Fabric Ventures Looks at ICO Fundraising for 2018 in Updated Report
Venture capital firm Fabric Ventures has released the second edition of The State of the Token Market report, providing a deep analysis of token sales (ICOs) for the first nine months of 2018. The company also lays out its predictions for the changes that blockchains could bring to the digital economy.
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Fabric Sees Development Community Strong Despite Crashing Crypto Markets
The new report is the second from London-based Fabric Ventures, which published its first overview of the 2017 ICO market earlier this year. This year’s report has two parts, with the first section comprehensively analyzing token sales in 2018 and the second laying out Fabric’s vision of what the future token economy could look like.
Anastasiya Belyaeva, partner at Fabric Ventures, spoke with Bitsonline and gave some insight into how the firm approached their latest report as compared to the one they prepared for 2017:
“When we wrote our last report, everyone’s attention was tied to the tremendous influx of capital and the price surge. What we really wanted to focus on this time was how unaffected the developer community was by any market corrections: even at the times of the bear market, development activity continues to bloom. That is especially true for Europe – which has really been leading the way at project formation, the emergence of new crypto hubs, and positive regulatory responses. That makes us more excited than ever to back and support teams in the space!”
Funds Raised in ICOs So Far in 2018 More Than Doubles 2017 Totals
The first main takeaway is that token sales raised $12.3 billion USD in the first nine months of 2018, more than doubling the $5.6 billion recorded in all of 2017. This is partly due to massive ICOs like EOS, Telegram and Bankera, which between them raised around $5 billion. In sum, the top ten token sales accounted for nearly half of all funds raised.
The pace of funding, however, slowed considerably as 2018 progressed, with 56 percent of the total occurring in the first quarter. September had the lowest volume, with just $181 million raised, as compared with $2.56 billion in February, the busiest month so far this year.
In terms of type of projects funded, infrastructure was the most popular, accounting for 40.4 percent of the funds raised thus far. These types of projects are trying to create the underpinnings of what Fabric calls the “Web 3.0 stack” and includes projects such as EOS, Hedera Hasgraph, and Basis.
This figure marks an increase from the 2017 report, when Fabric found only 31.7 percent of projects were infrastructure-based.
Europe Remains Popular for Founders
Many blockchain startup founders have chosen to base themselves in Europe, even though their projects may be legally domiciled somewhere else. The amount raised by projects whose founders are living in Europe is at more than $4 billion so far in 2018. This is substantial increase from around $2.2 billion last year.
By comparison, founders living in Asia had their projects raise a little more than $2 billion in the same span, while those in the Americas raised around $2.75 billion.
Fabric is bullish on Europe as a place to build blockchain startups. It sees European countries as having distinct advantages as compared to other places. They note that European universities produce 5.5 million developers per year, whilst in the U.S. there are only 4.5 million. The number of STEM PhDs graduating from European universities each year is also higher than in the States, at 58,941 against 26,959.
When it comes to where blockchain projects are legally domiciled, however, the United States has been the most popular choice, playing host to projects raising $1.6 billion in funding. Singapore came in second with $657 billion, whilst Switzerland was third with $555 million.
Fabric Lays Out Its Vision for the Token Economy
In the second part of The State of the Token Market report, Fabric described how it sees the future of Web 3.0 playing out.
The firm said what is happening with blockchain is a “paradigm shift in software architecture” that hails a shift to peer-to-peer data networks based on open standards, otherwise known as blockchains.
Software is being used in increasingly personal and intimate ways, with massive amounts of people’s private data being entrusted to third parties, particularly technology companies. Yet, the report argues, there is a risk to having private entities hold so much data, and they have a point — see Facebook’s recent hack, which saw 30 million user accounts compromised.
Using Blockchains to Prevent Data Centralization
Fabric sees decentralized blockchain networks as a way to prevent a dangerous concentration of data in hands of relatively unaccountable companies and governments. The firm points out that tech companies like Google, Facebook, and others have used “massive monopolised silos of user data,” to create “competitive moats protecting trillions of dollars of market capitalisation.”
But Fabric believes that data will become commoditized, just like hardware, operating systems, software, and networks did. At that point, the tech firms will lose their competitive edge, predicts Fabric.
According to the firm, what comes next is open-source networks that reward and incentivize contributors without a central authority, similar to what bitcoin has done for value transfer.
Fabric is betting on this vision of the future happening with their portfolio of investments, which include everything from cross-chain protocol Polkadot to mobile Ethereum Dapp browser Status. The firm is also working on building an incubator in London called Fabric House.
There are numerous detractors, including academics, economists and businesspeople, of the so-called “token economy” that Fabric is investing in. Regardless, there are many other venture capital firms who are making similar investments.
Have your say. What’s your take on the token economy? Can blockchain startups disrupt tech giants like Facebook or Tencent?
Images via Fabric Ventures