Nov 22, 2017 | Techcelerate Ventures |
#BlockchainCBI Blockchain In Review Investment Trends And Opportunities #BlockchainCBI Webinar recording will be distributed after The presentation will also be sent to you. Feel free to share with colleagues. The resolution of some slides may be suboptimal due to the webinar software. Those slides will look fine in the presentation that we send you. http://support.citrixonline.com/en_US/Webinar 2 #BlockchainCBI @cbinsights #BlockchainCBI Join the conversation on Twitter 3 #BlockchainCBI The technology market intelligence platform. CB Insights software lets you predict, discuss and communicate emerging technology trends using data in ways that are beyond human cognition. 4 #BlockchainCBI The most publicly referenceable customers of anyone in the industry A FEW OF OUR HAPPY CUSTOMERS Pat Grady Sequoia, Partner "Think of the fundamental value chain of venture capital If we play the clock forward, the finding and assessing of investments will be almost entirely done by technology, not human beings. And the company that is today positioned to be the market leader in that evolution is CB Insights." 5 #BlockchainCBI CBI Councils brings together experienced executives to accelerate their success through the sharing of experience-based insights that inform business decisions and help solve complex strategic, organizational, and growth challenges. #BlockchainCBI Arieh Levi @arieh313 firstname.lastname@example.org Intelligence Analyst, CB Insights Arieh Levi is an Intelligence Analyst at CB Insights, where he focuses on Fintech, Financial Services, and Blockchain. Arieh's published research and data analysis has been featured in Fortune, The Wall Street Journal, CNBC, Reuters, and Bloomberg. Arieh previously held roles in healthcare and financial services, and is a summa cum laude graduate of Yeshiva University. 7 #BlockchainCBI Robert Hackett @rhhackett Reporter, Fortune Robert Hackett is a staff writer at Fortune where he covers technology, business, security, and all things crypto-related. He is the creator of Cyber Saturday, the weekend edition of Fortune's daily tech newsletter. He is a co-host of Fortune Tech Debate, a weekly video series, and a founding editor of The Ledger, Fortune's new fintech franchise. Before Fortune, Hackett served at Nautilus Magazine, TED Conferences, and Johnson & Johnson. He studied chemistry and English with minors in history and science & technology studies at Cornell University and journalism at Columbia Journalism School. 8 #BlockchainCBI Blockchain Report & Article 9 Click here for the article Click here for the report #BlockchainCBI 11 12 27 42 53 57 What is Blockchain? Blockchain Venture & Equity Investment The Rise of Initial Coin Offerings Blockchain Corporate Investment Key Takeaways and the Road Ahead Q&A Table of Contents 10 #BlockchainCBI Source: Dilbert. What is Blockchain? A Three-Minute Primer 11 #BlockchainCBI Blockchain Venture & Equity Investment A Shifting Landscape 12 #BlockchainCBI Since 2012 650+ equity deals have closed for over $2B 13 #BlockchainCBI Early investments in the sector explored bitcoin's outlined purpose Wallets, exchanges, and remittance platforms allow consumers to send bitcoin across borders and watch their transactions settle on the blockchain in real time. Early investments focused on currency and trading WALLETS & MONEY SERVICES EXCHANGES & TRADING Equity funding (excluding ICOs) 14 #BlockchainCBI Howard Marks Founder, Oaktree Capital Management "Think about the fact that the price of Bitcoin has risen more than 350% so far this year and 3,900% in the last three years. To the degree people argue that Bitcoin is a currency, then (a) why is it so volatile? and (b) is that desirable? You might want to consider whether a real currency can do that, or whether speculative buying is determining Bitcoin's price." Use case as currency gives investors pause 15 #BlockchainCBI Startups pivoted as certain use cases see little traction Coinbase initially promised "instant payments, simple transfers, and widespread adoption." The company's branding has since shifted to emphasize its exchange and trading platforms, primarily for investment. Coinbase homepage shifts from currency to investment 2013 2017 YTD January 2013 January 2017 16 #BlockchainCBI Early blockchain startups failed at a higher rate than other sectors Of 103 blockchain companies that received seed or angel funding in 2013 2014, only 28% managed to raise additional funding, and just one company made it to Series D. Blockchain vs. tech rate of follow-on equity funding Equity funding 100% 28% 11% 2% 100% 46% 28% 14% Seed/Angel 1st Follow 2nd Follow 3rd Follow 2013 - 2014 Blockchain Cohort 2008 - 2010 Tech Cohort 17 #BlockchainCBI BIG BANKS CONSIDER USING BITCOIN BLOCKCHAIN TECHNOLOGY September 17, 2015 FOR THE CURIOUS BUT UNCOMMITTED, A BLOCKCHAIN IN A BOX December 8, 2015 2015: Bitcoin bad, blockchain good 18 #BlockchainCBI As the sector matured, VCs turned to private business blockchains Expanding beyond bitcoin, private blockchain providers looked to build enterprise blockchain and distributed ledger solutions, first for financial services, and then moving to other verticals. Sector matures, focus moves to private blockchains ENTERPRISE & GENERAL BLOCKCHAIN SOLUTIONS CAPITAL MARKETS & FINANCIAL SERVICES Equity funding (excluding ICOs) 19 #BlockchainCBI Brand-name investors have placed far-ranging bets on blockchain Investors have since placed blockchain bets across payments, ICOs, and alternative use cases, such as digital rights management (MediaChain) and commerce (OpenBazaar). Select brand-name investors and blockchain investments Equity funding (excluding ICOs) 2012 2017 YTD (10/08/2017) Note: LP placements into cryptocurrency hedge funds (e.g. MetaStable) are not considered equity funding. 20 #BlockchainCBI 2017 should see highest number of equity deals After a weak 2016, investors are returning to the sector en masse, driven in large part by a run-up in cryptocurrency prices and a substantial increase in the number of companies looking to raise funding. Blockchain VC-backed deals vs. equity deals Equity deals (excluding ICOs) 2012 2017 YTD (10/08/2017) 2 20 54 61 57 59 6 50 143 165 138 144 77 (Full-year run rate) 188 (Full-year run rate) 2012 2013 2014 2015 2016 2017 YTD Blockchain VC-Backed Deals Blockchain Equity Deals Note: VC-backed deals include participation from at least one VC-type investor (VC, Growth Equity, or Super Angel). 21 #BlockchainCBI After mega-deals, dollars should also rise in FY 2017 While some have pronounced the death of traditional blockchain VC due to ICOs, equity deals and dollars should rise this year. Total funding has been boosted in large part by mega-deals to Coinbase, R3, and Digital Asset among others. Blockchain annual global financing history Equity funding (excluding ICOs) 2012 2017 YTD (10/08/2017) $98 $357 $525 $545 $640 6 50 143 165 138 144 2012 2013 2014 2015 2016 2017 YTD Disclosed Funding ($M) Deals $831 (Full-year run rate) 188 (Full-year run rate) 22 #BlockchainCBI Blockchain-specific firms are the sector's most active VCs While the sector has matured, the top investors (by number of portfolio blockchain companies) remain blockchain-focused VC firms, like Digital Currency Group, Blockchain Capital, and Pantera. Most active VC blockchain investors 2012 2017 YTD (10/08/2017) Rank Venture Investor 1 Digital Currency Group 2 Blockchain Capital 3 Pantera Capital 4 Draper Associates 5 500 Startups 5 RRE Ventures 5 Fenbushi Capital 8 Andreessen Horowitz 8 Plug and Play Ventures 10 Liberty City Ventures 10 Union Square Ventures 10 FuturePerfect Ventures Note: VCs in orange focus specifically on blockchain. 23 #BlockchainCBI The sector is maturing, with more deals at later stages A steady decline of the proportion of early-stage equity deals may indicate that blockchain like other emerging technologies is moving from creation, to crowding, to consolidation. Blockchain annual global deal share by stage Equity deals (excluding ICOs) 2012 2017 YTD (10/08/2017) 100% 70% 71% 72% 57% 50% 14% 17% 8% 21% 20% 2% 2% 4% 7% 5% 2% 1% 1% 1% 1% 1% 14% 10% 13% 14% 21% 2012 2013 2014 2015 2016 2017 (YTD) Seed / Angel Series A Series B Series C Series D Series E+ Other 24 #BlockchainCBI Deal share grows outside of top countries As the sector has matured, teams looking for equity funding have outgrown the top ten countries, highlighting the technology's inherent bend toward borderless development. Blockchain annual deal share by country Equity deals (excluding ICOs) 2013 2017 YTD (10/08/2017) 0% 10% 20% 30% 40% 50% 60% 70% 80% 2013 2014 2015 2016 2017 YTD 25 #BlockchainCBI Blockchain Venture & Equity Investment Conversation and Q&A @cbinsights #BlockchainCBI 26 #BlockchainCBI The Rise of Initial Coin Offerings Ethereum and Tokens 27 #BlockchainCBI THE NEW BLOCKCHAIN TREND THAT COULD TRANSFORM BUSINESS October 18, 2017 HOW BLOCKCHAIN AND ICOS ARE CHANGING THE FUNDING GAME FOR STARTUPS September 24, 2017 2017: Forget blockchain let's talk crypto 28 #BlockchainCBI Initial coin offerings Blockchain startup seeks cash, announces an ICO ICOs embed value in the protocol, and reward: (1) investors (2) developers (3) users The startup exchanges "utility tokens" for cash Tokens are traded on exchanges 1 Investment of money 2 In a common enterprise 3 With an expectation of profits 4 From the efforts of others Is your token a security? The Howey Test 29 #BlockchainCBI Since January 2016 250+ ICOs have closed for well over $2B 30 #BlockchainCBI Fred Wilson, October 2017 Partner, Union Square Ventures "We have a good thing going with the equity based model but we understand that we have to adapt and react to changes in the market and we are doing that, fairly aggressively, with tokens." The disruption of VC? 31 #BlockchainCBI ICOs growing at a much faster rate than equity deals Over 250 blockchain teams have completed ICOs since January 2016, with more than 55% of them raising during or after July 2017. Cumulatively (since January 2016), the number of ICOs should surpass the number of blockchain equity deals in October 2017. Ethereum price vs. cumulative blockchain equity deals, ICOs 2016 2017 YTD (10/04/2017) $15 $388 $391 $292 30 130 190 250 93 157 259 282 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 ETH/USD Completed ICOs (cumulative) Blockchain Equity Deals (cumulative) Sources: CB Insights, TokenData, CoinSchedule, EtherScan. 32 #BlockchainCBI Blockchain startups turn to ICOs for funding, as capital floods sector Total funding raised by ICOs surpassed total funding raised via traditional equity financing for the first time in Q2'17. Year-to-date, ICOs have closed more than $2B in funding, with many ICOs still ongoing and hundreds more scheduled. Blockchain equity funding vs. ICO funding Q1'16 Q3'17 $179 $161 $122 $83 $130 $248 $259 $12 $21 $21 $39 $38 $757 $1,327 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Blockchain Equity Funding ($M) ICO Funding ($M) Sources: CB Insights, TokenData, CoinSchedule. 33 #BlockchainCBI Tokens offer immediate liquidity, differ from traditional VCs Brand-name VCs have invested into cryptocurrency hedge funds (as both LPs and GPs) and tokens directly. Over 70 cryptocurrency funds have sprung up since the start of 2017, many with venture funds as investors. VCs invest in tokens, cryptocurrency funds 34 #BlockchainCBI ICOs span the spectrum Teams holding ICOs are building decentralized blockchain applications across verticals, ranging from asset management to social networks to prediction markets. 134 blockchain startups with ICOs Closed ICOs greater than or equal to $500K, 2014 2017 YTD (09/08/2017) 35 #BlockchainCBI THE SEC FILED FRAUD CHARGES AGAINST 2 'INITIAL COIN OFFERINGS' October 1, 2017 TEZOS RAISED $232 MILLION IN A HOT COIN OFFERING, THEN A FIGHT BROKE OUT October 19, 2017 Cause for alarm? 36 #BlockchainCBI "Token logic" louder than over-capitalization concerns $1,186 $1,316 $1,232 $1,197 $1,434 $1,279 $1,406 $12 $21 $21 $39 $38 $757 $1,327 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Tech Angel & Seed Equity Funding ($M) ICO Funding ($M) $158 $70 $51 $63 $52 $183 $73 $12 $21 $21 $39 $38 $757 $1,327 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Blockchain Early-Stage Equity Funding ($M) ICO Funding ($M) Blockchain early-stage equity funding vs. ICO Tech angel & seed equity funding vs. ICO Q1'16 Q3'17 Q1'16 Q3'17 Note: "Blockchain Early-Stage" includes Angel, Seed, and Series A. Sources: CB Insights, TokenData, CoinSchedule. 37 #BlockchainCBI Steven Peikin Co-Director, SEC Division of Enforcement "As with any kind of newsworthy event, roaches kind of crawl out of the woodwork and try to scam money off of investors." 38 #BlockchainCBI Self-regulation could rein in runaway ICOs The SAFT proposes a forward contract; accredited investors purchase securities that convert into tokens once the network is functional. SAFT: The Safe Agreement for Future Tokens October 2, 2017 39 #BlockchainCBI The apple might not fall too far from the tree Ignoring the critics, if you had bought $100 of bitcoin on January 1, 2011, it would be worth upwards of $1.7M today. While ICOs catch the eye of scam artists and regulators alike, decentralized token technology is certainly innovative, and perhaps fundamentally disruptive. Annual Bitcoin "obituaries" 2010 2017 YTD (10/18/2017) 1 6 1 15 28 39 28 58 2010 2011 2012 2013 2014 2015 2016 2017 YTD Bitcoin Obituaries Source: 99Bitcoins. 40 #BlockchainCBI The Rise of Initial Coin Offerings Conversation and Q&A @cbinsights #BlockchainCBI 41 #BlockchainCBI Blockchain Corporate Investment Private Blockchains and Consortia 42 #BlockchainCBI Since 2012, corporates have participated in 140+ equity deals closing for over $1.2B 43 #BlockchainCBI Financial services firms express the most interest in blockchain Since mid-2014, more than 50 of the world's largest financial services institutions have made direct investments in the sector. Financial services firms invest early in blockchain Equity deals Q2'14 Q2'17 Note: By date of first investment. 44 #BlockchainCBI After 2016 dip, record number of corporates invest in sector The number of active corporate investors at 91 in 2017 YTD is closing in on the same metric for VCs, which has seen 95 active investors in 2017 YTD. Blockchain annual active investors by type Equity deals 2012 2017 YTD (10/08/2017) 3 18 89 69 91 6 40 100 113 90 95 2012 2013 2014 2015 2016 2017 YTD Corporate & CVC Venture Capital Note: Corporate & CVC includes diversified financial institutions, investment banks, and merchant banks. 45 #BlockchainCBI Corporates continue to make direct blockchain investments Corporate participation in blockchain equity deals and funding is set to rise in FY 2017. Blockchain annual corporate participation Equity funding (excluding ICOs) 2012 2017 YTD (10/08/2017) Note: Corporate & CVC includes diversified financial institutions, investment banks, and merchant banks. $3 $75 $375 $390 $327 1 4 20 33 43 42 2012 2013 2014 2015 2016 2017 YTD Corporate Participation ($M) Deals 46 #BlockchainCBI Top corporate investors invest in far-ranging applications Google comes in second, with 6 investments that span data storage (Storj), financial services (LedgerX), and merchant services (Veem). Most active corporate blockchain investors 2012 2017 YTD (10/03/2017) Note: Corporate & CVC includes diversified financial institutions, investment banks, and merchant banks. Investor Rank Select Companies Orb R3 Ripple Kraken Coinplug Veem Wirex bitFlyer 1 Storj Labs Blockchain Ripple LedgerX Buttercoin Veem 2 Settlemint Factom Ripio Symbiont Bitt Peernova 3 Digital Asset R3 Axoni Cobalt Chain 4 Digital Asset R3 Axoni Circle 5 2012 - 2017 YTD (10/03/2017) Note: Goldman Sachs has since left R3. 47 #BlockchainCBI William Mougayar Author, The Business Blockchain "[Consortia] are hard. Pulling diverse companies to work together is not easy. You need disciplined processes, persistence, patience, a tolerance for some politics and lots of maturity." Consortia present promise and peril 48 #BlockchainCBI Indy Hyperledger members and notes Iroha Fabric Burrow Sawtooth Lake About Modular blockchain Governed by the Linux Foundation Permissioned/private blockchains Use Cases Five modules allow for range of custom use cases Supply chain and logistics Road Ahead Pilots and proofs-of-concept Incorporation of smart contracts Interoperability with other consortia and blockchains, most notably ethereum Note: Members listed are not exhaustive of consortium's members. 49 #BlockchainCBI 48% 27% 21% 3% 1% North America Europe Asia Unknown South America About Largest open-source alliance Connecting corporates with blockchain SMEs Native cryptocurrency, ether (ETH) Permissionless (questions of scalability, privacy) Use Cases Generic platform allows for cross-vertical cooperation Hybrid blockchains (public-private) Supply chain/logistics Road Ahead Structuring alliance governance Launch of seven working groups Standards-setting Note: Members listed are not exhaustive of consortium's members. Source: Enterprise Ethereum Alliance. Enterprise Ethereum Alliance members and notes EEA members by continent 50 #BlockchainCBI About Enterprise 'global consensus ledger' software for cross- border payments and remittance Native cryptocurrency, ripple (XRP) Geographic consortia (e.g. Japan) Use Cases Interbank transfers and payments Retail remittances Supports any token/unit of value Road Ahead Building out administered geographic consortia Custom enterprise software offerings Distinguishing between XRP and Ripple Ripple investors and notes Note: Investors listed are not exhaustive of consortium's members. 51 #BlockchainCBI About Corda distributed ledger technology Smart contracts incorporating legal contracts Permissioned, private Working with regulators, leading financial institutions Use Cases Financial services Relatively closed ecosystem and non-modular architecture leave little room for experimentation Road Ahead Interoperating with other consortia and blockchains Rolling out Corda and continuing development A red line denotes an investor that has since left the consortium. R3 investors and notes Note: Investors listed are not exhaustive of consortium's members. 52 #BlockchainCBI Key Takeaways The Road Ahead 53 #BlockchainCBI Key Takeaways: Initial coin offerings have raised more than $2B in 2017 YTD. Total ICO deals and funding are increasing at a faster clip than traditional equity deals and dollars. Mega-deals push equity funding up, but growth slows as ICOs take hold. Traditional equity deals and funding could see their highest annual totals ever, although the number of teams raising via ICOs is increasing faster. Corporate investment is set to rise in 2017. The number of unique active corporate investors has hit a high of 91 in 2017 YTD, and is closing in on the number of active venture capital investors participating in equity financings. 54 #BlockchainCBI Key Takeaways: ICOs look to remain the financing method of choice for blockchain startups. On a quarterly basis, total funds raised by ICOs surpassed total funds raised via traditional equity financing for the first time in Q2'17. More VC firms are investing in cryptocurrency hedge funds and tokens directly. Brand-name investors placing bets on top ICOs could signal institutional interest in this most recent wave of blockchain innovation. 55 #BlockchainCBI Venture investors are still looking for real blockchain usage beyond speculation. Users are necessary for the sector to mature beyond speculation. Teams holding ICOs have yet to seriously collaborate with regulators to develop strong legal frameworks. Without uniform self-regulation, state bodies will have to step in. Corporate investors will have to take a hard look at their blockchain bets. With recent successful pilots thrusting the technology back into the spotlight, corporate investors will continue to seek concrete solutions through direct investments and consortia memberships. The Road Ahead: 56 #BlockchainCBI Blockchain In Review Conversation and Q&A @arieh313 @rhhackett @cbinsights #BlockchainCBI 57 #BlockchainCBI CBInsights.com @ cbinsights +1(212)292-3148
Early investments in the sector explored bitcoin’s outlined purpose Wallets, exchanges, and remittance platforms allow consumers to send bitcoin across borders and watch their transactions settle on the blockchain in real time.
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