In early 2016 it started becoming obvious that Bitcoin hadn’t just given rise to a full new asset class of blockchain related projects but that these entities were reinventing how early stage fundraising is done.
No longer are young blockchain startups laboring in the traditional capital markets of angel investors and venture capital firms. Instead, we’re seeing massive demand for blockchain assets from investors globally who have no qualms about sending digital currencies online to teams they’ve never met in person who have yet to produce even an MVP product.
The continually growing number of massive digital-currency raises among blockchain startups has shifted the attention of many investors from conventional crowdfundings and IPOs to what have now been dubbed “Initial Coin Offerings” or ICOs.
This digital-currency funding path presents numerous alluring opportunities, from a worldwide potential investor pool to limited accreditation standards to multiple global exchanges providing 24/7 trading with deep order books and clients hungry for new assets — all with vague legal and regulatory compliance standards completely in their infancy.
The speed and ease of closing a round has never been so efficient. Blockchain companies are now raising millions of dollars in days, hours, or even just minutes — a process that used to require months upon months of relationship building, negotiation, and proof of product and revenue growth.
Traditionally, a startup would dream of initially tapping friends and family for money to get off the ground, building a prototype to help raise a seed of a few hundred thousand from angels, and then praying to close a Series A of a few million over a year later from established VC firms who would drill them on everything from market opportunity to product growth to the background of the team to its financials to who else is already committed in the round.
And blockchain startups were taking this traditional path as recently as last year. We saw Ripple raise a $200,000 seed back in 2012, two $1 million angel rounds in 2013, another $3.5 million seed in late 2013, and then eventually raise a massive $28 million round in mid 2015. Similarly, Factom raised an initial seed of $140,000 in April 2015 and three subsequent rounds in the following eight months to total around $3 million. Both Ripple and Factom have blockchain assets native to their networks, XRP and FCT, yet chose the VC route as opposed to selling tokens to the public.
But in 2016 alone, we’ve seen three extremely fast blockchain-startup fundraises based on the sale of their native digital tokens: Lisk (LSK) raised over $5 million in a month, Digix (DGD) raised over $5 million in 14 hours, and just yesterday, First Blood (1SŦ) raised over $5 million in less than five minutes. Each of these platforms is very much in its early stages.
Blockchain asset raises haven’t been limited to the few-million-dollar range either. This same year we’ve also watched Waves raise north of $15 million and The DAO notoriously raise north of $150 million before getting hacked and causing Ethereum (ETH, another famous crowdsale that raised over $15 million — now worth over $1 billion) to spin off another fork (Ethereum Classic, ETC — now worth over $100 million).
The trend is only continuing to pick up steam, and the calendar of live and upcoming blockchain asset crowdsales is getting more packed than ever, with Iconomi having collected over $5 million with several days left and highly anticipated projects like Golem, ZCash, and Gnosis scheduled to kick off their fundraisings in the coming weeks.
The traditional paradigm of early stage fundraising and investing has clearly shifted, and it’s clear we’re in for a world of numerous blockchains and projects with their own markets that have begun to attract the attention of both entrepreneurs and investors worldwide.
Disclaimer: All viewpoints are completely my own . Nothing presented represents the viewpoints, opinions, etc. of any corporation or organization and all data/charts/analyses are for illustrative and discussion purposes only and should not be construed or interpreted as fact, advice, recommendation, or anything of similar nature. I am biased on the investments covered and do hold positions in various blockchain assets.
Alex Sunnarborg is CFO and cofounder of Lawnmower.io, a mobile app for investing in bitcoin and blockchain technologies. Previously, he was a municipal investment banking analyst at Raymond James, and prior to that, he worked in wealth management.