Venture Capital China Going Bust?

China’s Venture Capital Boom Shows Signs of Turning Into a Bust

From Bloomberg by Peter Elstrom July 9, 2019


China went through a five-year surge in venture capital investment that fostered a new generation of startups from ride-hailing giant Didi Chuxing to TikTok-parent Bytedance Ltd. Now the boom may be over.

Venture deals in China plummeted in the second quarter as investors pulled back amid unpredictable trade talks and growing concerns about startup valuations. The value of investments in the country tumbled 77% to $9.4 billion in the second quarter from a year earlier, while the number of deals roughly halved to 692, according to the market research firm Preqin.

The second quarter of 2018 marked the peak for China venture deals with a total of $41.3 billion invested. That included a $14 billion round for digital payments giant Ant Financial, $3 billion for e-commerce upstart Pinduoduo Inc. and $1.9 billion for truck-sharing service Manbang Group (known also as Full Truck Alliance Group). By comparison, the largest venture deal in the second quarter of 2019 was a $1 billion investment in JD Health, the health care affiliate of e-commerce provider JD.com Inc.

China has never been through a widespread bust like the U.S. did after the dotcom boom, in part because the country’s venture market is so new. Years of steady growth in tech investments resulted in predictable -- and enormous -- profits. Whether the current downturn becomes a painful crash depends in large part on how VCs, entrepreneurs and regulators navigate terrain they’ve never seen before.

“We’re seeing real stress in the system for the first time,” said Gary Rieschel, a founding partner at Qiming Venture Partners who has worked in China and the U.S. “We have never seen a downturn in the China market. For 20 years, it’s been pretty much up and to the right.”

Venture deals in the U.S. rose about 15% in the second quarter of 2019 to $27.7 billion, while Europe investments climbed 32% to $7.9 billion, according to Preqin.

“We haven’t seen the same slowdown in other markets,” said Chris Elvin, head of private equity at Preqin. “It’s always tricky with quarterly numbers though. A quarter doesn’t necessarily mean a trend.”

China’s venture boom began in 2014 when Alibaba Group Holding Ltd. went public in the largest-ever initial public offering, making clear to investors the potential riches in the world’s most populous country. Venture deals tripled that year to more than $17 billion and proceeded to rise every year through 2018 when the total topped $105 billion, almost as much as in the U.S.

Along the way, firms like Qiming, Sequoia China, Tiger Global Management and SoftBank Group Corp. fostered some of the most valuable startups in the world. Bytedance, the force behind short-video app TikTok and other addictive services, sports a valuation of $75 billion, the highest anywhere according to CB Insights. Didi, the ride-hailing service that ousted Uber Technologies Inc. from China, was last valued at $56 billion, the second highest.

But the rise of China’s tech industry put it squarely in the crossfire of the trade war. The Trump administration has accused China of stealing intellectual property and unfairly subsidizing companies in strategic fields, including semiconductors, artificial intelligence and autonomous driving. In May, the U.S. blacklisted Huawei Technologies Co., preventing the telecom giant from buying American components, and is considering doing the same to a swath of startups.

The trade war gives investors one more reason for caution. Valuations had already grown vertiginous. High-profile startups such as smartphone-maker Xiaomi Corp. and delivery giant Meituan Dianping saw their stocks tumble after they went public, reinforcing the impression that private-market valuations had gotten out of hand.

So-called sharing economy startups have also tested the patience of their investors. Companies like Didi, Meituan and bike-sharing provider Ofo blitzed the market with heavy subsidies to grab market share from rivals, making up for their losses with venture money. Now there’s skepticism that many such companies will ever turn a profit.

“You’re really reaching the end of the shared economy -- this idea of let’s give away services for free and make up for it in volume,” Rieschel said. “Some companies -- Didi is the classic case -- are just not showing any ability to become profitable.”

A Didi representative didn’t respond to a message and email seeking comment.

Valuations haven’t declined yet in China though. The country’s startups have resisted so-called down rounds, when they raise money at lower valuations than an earlier round. “China entrepreneurs, more than any on the planet, will do unnatural things to avoid a down round,” Rieschel said.

Meanwhile, venture firms are pivoting to alternative business models, like enterprise software. Such startups are not only less capital intensive, they are at a stage of development where they require less money.

This also may simply be a time when venture investors opt for caution. Given the volatile negotiations between Donald Trump and Xi Jinping, it’s not clear what kind of opportunities China’s tech startups will face in the years ahead or how capital markets will treat the next big IPO filing.

“It won’t cost you that much to sit on your hands for a few months,” Rieschel said.

Source: https://www.bloomberg.com/news/articles/2019-07-09/china-s-venture-capital-boom-shows-signs-of-turning-into-a-bust

Blockchain Technology to Reach $3 Trillion by 2030

PwC Report: Blockchain Technology to Reach $3 Trillion by 2030

From CryptoSlate.com by Shaurya Malwa August 28, 2018

PwC, a “Big Four” auditing firm, recently published research that found 84 percent of companies have either a “live” blockchain project or experiment underway.

China Primed to Lead Blockchain Innovation

The company surveyed over 600 executives from 15 countries–including the U.S., India, China, Africa and Sweden–with only 14 percent of respondents having “no involvement in blockchain technology.” (The sum does not equal 100 percent due to rounding.)

The study also found that 30 percent of respondents believe China is set to dominate blockchain development over the next five years, with only 18 percent backing the U.S.

Meanwhile, four out of five executives confirmed blockchain projects were underway at their organizations, with 15 percent of respondents having “live” networks up and running. Thirty-two percent of the firms are still developing their blockchain products, while 10 percent are running pilot models and 7 percent have “paused” research and development.

PwC cited a Gartner report forecasting a $3 trillion market value of blockchain business by 2030, with the survey recognizing ICOs and asset tokenization as a significant feature of the technology’s future.

Trust: A Compelling Concern

A vast majority of the respondents cited regulatory uncertainty and a lack of trust as the “biggest barriers” to mainstream technology adoption, with 45 percent terming it the most significant hurdle to adoption.

Steve Davies, a blockchain consultant at PwC, stated:

“Businesses tell us that they don’t want to be left behind by blockchain, even if at this early stage of its development, concerns on trust and regulation remain.”

Davies added that blockchain technology is “trustless” in nature, but companies “confront trust at nearly every turn.”

Davies noted blockchain technology presents a considerable ecosystem for companies and is unlike an “IT project,” meaning it involves put down rules, robust regulations, globally-accepted standards and perennial flexibility toward regulatory decisions.

Blockchain Frameworks Defined

Survey results are understandably dominated by finance and fintech service companies, with 46 percent respondents calling it the “leading” sector in the coming years. Other identified disruptors were healthcare, industrial manufacturing and energy.

The study also identified four “key areas” for startups and large organizations looking to integrate a blockchain-based framework into their business. These include making the business case, building an ecosystem, concentrating on user-centric design and navigating regulatory uncertainty.

According to Davies:

“A well-designed blockchain doesn’t just cut out intermediaries, it reduces costs and increases speed, reach, transparency and traceability for many business processes. The benefits can be compelling if organizations understand what their endgame is in using the technology, and match that to their design.”

Source: https://cryptoslate.com/pwc-report-blockchain-technology-to-reach-3-trillion-by-2030/

Venture capital investments in cryptocurrency startups up 316% in 2018

Venture capital investments in cryptocurrency startups up 316% in 2018

From Cryptomorrow.com by David Kariuki Nov 23, 2018

A recent report by Outlier Ventures reveals that venture capital investments in the cryptocurrency industry attained a year-over-year growth of 316% to $2.85 billion from $900 million through the three quarters of 2018.

This indicates that more startups in the blockchain and cryptocurrency are turning to more traditional forms of funding even as the number of initial coin offerings or ICOs continued to decrease and raise lesser total amount of capital especially in the third quarter of this year. Of course, the report agrees with previous reports that many startups are now using a mix model of raising capital including ICOs and venture funding.

Outlier Ventures, for instance, says that in the 119 venture capital deals completed in Q3 of this year, venture capital share was the highest in total compared to the total in other quarters this year. VCs within the United States continue to drive these venture capital investments in blockchain and cryptocurrencies. The report states that with capital investments shifting away from tech-savvy retail investors toward VCs, hedge funds and ultimately larger institutional investors, "a large growth" in (startups) new businesses and services that are enabling institutional investors to enter the industry. Those new businesses and services are coming in the form of institutional-grade trading platforms, custody providers, etc that want to solve the technical complexity and risks of dealing with blockchain and crypto such as risk of users losing private keys.

A previous report last month from market research group Diar also indicated venture capital raised by blockchain and cryptocurrency startups had increased three-fold to $3.8 billion in 2018 compared to last year's total. This amount was raised from 2,000 investors (most from U.S. based dealmakers) across 384 deals. The report by Outlier Ventures says some startups in cryptocurrency and blockchain that do not require networks (online communities) to survive, have been avoiding token generation events called ICOs because of increasing legal expenses, marketing costs and community building efforts required. Of course, a lot of decrease in popularity of ICOs has come as a result of bear cryptocurrency market as being witnessed currently. ICOs, according to the new report, raised $1 billion down from $3.8 billion in Q1 representing a 74% decline since the start of the year.

That does not mean the token is unpopular: the report says that startups still believe that the tokens are foundational to Web 3.0 infrastructure and represent the opportunity for new business models. The role of the token is also evolving beyond fund raising into a model for business innovation and could expand as a way to engage, retain and attract users. The latter is being witnessed with chat apps like Kik, Telegram and Line implementing tokens.

Additionally, according to the report, FinTech innovation around crypto and blockchain is still alive and hot. For instance, there was introduction of a blockchain phone in the third quarter from HTC. Evolution of blockchain-based mobile devices and smartphones is expected to help reduce the "leak of personal data from phones and combine secure enclave security with blockchain-based verification and authentication systems." It says that future iterations of retail mobile devices will integrate blockchains as a method to " authenticate third parties accessing private data of individuals." Currently, the new hotness is zero knowledge according to the new report, with enterprises becoming further interested in zero knowledge proofs (ZKP) that for instance enable private transactions, authentication of entries on the ledger, and the verification of claims "without necessarily requiring access to the data itself."

Banking and financial institutions continue to lead in blockchain innovations as their fin-tech programs capitalize on blockchain-based open source projects according to the report.

The author is of the opinion that reduction in volatility could have resulted from "accumulation of tokens by larger more established players and retail investors (who are) no longer panic selling." The author notes that the current bear market, which has seen the market collapse from a high of $829bn in early January to currently around $200bn, is "very unattractive" for active cryptocurrency traders.
According to the report, a lack of volatility for tokens has resulted to a drop in daily volumes from over $20 billion to slightly over $10 billion this quarter.

It says that a rise in alternative investment instruments in the market such as DARs from Citi Bank could further reduce the volume of Bitcoin futures contracts, which has already fallen this year and whose launch (CBOE's) "has not necessarily done much to positively impact the price of the token." Bitcoin futures are struggling partly because of the "heavy expenses involved in taking and maintaining positions."

The new report by Outlier Ventures does reiterate the role of and development of regulation around blockchain and crypto topics: more countries continue to make decisive regulatory determinations relating to the issue, and "forward-looking" countries have started to engage with "regional banking entities" to create a regulatory environment that captures the "vast economic gains." France, Thailand, Singapore, Switzerland and Thailand have pushed for the creation of ecosystems that enable token issuance this past quarter. Japan’s Financial Services Agency also enabled self-regulation of the industry through the ‘Virtual Currency Exchange Association. The UK, France and Switzerland are also exploring possibilities of enabling the token economy.

Source: http://www.cryptomorrow.com/

Start-up Bitcoin Rewards Firm Raises $2.25 million

Bitcoin [BTC] rewards start-up raises $2.25 million; Bain Venture Capital one among the investors

From AMBcrypto.com by Priya, Nov. 15, 2018

Earlier today, Lolli, a Bitcoin rewards start-up announced that they have raised $2.25 million in their seed round. The start-up gained investment from the top-notch players across the globe.

This included Bain Capital, a private investment firm based in Boston, Version One, Digital Currency Group, Forerunner Ventures, 3K VC, Quaker Health Ventures, SV Angel, FJ Labs, and Rugged Ventures. More so, the company stated that they gained investment from the “some incredible strategic angels.”

With the investment raised in their seed round, the start-up will be making further improvements on their product, add more merchants, increase the strength their team and increase the adoption of Lolli.

The reward application enables users to gain free Bitcoin when they shop online. This includes various industries such as lifestyle, trade, food, and fashion. Lolli has partnered with over 500 online retail merchants. The company which works towards making Bitcoin more accessible has successfully added Hilton, Marriott, GoDaddy, Priceline, Booking.com, Walgreens, VRBO, and CVS to their partnership list.

The CEO and Founder of Lolli, Alex Adelman, in an interview with The Block said:

People haven’t really thought about the consumer. People want to earn bitcoin more than they want to spend it. You can attract young, affluent users who are tech-savvy if you offer them bitcoin”

Adelman further added:

“We are working with international retailers. Bitcoin is inherently international”

According to The Block, Angela Tran Kingyens, a partner at Version one said:

“Lolli makes it incredibly simple for people to earn bitcoin when they shop online. All a user has to do is sign up for Lolli and shop at one of 750+ top online stores, and they will automatically get bitcoin deposited to their Lolli wallet. The simplicity of the product and mass appeal of shopping will lead to broader adoption of bitcoin.”

Source: https://ambcrypto.com/bitcoin-btc-rewards-start-up-raises-2-25-million-bain-venture-capital-one-among-the-investors/

Blockchain Startups

How To Grow Your Startup With Blockchain In 2019?

From TheStartup on Medium, by Mantra Malhotra, Nov. 1 2018

2019 is coming and Blockchain has gained a huge popularity in a very short period of time. Currently, it is helping reshape industries in multiple domains viz. Healthcare, finance, manufacturing, education, and government.

It will continue to evolve more and be used in many innovative ways. So, it is the peak time to leverage Blockchain for transforming your business and reshaping your target industries.

Before we start discussing how Blockchain technology can help your business grow in the near future, just take a close look at some interesting Blockchain stats:

As per Statista, it was expected in 2017 that the global Blockchain technology market would reach 339.5 million U.S. dollars in size and is expected to grow to 2.3 billion U.S. dollars by 2021.

According to the latest survey from IBM, it suggests that 65 percent of major global banks will use Blockchain technology within just three years. As per the reports by the same source, 17% of Banks will go to have full Blockchain product.

In terms of its usage, according to Statista, about 53 percent of respondents stated that their companies are working on a supply chain use case.

In this blog, we will discuss some ways using which you can build your own business with Blockchain technology and the respective apps.

Below given the list of such ways/strategies:

1) Connect with Blockchain

As a startup, first, you come up with a new and fresh business idea. It doesn’t matter how difficult your traditional startup business idea may seem, technology can make it look perfect and seamless.

Whether you want to start a business or scale the one you are already running, blockchain can help you in a number of ways. Some of these are listed below:

-> Help you with marketing via its transparency feature and accurate tracking.

-> Help you with funding through Blockchain ICOs.

-> Help you with security through its cryptographic system.

So use the above ideas and integrate them into your startup business which can make your next success story for a long period of time.

2) Use Blockchain-powered ICO

If you are a startup and have a great business idea, one that you are sure your target audience will love. But not having the necessary funds to advance your startup vision. Then no need to worry now as it is a common problem for all startup businesses. Traditional venture capital is actually difficult to achieve.

Today, the Blockchain technology initial coin offerings (ICO) throw good news for aspiring entrepreneurs. Start thinking of the ICOs as a way to democratize the initial financing. They provide a platform to raise funds from individual investors, assuring emerging entrepreneurs that no one is alone in this.

Few things to take care of when you are starting a business with Blockchain are mentioned below:

-> Refine your idea

-> Configure the blockchain for your new token

-> Receive the seed capital to finance your new company

A number of your competitors are already benefiting from these offers, attracting huge sums of money from the ICO driven by blockchain. According to Coindesk reports, in the second quarter of 2017, entrepreneurs raised about $ 291 million through ICO, compared to $ 187 million in traditional risk funds.

Make sure you have the technical expertise to consume all the benefits that ICO has to offer. For this, you can hire a developer to help you in this effort as they can make sure that your ICO driven by blockchain serves not only to raise funds but also as a tool to create steady growth.

3) Use crypto to run your ads

In order to grow your startup business, it is important to promote it properly. In an era of widespread online advertising frauds that attract attention, promoting your startup business can be challenging as building and executing it.

Desperate to promote their products, startups often bombard their customers with torrents of bulletins, coupons, practical guides, and innumerable advertisements.

The reasons usually lack attention because business leaders do not really know what exactly their clients want. They are simply waiting for their messages to attract enough customers.

However, crypto can professionally address groups of key customers with messages that resonate with them. Blockchain combines an excellent level of tracking and transparency with the ability to collect accurate data. Together with this, it guarantees the optimal frequency of ad display for each consumer.

4) Cryptography protects your startup

As we already know that cryptography can protect your data online, defend your e-commerce site, and protect your company’s files better than any other solution.

Powered by the digital signature, as well as by private and public keys, cryptography is an incredible solution for protecting your data in today’s digital business world. The reason behind its success is that it transmits information in codes. Thus, keeping the data illegible for unauthorized users.

Youngwhan “Nick” Lee, CEO of EcoVerse and founder of the W3C Blockchain community said that “Transaction logs are verified every time they move from one blockchain node to another,” and “That helps you track and review your audits. Simple and seamless fashion.”

However, you can take the cryptography beyond the protection of the data of your startup. It can help authenticate your potential customers, separating real buyers from cybercriminals.

Some major blockchain apps are listed below that can help your business:

- Apps for Notary: Uproov

- Apps for Distributed cloud storage: Storj

- Apps for Supply chain communications

- Apps for Smart Contracts

- Apps for Payments and money transfers

- Apps for Digital identity

- Apps for Networking & IOT

- Apps for Gift cards: Gyft Block

Conclusion:

So far we have seen the list of strategies/ways in which your startup can build a great business. Using the above-mentioned ideas, it will help you quickly develop blockchain applications to redefine your startup business networks.

In addition, by hiring a reliable blockchain web development company such as ValueCoders, you can achieve this goal.

At ValueCoders, we have a proficient team of Blockchain web developers who have successfully delivered more than 4200 projects to more than 500 happy customers along with their expert software testing services around the world.

Source: https://medium.com/swlh/how-to-grow-your-startup-using-blockchain-in-2019-44d4e6682147

Top funded blockchain startups & companies by total funding raised:

	Number of  Funding  Rounds	Total  Funding  Amount
Coinbase	7	$525.3M
Circle	5	$246M
Qulian Technology	3	CN¥1.5B
Bitfury Group	5	$170M
HashCash Consultants	3	$150M
Figure	2	$100M
Blockchain Industries Inc	1	$100M
Oasis Labs	5	$90M
Ledger	4	$85.1M
High Fidelity	5	$72.9M

Funding for Startups in the D.C. Area Reached $50 Million in October

Funding Roundup: D.C.-Area Startups Raised $50M in October

By Kieran McQuilkin - October 31, 2018
Topic: Funding for Startups

October was another quiet month volume-wise for DMV term sheets, with just one high-value deal moving big money into the local startup scene and several around $4 million and $5 million. At least 11 D.C. metro-area startups (including Baltimore) raised a combined $50 million in funding, led by an eight-figure venture round by Bethesda data analytics company Aledade.

The biggest tech funding deal came from D.C.-based sales software company Afiniti, which quietly raised $130 million in a Series D round, valuing it at $1.6 billion and making it the metro area’s newest unicorn. Since it was founded in 2016, it aged out of our startup roundup, but was a notable capital infusion nonetheless.

A few investment groups got in on the action as well, with the opening of a $300 million fund for a District-based venture capital firm and the closing of a Vienna firm’s first outside fund of $250 million.

FYI, we cover startup funding news in the DC Inno Beat newsletter every weekday. Stay on top of who’s getting funded by signing up here. See you in the inbox.

Below are the 11 local startups that raised capital in October.

Aledade, a Bethesda-based data analytics software company that helps doctors cut costs on readmissions, raised $23 million in new venture funding. Palo Alto-based Meritech Capital Partners led the round, contributing $15 million. The new money is a continuation of a prior round, and it adds to a $23 million round late last year.

On-demand technology repair company Fixt hauled in $6.5 million in Series A funding. The round was led by San Francisco-based Precursor Ventures and U.S. Cellular, with participation from Naples Technology Ventures and additional existing investors. The Baltimore-based startup previously raised a $1.4 million seed round in early 2016.

Columbia, Md.-based Zentail, which helps small retailers manage their e-commerce operations across websites like Amazon and eBay, raised $5 million. Initialized Capital led the Series A round for the 3-year-old startup, with participation from FundersClub. It has previously raised $1.2 million in seed funding.

Baltimore startup Hunt a Killer, which sells subscription boxes with mystery puzzles is seeking up to $5 million in venture capital to support customer growth and new products. It expects to have 50,000 customers by yearend. Last month, the company also announced a long-term $8 million funding deal from Clearbanc.

UMB-born biotech startup Breethe has raised at least $3.5 million of a $5 million funding round toward its quest to create artificial lungs. It spun out of the university in 2014 and is backed by more than $5 million in previous funding, including a $3 million round reported in December last year.

D.C.-based nonprofit edtech startup CommonLit is continuing its blockbuster growth with a $3.5 million grant from Google. In June this year, CommonLit nabbed $4 million in funding from backers including AT&T, Teach for America, the EPIC Foundation, Arthur Rock Foundation and others.

Bethesda-based cybersecurity startup Syncurity closed a $2 million round of investment. The new funding was led by the Maryland Technological Development Corporation, better known as TEDCO, which has made a variety of startup investments. Syncurity, founded by JP Bourget in 2014, raised an undisclosed seed round in 2014 and $380,000 in 2016.

Byte Back, a nonprofit that offers technology training and job placement to underserved populations in the D.C. area, is expanding its services to Baltimore with a $775,000 grant from TD Bank. The grant came as part of the inaugural TD Ready Challenge, which this year focused on financial security and awarded the same total to 10 organizations in the U.S. and Canada.

D.C.-based voice app creator XAPP Media raised at least $750,000 from seven investors in a maximum $2 million equity round, according to SEC filings. The company has launched and manages over 1,000 apps on Amazon Alexa, Google Assistant and Microsoft’s Catana. It’s no stranger to fundraising, having hauled in $11.3 million in capital since 2014, according to a Crunchbase tally.

Maryland-based AI startup RedShred was awarded a $745,000 Small Business Innovation Research Phase 2 grant from the National Science Foundation. The grant will be provided over 18 months for development and commercialization of its technology, which analyzes and produces summaries of lengthy proposal documents for government contractors, grant researchers and universities. The company previously was awarded a $225,000 Phase 1 SBIR grant in 2016.

David Adler, founder and CEO of event-planning platform BizBash Media, along with his company and family invested over $500,000 in D.C.-based startup Goodshuffle. Goodshuffle launched four years ago and makes a software tool designed for event rental, production and entertainment companies to manage inventory, track sales and streamline operations.

A pair of investment companies made moves in October as well:

D.C. venture capital firm Updata Partners opened a $300 million raise for its latest fund. The fund, which targets later-stage companies and provides growth funding, has invested in several D.C.-area startups, including real estate platform Homesnap and content creation platform Storyblocks. According to its website, the VC firm has raised $750M in committed capital and invested in more than 40 companies.

Vienna-based growth equity firm Aldrich Capital Partners closed on its first outside fund, raking in $256 million. The investment company had previously used a self-funded $50M to invest in several startups, including Cofense, which sold for $400 million this year. Aldrich partners said the fund will be aimed at companies in healthcare IT, fintech and software that are still led by their founders and haven’t yet raised institutional funding.

Source: https://www.americaninno.com/dc/funding-dc/funding-roundup-d-c-area-startups-raised-50m-in-october/

Blockchain Technology Plus Venture Capital Equals Boston's Startup Culture

Venture Capital and Blockchain Technology in Boston’s Startup Culture

From Americaninno.com by Kirill Bensonoff Oct. 9, 2018

When people think of Boston, several things typically come to mind: cravings for clam chowder, the iconic Fenway Park, and the exaggerated “BAston” pronunciation from strangers. Lately, the city that spawned companies as diverse as Gillette and DraftKings is becoming known for its vibrant startup culture that’s launching dozens of new companies each year.

This is not surprising.

Our city has twice been named the top startup community in the U.S. by the “Innovation that Matters” report compiled by the organization 1776 and the U.S. Chamber of Commerce Foundation.

This fact is not lost on entrepreneurs. According to The Boston Globe, 1,869 startups are operating in Boston, and those numbers continue to increase as our venture capital scene becomes more competitive with other startup hubs including San Francisco and New York. In terms of actual investment dollars, San Francisco leads the nation, but Bloomberg’s assessment of regional startup investment found that Boston places near the top of the list in each of the last several years. This year, Boston’s venture capital initiatives jumped 15%, surpassing New York City for second place in the national rankings.

In the past, the city’s prominent universities served as a launching pad for some of the most famous platforms in the world, but those businesses typically found their way to other cities once they became popular. For instance, Facebook, which began in 2004 in Mark Zuckerberg’s Harvard dorm room, and Dropbox, founded by Drew Houston while he was studying at MIT, both ultimately moved to San Francisco.

Now, the combination of available venture capital and the innovative ethos promulgated by Boston’s universities is encouraging companies to stay. Therefore, as the next wave of innovation is preparing for launch, Boston is uniquely suited to meet the new demand.

The Cryptocurrency & Blockchain Movement

Just like internet startups were on the precipice of mass adoption more than two decades ago, blockchain technology is at the forefront of the innovation curve. In addition to receiving significant investment and attention from companies like Microsoft and IBM, hundreds of startups are building new platforms to meet the demands of the decentralized economy.

In 2018, nearly 700 new blockchain startups launched through Initial Coin Offerings (ICOs). Collectively, these companies have raised $17.5 billion this year, which is more than triple the amount from the previous two years.

Not to be left on the sidelines, several prominent venture capitalists have picked up on this movement. Andreessen Horowitz launched a $300 million venture capital focused on blockchain startups, Tim Draper has committed a similar amount to various ICOs, and Sequoia Capital prominently entered the market last year.

At this year’s Boston Blockchain Week, local venture capital firm Pillar asserted themselves as the de facto financing arm of Boston’s blockchain scene. In an event roundup, Pillar encouraged ICOs looking for funding to “Call Pillar first, obviously.”

Venture Capital Streams

In many ways, the ICO model was meant to disrupt traditional capital raising methods including venture capital initiatives.

Instead, venture capital and ICOs are operating in tandem with one another. In May, Bloomberg observed, “While ICOs were supposed to disrupt venture capital, such funding in blockchain-based companies is surging, with startups raising $434 million since December, the most ever in a three-month period.”

In general, this seems to be a boom for both industries. Venture capital firms are finding fresh relevance and entrepreneurs are afforded another opportunity to finance their platforms.

The Challenges of Change

The ICO movement isn’t without its detractions.

For starters, this novel fundraising mechanism remains in a state of regulatory limbo. Although the SEC has decided that Bitcoin and Ether, the two most popular cryptocurrencies, should not be regulated as securities, there is a broad expectation that some ICOs will eventually be classified as such.

In short, VCs are participating in a game in which some of the rules are still being written.

This ambiguity is illustrative of the broad crypto movement. It’s an industry under construction, and it can change swiftly. Venture capital firms will be tasked with keeping up with this rapid innovation and the emerging legal framework that accompanies its novelty.

Boston & The Blockchain

While blockchain sentiment can fluctuate wildly, it’s evident that the decentralized ecosystem is not going away any time soon.

Many describe the blockchain economy as the third iteration of the internet, which places tremendous scale and opportunity in the industry. Of course, like any burgeoning industry, there are likely to be an abundance of failures, and blockchain prognosticators have indicated as much.

Last October, Ethereum co-founder, Vitalik Buterin, told a crowd at the ETHWaterloo Hackathon in Canada that “It is an established fact that ninety percent of startups fail. And it should also be an established fact that 90 percent of these ERC20s on CoinMarketCap are going to go to zero.”

Therefore, risk management and market maturation become critical metrics for venture capitalists.

In Boston, the prominence of blockchain technology and the emergence of a dynamic startup culture are bound to coalesce. As the first generation of blockchain platforms begin emerging out of Harvard and MIT, it’s less likely that they will flee to the other coast. Boston is offering everything we need.

Source: https://www.americaninno.com/boston/from-the-community-boston/venture-capital-and-blockchain-technology-in-bostons-startup-culture/