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Top VC Investments in Blockchain Q4 2019 & Q1 2020

It’s time to have a quick recap at what leading VCs have invested in the blockchain industry since October 2019. If you are interested to find out more about why I follow these particular VCs please click here, and if you want to read posts on earlier investments in 2019 please click here and here.

In the past 5 months, blockchain investments by the 25 VC funds in the US and 6 VC funds in Asia were mostly financial services, blockchain infrastructure and tools. There has been no announced investments in any new public blockchain and quite few in consumer-facing products.

Top Blockchain VC Funds

Among the 31 venture funds, 20 of them have announced investments in blockchain-related projects from October 1st, 2019 to March 1st, 2020. Among which, Pantera Capital has made six investments, followed by Polychain Capital, Coinbase Ventures, Winklevoss Capital, Binance, Hashed, ConsenSys Labs and Fenbushi Capital.

Since October 1st, 2019, Galaxy Digital LP, Digital Current Group, YCombinator, Binance Labs, Boost VC, Dekrypt Capital, Electric Capital, and 1kx Capital haven’t announced any investment in the blockchain industry based on information available on Crunchbase.

Part II Investments Analysis

A total of 35 blockchain-related projects have announced funding from the above mentioned VC funds, and almost half of them are crypto-related financial services, and one third are blockchain infrastructures/tools (lacking better category), with the rest few in regtech, games & collectibles and mining.

 

 

Here is a diagram with all the invested projects. Please note that it is categorized by sub-sector and sorted by investment volume. And some of their investment volumes were not disclosed.


Among the 16 investments in financial services, there are six lending and borrowing platforms, three crypto payment providers, two derivatives exchanges, a stablecoin, a security token platform, an OTC platform, a liquidity provider and an actual bank. The comparatively large number of investments in savings related products is because it solves a real-world problem and by far attracts most users in crypto.

As for blockchain infrastructures and tools, we see large investments in node infrastructures, e.g. Alchemy and BisonTrails, and there are also investments in wallets, scalability, storage, data privacy, and cybersecurity.

Regtech is a rising star in the blockchain industry. Among the five invested projects, two of them are focused on AML and anti-fraud detection, and three are focused on crypto-related tax preparation and auditing services.

Part III Key Projects

Among all the investments, I would like to go into detail for five projects with the largest investment amount as each indicates the somewhat maturity of its subsector. It also helps us understand where we are in the market cycle.

LightNet is a blockchain-based cross-border payment in Thailand. It announced raising $31 million Series A in January, 2020, led by Uni-President Asset Holdings, followed by HashKey, Gumi Cryptos Capital and three other VC funds. [1] According to its website, Lightnet is targeting cross-border payments in the South East Asian counties. The system is built on top of Stellar. It’s worth noticing that Uni-president Asset Holdings “reportedly owns 9,000 Starbucks and 7-Eleven across Taiwan, China, and the Philippines”. [2] People expect that Lightnet can leverage its investors’ strong presence in retail to drive adoption.

BlockFi is a crypto wealth management platform. It announced a round of $ 30 M Series B on Feb 13th, 2020 led by Valar Ventures (Peter Thiel), followed by Winklevoss Capital, Arrington XRP Capital. BlockFi is a crypto wealth management platform. It offers a suite of crypto-related financial services. It offers a crypto interest account that pays up to 8.6% of annual yield to five mainstream crypto assets. It also offers users crypto collateralized USD loans. In addition, it also offers trading among five mainstream cryptos.

Crusoe is a Denver-based company, using flaring gas at oil wells to mine bitcoin. It solves an “solve an environmental and economic problem for the oil and gas industry”. [3] The company has received a $ 30 M venture round on December 6th, 2019, led by Bain Capital Ventures and KCK, followed by PolyChain Capital, Winklevoss Capital, and Founders Fund. According to Bloomberg, “it now has eight operations across the U.S. and plans another 30 in the first half of next year.” [3]

Amber Group is a Hong Kong-based company founded by ex-Morgan Stanley traders. “ The company focuses on electronic market-making and systematic trading in digital currencies — covering spot, futures, swaps, options and other derivatives. It provides liquidity for mining pools, exchanges, and token issuers”. [4]

Amber announced a $ 28 M Series A funding led by Pantera and Paradigm Capital on Feb 14th, 2020. PolyChain, Coinbase Ventures, Dragonfly Capital and Blockchain Capital also joined this round of funding.

Bison Trails is a blockchain infrastructure provider. It helps users to “to launch secure, highly-available, and geographically distributed nodes on a participatory blockchain network with only a few clicks”. [5]

Bison Trails announced a $ 25.5 M Series A led by Blockchain Capital and joined by Coinbase and two other VC funds on November 19, 2019.

Conclusion

I use leading VC investments as something similar to a progress bar of the whole industry.

In the past two years, we have seen a vast number of projects testing the validity of different blockchain use cases. After the market solidifies in two bear markets, we have finally started to see what actually works. At this stage, it’s safe to say crypto-related financial services is a proven business model.

Also, we see for the first time that blockchain infrastructure like Bison Trails and Alchemy receiving large amounts of investments. We are still at the staging of building infrastructures and tools, still pretty far away from the consumer-facing stage we all hope for. Hence explains the scarce investment in another chain or consumer-facing products.

References:

[1] Forbes: Lightnet Targets Moving $50 Billion Of International Payments, Annually, On The Stellar Blockchain Network By 2022;

[2] Cointelegraph: https://cointelegraph.com/news/thai-stellar-based-startup-lightnet-raises-31m-to-replace-swift

[3] Bloomberg: Why Bitcoin Mining Is Being Touted as a Solution to Gas Flaring

[4] Forbes: https://www.forbes.com/profile/amber-ai/#771e8fde5364

[5] Introducing Bison Trails

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