BY Fintan Ng - October 9, 2018
ICO downtrend continues in September
Initial coin offerings (ICOs) are fast losing their lustre, with startups raising funds through selling equity and even starting to raise money through security token offerings (STOs) instead.
Autonomous Research says in an Oct 8 report that crowdfunding through ICOs continue to trend down, with about US$300mil in funds raised in September, from just over US$400mil the previous month.
It noted that this was a far cry from the US$2.4bil raised in January and if EOS and other chunky private token raises were included, would have gone to over US$3bil, which suggests that September monthly activity is down 90%.
It says that the drop in monthly activity mirrors that of the drop in ethereum price but with a three-month lag.
There could be several reasons for the apparent disinterest in ICOs, with investors’ waning interest in utility tokens being one of them.
The research outfit believes that investors now prefer equity in startups over utility tokens that does nothing yet and are legally non-binding.
“Anecdotally, projects are selling equity and giving matching tokens for “free” to investors in the capital structure,” it adds.
But balancing that view is Pitchbook’s data on blockchain and bitcoin venture capital raises showing that such funding has increased to over US$1bil in August.
Autonomous Research says the reasons are that fintech companies such as Robinhood and Revolut have moved into the crypto space and Bitmain, the bitcoin mining rig manufacturer, “trying to vacuum up capital before the public offering”.
“This gives us a slightly more balanced view of funding in the space – with recent months seeing a decline in public crowdfunding, but an increase in private checks,” it adds.
It noted that a number of platforms are also now involved in STOs but this form of funding is still at the beginning stage, with STOs not a serious form of fundraising for at least another half-year due to regulators’ concerns.