On Friday (14 December 2018),  Changpeng Zhao (nickname: “CZ”), the CEO of crypto exchange Binance, said that his firm felt more comfortable with venture capital (VC) investing now than when the crypto market was in a much more bullish mood and cryptocurrency prices were at their all-time highs.

The Binance CEO made his comments via Twitter earlier today:

When CZ says that many VCs have “paused”, he is probably referring to comments made by Barry Silbert, the Founder and CEO of crypto-focused venture capital firm Digital Currency Group (DCG), on Wednesday (December 12th):

So, how “comfortable” does Binance really feel about VC investing at the moment? Well, yesterday, the VC arm of Binance, which is known as Binance Labs, told crypto news outlet Coindesk that it “will launch new incubator programs in Berlin, Buenos Aires, Lagos, Singapore and Hong Kong come March 2019.”

Last month, Outlier Ventures, a VC firm that focuses on blockchain, IoT, and AI technologies, published a research report titled “State of Blockchains Q3”. This report said that “VC investments in the space at all time high as professionalisation of the industry continues”, and that this was due to the “drastic reduction in the frequency and size of token sales”:

“The drastic reduction in the frequency and size of token sales have created a gap that is now being filled by venture capital. VC financing is moving earlier in the funding cycle at Seed or Series A instead of the later stage, pre-ICO rounds we witnessed in Q2. Legal expenses, marketing costs and community building efforts are part of the reason why startups that don’t necessarily require a network or token have been avoiding token generation events completely. Until we see a recovery in Bitcoin’s price, it is likely that the model of token generation events that took center stage in 2017 would never return.”

In particular, the report found that:

  • “VC investments have surged from a total of $900 million in 2017 to $2.85 billion so far this year, a 316% increase”
  • “VCs are active across all funding stages with 119 deals disclosed this quarter the most ever as quality projects with developed products continue to receive financing”
  • “The US is still the dominant source of VC investments in the crypto space”

And yesterday, blockchain-focused investment firm Pantera Capital noted in its December newsletter (“Pantera Blockchain Letter”) that “there are many advantages of venture capital over ICO funding” (such as lower volatility), and that, in fact, “the majority of blockchain projects are better suited for equity rather than tokenization.” 

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