So, I analyzed one hundred forty VC-backed Blockchain
So, I analyzed 140+ VC-backed Blockchain/ Bitcoin companies. This is what I found.
Note: This brief analysis is pretty much a work-in-progress as I intend to update it every 4–6 months. Hence, let me know if you spot any discrepancies in the data-set or have fresh information. All views are mine. Love!
Most of the reports/analysis on Blockchain concentrate on “What is Blockchain?” or “Let me showcase you that Blockchain can save $XXXm+ of cost each year for [inject name of industry]”. It still feels very much like two thousand fourteen for Bitcoin, see A16Z and like two thousand fifteen for Blockchain, see Goldman Sachs. As of today, people seem to have understood that Blockchain technology is interesting but still uncertain about the applicable use cases and timeline.
Working in venture capital, I have come across 140+ Blockchain companies in the last twelve months and I recently desired to better understand the development of Blockchain/Bitcoin VC-backed companies. Like everyone, I read the awesome Coindesk quarterly report on the state of the Blockchain & Bitcoin landscape which include slips on VC-investment per quarter, largest deal per quarter etc…
Based on the publicly available Coindesk’s dataset (Link), I added several variables in order to get fresh insights on Blockchain & Bitcoin VC backed companies and see if I could find some interesting insights. Love.
Ps: one means Yes and zero means No in the graph.
- Financial Investors (FIs) like to invest in big deals ($20m+) and in US-Blockchain & Bitcoin companies: Financial investors (Sell-side, Buy-side) have invested in twenty two rounds or equivalent to 15% of the overall rounds of funding. However, FIs invested in eight of the twelve $20m+ funding rounds or equivalent to 67% of the $20m+ funding rounds. Moreover, out of the eight companies with FIs investments, four are Blockchain companies: Blockstream, Chain, Ripple and DAH and four are Bitcoin companies: Bitflyer, BitPay, Blockchain and Coinbase. Interestingly, 50% of companies backed by Financial institutions are based in the US. The rest of the world still has a chance to raise large round of funding :).
- Bitcoin VC-backed companies come from everywhere; Blockchain VC-backed firms come from the US: Bitcoin VC-backed companies are spread in 25+ countries; whereas Blockchain VC-backed companies are spread in eleven countries but 70% of them are based in the US. I found amazing that Bitcoin companies based in India like Unocoin or Zebpay or based in the Caribbean islands like Bitt were able to raise funding and proceed to grow. From talking with different companies, it indeed seems that Bitcoin can have a gigantic influence in emerging markets due to numerous reasons such as low credit card invasion, low bank account invasion, high inflation etc…On the other arm, the large concentration of American firms seem to confirm that Blockchain technology is mostly built towards an enterprise use case and; thus, needs to have founders based close to where large B2B companies are (aka West/East coast). Tho’, this findings is to take with a pinch of salt, I have seen many strong Blockchain UK-based firms but these have yet raised any VC funding…
- Most of the Blockchain & Bitcoin VC-backed Companies are less than three years old: 41% of Blockchain/Bitcoin VC-backed companies were founded in 2014; 33% were founded in two thousand thirteen and 10% were founded in 2015. This confirm the trend of entrepreneurs observing chance in the Bitcoin/Blockchain technology following the price surge in 2013.
- Blockchain and Bitcoin Companies are still relatively petite: 76% of Blockchain and Bitcoin companies in the dataset have less than fifty FTE (Source: LinkedIn). On average, Bitcoin VC-backed companies have c. Twenty one FTE and Blockchain VC-backed companies have seventeen companies. Moreover, eight of the eleven companies with 50+ FTE are predominantly Bitcoin focused such as Coinbase or 21inc.
- After the very first year, fast-growing companies emerge: When you plot Age (X axis) and FTE (Y axis) of both Blockchain and Bitcoin companies, one can embark to see which companies growth quicker (based on the number of employees as a proxy). Interestingly, it is very hard to see any growth pattern during the very first year of a VC-backed companies, however, growth patterns embark to emerge from the 2nd year. For example, Abra has 80+ FTE in only two years or Ripple with one hundred eighty FTE in only four years. Of course, the number of employees does not mean that the Company is a definite winner and is very much linked to the amount of VC funding as well as the different business model. Moreover, the LinkedIn data is not flawless for Emerging Market based companies. Nevertheless, it is very interesting to see how swift some companies scale compared to others.
- VC funding is still nascent and winner takes all the VC money: twenty nine companies have raised $10m or more. This is equivalent to c. 20% of the entire number of companies from Coindesk dataset. On the other palm, one hundred nine companies have raised less than $5m or equivalent to c. 74%. Moreover, the top ten VC-backed companies raised 59% of the total VC funding with three companies having raised more than $100m: Circle, 21Inc and Coinbase (All US and Bitcoin focused companies).
- VCs have yet to see come back from their investments.
Good news, Blockchain/Bitcoin companies have a low bankruptcy rate (so far). Bad news, M&A remains low as the sector is not mature enough: twenty one companies appeared to have gone bankrupt/fire sale. This is equivalent to c. 14% of the total number of VC-backed Blockchain & Bitcoin companies from the Coindesk dataset. Of the twenty one bankrupt companies, thirteen were founded in two thousand thirteen or equivalent to c. 62% of the number of bankrupt companies. When one looks closer, it seems that, eighteen of the twenty one bankrupt companies were concentrate on Bitcoin. So far the number of M&A transactions has remained low and seems mostly concentrated within the bitcoin exchange sector where few companies have raised VC-funding. (The number of bankrupt companies come from my desktop search. Let me know if you have any updates on the above companies.)