To many, the future of blockchain investments appears uncertain: After a monster year in 2018, overall funding for blockchain startups fell by 28% last year. Several factors likely contributed to this decline, including the fact that many younger companies in the space are still searching for the product/market fit that would entice large investments.
Although retail investor enthusiasm for cryptocurrencies fueled a massive influx of institutional blockchain investment in prior years, 2019’s environment was decidedly different. Blockchain’s viability in facilitating value exchange was proven, and the companies leading the cryptocurrency space had already secured colossal deals. Coinbase, for example, raised an additional $300 million in series E funding to scale its business before the close of 2018.
Last year, venture capitalists began looking for other areas of opportunity, evidenced by a slight increase in early-stage investments — and they’re still looking today. So what does this mean for the future of blockchain startups? More specifically, what does this shift in investor focus mean for you if you’re leading a blockchain startup?
The range of applications for blockchain technology is enormous, and VCs know this. According to CB Insights, recent blockchain investment has centered on early stage companies. This suggests that the space as a whole is still relatively young.
Increasingly, VCs are likely to look beyond investing in blockchain companies building infrastructure or tools. Instead, they’ll likely opt for investments in applications that use said infrastructure.
In prior years, investors provided substantial capital to firms building public blockchain infrastructure — but there was also investment in blockchain infrastructure for enterprise applications. In both areas, this created significant (and perhaps excessive) competition that led to rapid maturation of the platforms on which financial and other types of blockchain applications can be built. This is great for startups, as it creates opportunities to