1.5 billion over seven funds since its founding back in 1994.

5) Digital Currency Group- NYC (Formerly Bitcoin Opportunity Group) Rebranded as Digital Currency Group (DCG), Barry Silbert's fund has been one of

the most active investors both personally and through DCG, with major names such as Coinbase, Circle and Ripple Labs rounding out its portfolio of 35 companies. Other bitcoin-focused startups that were backed by Silbert’s corporation include: BitFlyer, BitPay, BitPesa, BitGo, BitNet, BitPremier, BitX (2. Rizzo 2015).

DCG has been rather active to say the least, backing firms internationally—Latin America, Mexico, Japan and South Korea—as well as supporting innovation in virtually all areas of the digital currency ecosystem (2. Rizzo 2015).

6) Andreessen Horowitz- Menlo Park, CA

“Perhaps inarguably the most high-profile firm involved in the bitcoin ecosystem” (2. Rizzo 2015). Andreessen Horowitz, the private equity firm launched by Netscape founder Marc Andreessen and Netscape product manager Ben Horowitz, following its participation in Ripple Lab's April 2013 investment round, the firm moved aggressively to help develop and promote the industry's two best-funded startups, Coinbase and 21 Inc, which account for $227 million in total investment or “more than $1 in $4 so far invested in the industry” (2. Rizzo 2015).

7) Union Square Ventures- NYC Motivated by outspoken partner Fred Wilson, Union Square Ventures (USV) has

been among the most actively engaged, publicily. As of 2015, USV made investments in only three bitcoin and blockchain companies: Coinbase, decentralized commerce network OpenBazaar and open-source identity protocol OneName (2. Rizzo 2015). These investments suggest one of the more well-defined propositions among major VC firms. “USV believes in exploring whether the explosive growth enabled by the bitcoin protocol could be applied to verticals beyond finance rather than investments in bitcoin's supporting ecosystem” (2. Rizzo 2015).

8) Boost VC- San Mateo, CA Since its inception in 2013, Boost has been one of the most productive investors.

Back in 2015, Boost stated that it aimed to back 100 bitcoin companies by 2017, while it already boasted a portfolio that included startups with growth potential: Align Commerce, BlockCypher, BTCPoint, BitPagos and Reveal (2. Rizzo 2015).

Fortune.com: As of October 2017, VC firms struck 59 deals, exceeding the 57 that were signed in total in 2016 (3. Hackett 2017).

How Investment in Blockchain Startups Have Grown (2013-2018)

“When blockchains first appeared nearly a decade ago as the technical backbone of Bitcoin, the world’s leading cryptocurrency, they seemed to offer the masses a way to cut out the financial middleman” (5. Nordrum 2017). Over the past two years, giants such as, BNY Mellon, Goldman Sachs, ING, Santander and UBS have been exploring dozens of blockchain projects, some that are moving beyond the “proof-concept phase” (5. Nordrum 2017). One of the first to be released will come from a little known financial corporation that facilitates US $11 trillion-a-year-market for an arcane class of securities, the trading of which allows people to pay money to shed risk or make money by accepting it (5. Nordrum 2017). If all goes according to plan, a much larger chunk of the quadrillion-dollar securities market, along with many administrative tasks that are performed by banks and brokerages, we could see that soon will be running on corporation blockchains (5. Nordrum 2017).

“In the nine years that bitcoin came to this world, it went from a humble startup to a worldwide phenomenon that boasts as many as 12,000 average transactions

per hour,” which translates to over 99,000 BTC or 1,492,424,505 USD per hour, with each transaction worth an average 6 BTC (S7. Stark).

The first cryptocurrencies were riddled with liabilities/vulnerabilities making original public blockchains difficult to scale up. But fast forward to 2016, there was a higher profile. A $60 million heist at the DAO, which is an autonomous investment fund that ran on smart contracts placed atop Ethereum, the public block chain for ethers, which is a cryptocurrency rival to bitcoins (5. Nordrum 2017). Funds were recovered, although, remains a painful reminder that blockchains and their “accoutrements” are still dictated by humans, which makes for common errors. This is why financial firms have limited their own blockchain networks to clients that have clearly identified themselves through “digital keys” (5. Nordrum 2017).

Google and Goldman Sachs have been known to be two of the most active corporate investors in blockchain companies. Google having made investments in Blockchain and Ripple, which is a company that’s working on money transfers by using blockchain technology.

In October of last year (2017), there had been 42 equity investment deals made by corporates, totaling $327 billion, which was just behind the total amount for the entire 2016 year: $390 million (6. Kharpal 2017).

Initial Coin Offerings (ICOs) have outpaced traditional equity funding into blockchain startups, however, a risk of “over-capitalization” exists (6. Kharpal 2017).

Data taken from a report published by CB Insights in October 2017:

Since blockchain is being developed for use in a varies of industries (financial to insurance, for example) and promising cheaper, faster processes, a number of corporate investors in blockchain companies have hit a record high in 2017, this high reaching 9i, which is just behind the 95 venture capital firms in the space (6. Kharpal 2017).

Big banks and financial services firms were the first corporate players to make direct blockchain investments en masse, which is not surprising, considering Bitcoin’s underlying technology lends itself both “technically and in popularly thought, to financial services” (6. Kharpal 2017).

Large financial institutions experiment with ways blockchain technology can be used, ranging from trade finance to moving money.

Since 2014, the ten largest banks by assets have participated in nine rounds, totaling $267 million in disclosed funding to six blockchain companies the reports indicated (6. Kharpal 2017). At the same time, banks are part of associations that are aimed at exploring and developing blockchain technology.

Japanese financial services firm, SBI Holdings is the most active corporate investor, having stakes in eight blockchain firms, including R3, a consortium

of banks that are working on new applications for blockchain technology, and Kraken, which is an exchange for people to trade cryptocurrency (6. Kharpal 2017).

This study claims Google as the second most active, the third they claim is Overstock.com, while U.S. banks Citi and Goldman Sachs are in fourth and fifth places respectively, both companies having investments in Digital Asset Holdings, which is run by former JPMorgan Chase executive Blythe Masters (6. Kharpal).

Comcast Venture: A good Example of how the enterprise is participating in blockchain, hopefully this will provide some added information

Gil Beyda, managing director of Comcast Ventures says, “In 2018, we’re doubling down on Blockchain” (11. Shieber 2018). Comcast Venture is known as the investment arm of one of the world’s largest media and telecom companies. To be clear, Beyda explains, if bitcoin were $15 rather than $15,000, they’d still be committing to it.

o Comcast Ventures has been looking at blockchain technology for months, they have real-world opportunities inside Comcast where “folks are trying to solve real-world problems with blockchain,” Beyda says (11. Shieber 2018). Earlier in January, the company announced a commitment to MState Growth Lab, which is an accelerator program that is focused on enterprise blockchain startups that is also being funded by IBM and Galvanize, the latter being an accelerator investment fun and boot camp. Expect to see this year an increasing number of enterprise blockchain use, cases going mainstream and industries ranging from healthcare applications to government, supply chain and retail to the real estate and transportation industries (11. Shieber 2018). But, for these cases to succeed, blockchain startups must engage well with enterprise customers.

o The $250,000 commitment made to MState is just one in a series of experiments that the fund is trying as it wraps its head around the potential of blockchain for its businesses and as a startup investment opportunity (11. Shieber 2018).

Information Taken from Business Insider Article:

According to Goldman Sachs equity research report that was published in October of last year, with all the hype and the many that see blockchain technology as a “revolutionary innovation” that has a wide range of “potential applications,” on a global level, only two startups have raised $100 million during a 12-month period that ended in September 30th, 2017 (9. Peterson 2017). $100 million is considered relatively small when it comes to venture investments nowadays.

Another sign that venture investors are coming across as trepid in their interest is that the company Brave Software, ranked among the top ten in blockchain startups, a company that has raised the most money during the time period this study took place didn’t even receive its money through venture investment. Rather, Brave Software raised $35 million in 30 seconds through and ICO (9. Peterson 2017).

o Brave Software is a web browser that blocks ads, but pays websites for their content by using cryptocurrency.

Regardless of the above information, blockchain technology is growing in popularity by large enterprises and startups alike; they see it as growing market for a range of applications beyond cryptocurrencies. For example, documenting legal contracts and shipment tracking to name a few. Overall investment, however, have slowed in comparison to other markets. “The space only saw a 34% growth in global VC funding in the third quarter, compared to 65% growth across all global venture capital investments in the same period” (9. Peterson 2017).

IMB and Oracle announced commercial offers in 2016.

What Is the Average Investment Per Startup?

The following statistics are taken from Statista.com. They show the amount of money invested into startups in the blockchain/bitcoin sector worldwide from 2012 to 2016:

“In 2016, global investment into blockchain/bitcoin-focused startups reached 550 million U.S. dollars” (8. Funding and investment of blockchain startup companies worldwide from 2012 to 2016 (in million U.S. dollars)).

o 2012: $1 millo 2013: $93 millo 2014: $357 millo 2015: $524 millo 2016: $550 mill (8. Funding and investment of blockchain startup companies

worldwide from 2012 to 2016 (in million U.S. dollars)).

Demographic Breakdown

Gender:

The Token Summit, which was held May of last year (2017) demonstrated studies and statistical information based on ICO investors, Coinfund’s Jake Brukham being a main actor in the summit who presented information. Here is a snip-it of the information he presented:

91% of investors were male 60% range ages 21-40 and work in a tech field. They owe 50% of their holdings in digital currencies, with a third of them putting in 70%

or more into token/tokenization economy (12. English 2017)

“Bitcoin, and the world of cryptocurrency, is a boys’ club, say some experts, and that should be a case for concern” (13. Gaviola). Survey after survey backs up what the evidence suggests: women are underrepresented, simply put. Google Analytics results put the divide at 96.5% men to a staggering 3.43% of women (13. Gaviola). Here is a link that presents a graph for a visual: https://coin.dance/stats/gender

Duncan Stewart, Research Director at Deloitte Canada’s Technology Division, sees this as a red flag. He remarks, “It isn't merely that the value has risen as far and as fast as it has; it's the fact that it's 97 per cent men — that is, in and of itself, a potential danger sign” (13. Gaviola). There are studies that suggest men are inclined towards what Duncan refers to as, “bubbles,” in a way that women are not. In a recent online post about the subject, Stewart said that he cannot think of any security, currency or asset class in history that shows this extreme of a gender divide, and it has been sustainable (13. Gaviola). One reason is the well-documented lower-risk tolerance of female investors, Stewart explains. Or in other words, “if women aren’t getting involved, it’s likely too risky, this line of thinking suggests” (13. Gaviola). Here is a link to his blog post if you want to read further on this: https://www.linkedin.com/pulse/bitcoin-bubble-gender-split-says-probably-duncan-stewart/?trackingId=LlXWi2rCxUW0itfA92%2BhSQ%3D%3D

Iliana Oris Valiente is rarity in the cryptocurrency world. She has emerged as a female leader, recently chosen to lead Accenture’s global blockchain innovation division. When entering this world, she notes it being a “noticeably male-dominated industry” (13. Gaviola). She was regularly the only female in the room. She does not deny that change is approaching, there are strong women in leadership roles; however, it is slowly arriving to be something more than just a rarity.

So, from this information, a question is proposed: Is gender disparity affecting cryptocurrency prices? And the answer is, yes, it is.

Since a 2013 survey found that 96% of bitcoin users were male, this hasn’t changed much. According to Skye Dunworth, creator of Spendher app, which is specifically aimed at getting women involved with bitcoin, the app may have about 33% male users (14. Munro 2018).

It's been fairly well demonstrated across many studies that an enormous gender disparity tends to affect decision-making in any community. There’s also a wide body of research showing that on average men and women have significantly different investment habits.

I came across a study that scored participants across several categories based on their responses to hypothetical coin flip questions, and examined responses by gender. I found this to be rather interesting, and hopefully to add a little more to this gender gap. Both genders leaned towards the mathematically sensible option, but women were about twice as likely to accept “a statistically lower payout as the cost of guaranteed returns,” while, conversely, “men were slightly more likely to accept a statistically lower payout as the cost for a chance at higher returns” (14. Munro 2018). They presented this study in the form of a “Would You Rather” type of game.

1) Would you rather flip a coin for a chance at $120? (90.51% men would/ 81.8 % of women would) Or be given $30? (9.49% of men would/18.12% of women would)

2) Would you rather flip a coin for a chance at $120? (1.46% of men would/1.34% of women would) Or be given $90? (98.54% of men would/98.66% of women would) *Source: (14. Munro 2018).

So, how much of a difference in this actually making? “Based on this, it’s a statistically reasonable assumption that traders in the

cryptocurrency market are on average much keener on risk than investors in other markets, and the population as a whole,” (14. Munro 2018). This would be an expected effect of the gender disparity. However, the real difference this makes is harder to calculate. In practical terms, you could assume that this risk-happiness takes the form of average cryptocurrency traders putting down a larger portion of their savings on crypto than investors in other areas, along with a greater willingness to lose it all, but how much more? (14. Munro 2018). The author of this article, Andrew Munro, says that it’s hard to say, though existing research appears to suggest that the average difference in risk preferences between men and women is—keep in mind by a conservative estimate—"enough to change the outcome of decisions up to about 20% expected return on investment” (14. Munro 2018).

Age:

Joshua Gains in a blog post, layed out research presented for 2017 that was based on the age of entrepreneurs. Gains put his conclusion in the form of an imagined dialogue between a skeptical reader and someone who was armed with the facts about age and startup success. It's Here is it cited in full:

(Taken from a blog post written by Jessica Stillman for Inc.com, December 2017)

Skeptical Reader: Hold on a sec, my impression from TechCrunch is that the award winners are pretty young.

Expert: Yep, around 31 or if you look at Inc and stuff like that it is 29 years.

SR: OK so what is it like for the US?

E: For new firms in the US between 2007 and 2014 (aka the Y-C years), it is 41.9.

SR: OK but that is all firms. What about technology?

E: It is actually higher, 43.9 with VC backed firms 41.9 and patenting firms 44.6.

SR: Yeah but not in Silicon Valley surely?

E: Nope pretty much the same.

SR: Alright but what about successful firms? That's what the VCs care about.

E: In Silicon Valley, the ones with a successful exit have an average founding age of 47!

Stillman underlines this for the “skeptical reader”: “the average age of Silicon Valley entrepreneurs who have a successful exit (i.e. sell their company for a bucket load of money or take it public) is 47 years” (17. Stillman 2017). Gains is careful to point out that this data isn't perfect and research is ongoing, but he's pretty definitive that these results "should give Silicon Valley investors types some food for thought” (17. Stillman 2017).

Profile of a VC:

What profile do you need to work in VC, someone may ask? “The short answer: it depends” (18. Vidra 2013).

Judd Rogers from Boulder, Colorado tried to answer this question in his paper titled “How to be a venture capitalist when you grow up,” where he read the bios of 151 partners in US funds and looked at the 2008 NVCA Venture Census, which included over 500 professionals working in the venture capital field in the United States. He found that most partners in funds were either successful entrepreneurs or they worked their way up in venture capital.

Here is the profile Rogers came up with:

The average partner is 46 years old. Of the 2011 NVCA Census, which included 600 respondents, 79% were men and

87% of respondents were Caucasian. He found it not to be a very diverse industry then.

Of the 151 VC bios that were scanned, 79 or 53% had an MBA. Another 15% had a Phd, JD or MD. In the US, 60% of the MBAs were graduates of Harvard or Stanford.

They previously had a job in consulting or finance (18. Vidra 2013).

Mark Suster, an entrepreneur turned VC, made a blog post while he was recruiting for two VC analysts for GRP Partners. He described what a successful candidate may bring:

The chosen candidate will probably have worked for a highly reputable firm either in technology, consulting, investment banking, media or a startup.

The likely candidate will undoubtedly had graduated with an undergraduate degree within five years of applying

VC companies want somebody who is ready, willing and able to debate technology with us—Where do you think things are heading? What is the future of social media, digital television or mobile computing?

Companies also welcome those with interest area in financial services (18. Vidra 2013).

This article provides what they call as the “The 10 commandments for the Venture Capital job seeker” (All of this is directly taken from the source: 18. Vidra 2013).

1) Determine if this is really what you want to do — Guy Kawasaki created the entertaining VCAT — the Venture Capital Aptitude Test. Passed the test and still want to land a venture job? Keep on reading.

2) Make sure you have ‘real world experience’ — You have three routes available to you. You could start a company or land a role at an early-stage startup, work for a big corporation in a relevant role, or join a bank or a consulting firm. Different funds have different preferences, but regardless of what your experience is, you should be able to show that you were exceptional. [Note: You can still gain highly valuable experience being an early employee of a venture-backed startup — you’ll need to be prepared to live on a tight budget for a few years if you start your own business.]

3) Go to business school, and ideally a top ranked one — Having an MBA from Stanford or Harvard won’t secure you a place at a venture firm, but it certainly helps. It pains me to say this (even though I have an MBA), but I know plenty of funds who won’t even consider associates that haven’t graduated from a top business school. Of course, there are exceptions, and the level you are entering the firm matters — VC interns and analysts can be hired right out of college. Chris Dixon, a serial entrepreneur who is now a partner in Andreessen Horowitz, shared his own advice from Business School: “Even if you go to one of these fancy schools it’s still not easy to get a job. You need to network like crazy. I did a whole bunch of volunteer research projects for VCs when I was in business school. I came up with lists of investment ideas so when I got a few minutes with a VC, I could show them I was obsessed with this stuff. “

4) Build your reputation — Start a blog and set up a website, and maintain a social media presence. LinkedIn is the venture capitalist’s preferred social network (85 percent of them are active on it according to the 2011 NVCA Venture Census). Seth Levine of the Foundry Group points out that Union Square Ventures doesn’t even glance at traditional resumes, but rather asks for a candidate who is “web proof,” meaning they have a strong and consistent digital presence.

5) Have passion for great products — If you’re going to invest, you better know your tech. Use the products that you’re going to be investing in, whether it’s downloading the newest ride sharing app or testing the alpha social network. Become what I fondly call a “beta whore.” Ask yourself, what are your favorite new 10 startups in 2013? The Ultimate Startup Intelligence Tools List we posted on VC Cafe will point you to get tools like: Betalist, MOMB and others.

6) Network in a helpful way — Nothing is more annoying than people who ask to “grab coffee” without any context or thought of the benefit to both sides (check out this coffee etiquette). Your network is only as good as your ability to connect people in it — make helpful introductions, hook up startups and help VCs get their job done. Rinse and repeat, and those requests for coffee won’t feel like a drag to a VC. Get comfortable with the etiquette of making introductions.

7) Teach and be generous with your time — It goes without saying that startups have limited resources. Entrepreneurs could use some help looking at their marketing strategy or talking through their launch plans. As investor Charlie O’Donnell recommends, “be selfless with your time”. A great VC is a good teacher, so look for any opportunity you have to teach — alma mater, accelerator programs, hackathons, and so on. You’ll learn a lot along the way.

8) Never stop learning — The biggest mistake you can make is assume you know everything, because your CV says so. Spend some time on online education sites like CodeAcademy, Coursera, Khan Academy or Udemy to learn more about the world you want to get into. Here’s a long list of recommendations for learning in 2013.

9) Be Informed — In the fast-paced tech industry, you really need to be on top of your news. Find your Google Reader alternative, follow the top VC blogs (Fred Wilson, Dave McClure, Paul Graham, Chris Dixon or take your pick from this top 50 VC blogs list), and read tech news sites like VentureBeat. If tech news aren’t fascinating to you, find your passion: clean tech, biotech, hardware are all relevant.

10) Stay hungry, stay humble — I often use the acronym “DBDB,” meaning “don’t be a douche bag.” Even if you invested your dad’s money in a couple of startups, it doesn’t make you an expert. Venture Capital is a long-term game, and like any other profession, it will require you to spend 10 years to master the field. Give the same respect to the entrepreneurs you talk to, before, during and after you got the job.

*Another great article that focuses on this aspect of the subject matter: https://hbr.org/2014/04/how-old-are-silicon-valleys-top-founders-heres-the-data

What VCs are Currently Investing the most in Blockchain Startups? Niches They’re Investing in the Most

“It is no surprise that most blockchain startups can be found in the finance & insurance sector (35.3%)offer financial services (6.1%) or exchange, trading & investment (11.6%) and payment (7.7%) products as well as digital currencies (2.9%) or digital wallets (4.9%),” making the largest partition of blockchain startups, FinTech[ii] startups (19. Sander 2017). What’s interesting is that almost half of blockchain startups are in the information & communication sector (44.1%), approximately 70% are within the finance & insurance and information & communication sector, while other ecosystems, such as electricity, gas, steam and air conditioning supply are comparatively small, ranking in at (1.7%) (19. Sander 2017).

Regarding products, there is a larger variety that exists. The highest percentage of products are infrastructure products (13.1%), while other product groups “with a relatively high percentage are blockchain consulting (5.2%), provenance & notary (4.1%), governance & transparency (3.8%) and identity & reputation (3.7%)” (19. Sander 2017). Other product groups account for less than 3%.

The percentage of blockchain startups raising funds only through ICO

The amount of money raised by start-ups through ICOs has surpassed early stage venture capital funding for internet companies.

“ICOs are a way for start-ups to raise money by selling investors tokens in exchange for equity, similar to an initial public offering (IPO)”

ICOs are a way for start-ups to raise money from users, think of it being similar to crowdfunding, allowing them to buy a stake. ICOs are popular among cryptocurrency and blockchain start-ups and have recently exploded.

According to Coinschedule, (a website that tracks this kind of data) the total amount raised via ICOs in April of last year (2017) was just under $100 million, by May the total had more than doubled to almost $250 million and in June, ICO funding had hit over $550 million, making it the first month ever that it surpassed angel and seed VC funding.

“In July, ICOs were just over $300 million, while angel and early VC funding was just over $200 million”

In 2017, there had been 92 ICOs that had collectively raised $1.25 billion. (20. Kharpal 2017).

*The graph is taken from Kharpal’s article: (20. Kharpal 2017).

Though the above information looks promising, the bar is still considered low for startups raising through ICOs, why is that? Bernard Moon answers with the following: “You have a nicely written whitepaper, so you should be able to raise $10 million? You have a team from Google and Facebook or co-founded a prior company that was sold as an acquihire? Maybe most of these new startup investors don’t know how high the bar is in some sectors for seed capital. Most seed funds don’t even look at mobile applications with retention rates below 20% after six months or e-commerce companies with less than $500,000 in revenues” (21. Moon 2017).

This article provides more information that may be useful: https://medium.com/swlh/dont-be-dumb-money-how-to-invest-in-icos-and-blockchain-startups-698a29e27381

Added/Extra Information

The Bitcoin User:

“Given Bitcoin is a decentralized system, the Bitcoin network doesn’t offer a lot of information about its users” (15. Stray 2017). Although, one can base calculations on a number of wallets or transactions.

Regarding Bitcoin Wallets, the number has doubled from five to ten million during the 2014-2015 period.

In April of 2017, 12 million wallets were reported.

In 2014, research was carried out by the University of Illinois Urbana-Champaign. A questionnaire was posted on websites frequented by Bitcoin users, like Bitcoin.org, Reddit and Twitter. A visiting assistant professor of sociology, Jeremiah Bohr, and an assistant professor of library and information science, Masooda Bashir, analyzed almost 1,200 responses, finding that the results weren’t as great as they expected. The average age of respondents was about 33 years old and nearly half of them came from the US (15. Stray 2017). Here are the results Bohr and Bashir found:

25-year-olds have about half as many Bitcoins as 35-year-olds, where as 35-year-olds have about half as many Bitcoins than 45-year-olds (15. Stray 2017).

Bitcointalk took a poll of the average age of Bitcoin investors/users:

16-21 years of age: 18% 22-33 years of age: 47.1% 31-40 years of age: 25.9% 40-55 years of age: 6.3% 55+: 2.7% (Stray 2017).

Some examples of what “Bitcoiners” use cryptocurrency for:

Because of the anonymous and untraceable nature of Bitcoin, some choose to use it to buy drugs. Sites such as, Silk Road, help almost everyone to buy restricted substances via BTC. “The peak of activities of these “Darknet” businesses took place around 2011-2012, and it has subsided a little since then”

Some users prefer to give their BTC to charity. One charity organization recently managed to gather $7 million worth of Bitcoin donations (15. Stray 2017).

Based on surveys conducted from 2013-2015, the following is a typical Bitcoin User:

Gender: Male. “Over 90% identify as male” Nationality/Origin: American. 53% are either from North or South America. Religious Domination: Non-Religious. 61% of users do not affiliate with any religion. Yearly Household Income: $50-$100K. 23% made an income within this range. Marital Status: Married. 56% were married or in a relationship. Job Status: Employed. Over 43% had full-time jobs. Political Party: Libertarian. 37% were registered as Libertarian or “Anarcho-Capitalist” Generous? Yes. 77% spend coins as gifts, donations, as well as purchasing legal goods

(15. Stray 2017).

Future of Bitcoin:

First investor in Snapchat, Jeremy Liew and the CEO and co-founder of Blockchain.info Peter Smith, have made some predictions:

Bitcoin’s user base has grown from 120,000 users in 2013 to 6.5 million users in four years, the number can only soar higher.

By 2030, Bitcoin’s price will reach $500,000 and, judging by past levels of growth, the number of users can increase as high as 400 million, this being considered a rather optimistic prediction.

References:

1) https://pitchbook.com/news/articles/the-top-venture-capital-investors-in-cryptocurrency-startups

2) https://www.coindesk.com/10-vc-firms-bullish-on-bitcoins-potential/

3) http://fortune.com/2017/10/17/bitcoin-ethereum-blockchain-vc-cb-insights/

4) https://medium.com/@tahmaseb/blockchain-companies-vcs-should-invest-in-976dd3856781

5) https://spectrum.ieee.org/telecom/internet/wall-street-firms-to-move-trillions-to-blockchains-in-2018

6) https://www.cnbc.com/2017/10/18/google-goldman-sachs-investors-blockchain.html

7) https://www.forbes.com/sites/haroldstark/2017/12/12/keep-an-eye-on-these-blockchain-startups-throughout-2018/#6ca2503d13e6

8) https://www.statista.com/statistics/621207/worldwide-blockchain-startup-financing-history/

9) http://www.businessinsider.com/report-says-venture-investment-in-blockchain-technology-growing-slowly-2017-10

10) https://pitchbook.com/news/articles/the-top-venture-capital-investors-in-cryptocurrency-startups

11) https://techcrunch.com/2018/01/10/comcast-ventures-is-betting-on-blockchain-technologies-in-2018/

12) https://blog.sweetbridge.com/the-tokenization-of-everything-post-tokensummit-thoughts-3601a06bcf3

13) http://www.cbc.ca/news/business/bitcoin-s-gender-divide-could-be-a-bad-sign-experts-say-1.4458884

14) https://www.finder.com.au/how-the-cryptocurrency-gender-ratio-is-affecting-the-market

15) https://cointelegraph.com/news/bitcoin-users-who-they-are-and-what-they-do

16) https://hbr.org/2014/04/how-old-are-silicon-valleys-top-founders-heres-the-data

17) https://www.inc.com/jessica-stillman/youll-never-guess-average-age-of-successful-silicon-valley-founders.html

18) https://venturebeat.com/2013/08/13/so-you-want-to-be-a-venture-capitalist/

19) https://medium.com/@philippsandner/analysis-of-leading-blockchain-startups-worldwide-8ecee1a7d670

20) https://www.cnbc.com/2017/08/09/initial-coin-offerings-surpass-early-stage-venture-capital-funding.html

21) https://medium.com/swlh/dont-be-dumb-money-how-to-invest-in-icos-and-blockchain-startups-698a29e27381