Will ICOs outperform Venture Capital in 2018?


Although there has been some negative press around ICOs since they skyrocketed in 2017, it hasn’t stopped them from raising more funds for blockchain-based startups than traditional venture capital (VC). Indeed, according to Jason Rowley, a contributor at Techcrunch, ICOs are on track to do even better in 2018.

The investment from VC in 2017 was $900 million and in the first two months of 2018 it amounted to $375 million, but this looks like chump change compared with the ICO fundraisers.

Crunchbase recorded a total of 527 funding rounds by both VC and ICOs for 2017 and 2018 to date. In terms of numbers of startups, VC still has 68% of the market, but, whilst ICOs may only have 32%, the dollar volume is considerably higher.

Basically, as Jason Rowley says: “despite the smaller number of ICOs, these funding events — on average — attract much more capital than the average venture funding round.” In fact, if you look at the dollar volume, ICOs take 78% of the market for blockchain-related startups. In figures, this equates to $1.3 billion raised through VC and $4.5 billion raised by ICOs, according to Crunchbase.

Of course, not all ICOs have been a runaway success. Bitcoin news reported that out of 902 businesses raising an ICO, some 142 failed before they could even close the funding round, and another 276 failed after the fundraising was completed. A further 113 projects have been classified as ‘semi-failed’, either because they have stopped posting on social media, or because experts have assessed that the community is too small to give the project a chance of success. Ultimately, “59% of last year’s crowdsales are either confirmed failures or failures-in-the-making.”

This doesn’t mean that the ICO sector is doomed, there are still going to be many successful coin offerings – Telegram’s ICO is just one example of healthy show of support. Undoubtedly some will continue to view this form of fundraising with scepticism, but if investors do their due diligence and more regulation comes into play, there are no good reasons to think that the ICO does not have a secure and sustainable future.

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