Although the crypto industry does not have a centralized management hub and location, the very idea of decentralization is the connecting link for all players in the crypto industry. Some crypto enthusiasts even advise blockchain projects not to contact corporations or big money. Nevertheless, there are too many scams and unpromising enterprises on the market due to the worldwide hype around cryptos. Thus, startups need substantial funding in order to stay afloat and stand out among similar projects, and corporations in which money and power are concentrated can quickly provide such funding.
Ice on the Move: Venture Investments in Blockchain Startups
Despite the fact that the relationship between blockchain projects and capital funds can hardly be called sunny and devoid of any complicated contradictions, there are plenty of examples of startups being financed by venture capital. "If you turn to the practice of ICOs, you can see that startups have been turning to venture funds for a long time. Moreover, most of the investments come from institutional investors nowadays," as Roman Zabuga, representative of the Wirex cryptobank, shared his opinion with DeCenter.
Back in 2016, Ripple raised $55 million from Accenture Ventures, Standard Chartered, the venture arm of Siam Commercial Bank and SBI Holdings. Santander Innoventures, CME Group, Seagate Technology and Venture 51 also got their share of the business.
Circle recently reported attracting $110 million. Among the investors were such funds as Pantera Capital, IDG Capital Partners, General Catalyst, Accel Partners, Digital Currency Group, Blockchain Capital, and Bitmain, a huge Chinese company that produces equipment for miners.
In general, the interaction of startups and funds is already taking place. "Whether such an alliance contradicts the very spirit of blockchain or not is more of a philosophical question. The development of technology and the entire industry depends on recognition by the government and the influx of large sums of money. These are the necessary conditions to scale and popularize blockchain into the broader layers of the population and other areas of the market," added Mr. Zabuga.
And the Other Fiat Capitals?
Nevertheless, it is obvious that the majority of investment shares belong directly to blockchain funds or corporations, one way or the other connected with the crypto industry. As for investment from big money that has little to do with blockchain, there the situation is far more complicated. For the time being, large institutions are exercising caution. Though there is a noticeable thaw in the relationship between the crypto community and the big sharks of the fiat world. For example, back in January, George Soros, a major American trader, financier, investor, and philanthropist, spoke rather bitterly about the volatility of cryptocurrencies, linking it to world dictators, all the while buying out a stake of Overstock.com, a large retail platform that accepts cryptocurrencies.
The relations with blockchain are even more uncertain in the banking sector. Many of the players in this market continue to insist that blockchain and cryptocurrencies are not the same, and the latter cannot be considered as an alternative to fiat money as of yet. "Nevertheless, cryptocurrencies have two potentially interesting uses, as "bonuses" as a substitute in loyalty programs, and as investment tools. Investments via fundraising and crowd investing on blockchain can be a worthy alternative to venture funds, lending and other ways of raising funds for businesses. Furthermore, its development depends directly on regulation, market participants, and global trends. We expect that in the near future, the use of cryptocurrencies and tokens as digital assets will take its niche and will morph from a source of hype into a useful financial instrument," commented Sergey Rusanov, board member and head of the IT department of Otkrytie Bank to DeCenter.
The banking sector itself is still expressing ambiguous views regarding blockchain in general. "Blockchain brought a high degree of verifiability, but at the same time complicated the concept of distributed registries. As a result, in most situations, the use of blockchain is redundant. All of its functions are being covered with a margin by classical relational DBMS, for example, in the cloud version of applications the services of which are maintained by a provider with the necessary SLA. There are, however, some scenarios in which blockchain is really useful. For instance, when there is no need for fast transactions, data is transferred between the participants without mutual trust and must be recorded and stored by them. For example, a verified chain of transfers and smart contracts is in high demand on investment exchanges and in logistics," as Sergei Rusanov added.
Today it is difficult to say what the interaction between venture capital and blockchain in the future will be like, but any revolutionary technology is always perceived by society and large capitals with great skepticism at first. On the other hand, it is possible that startups interested in large venture capital investments should take a more diplomatic position with regard to centralized corporations.