What crypto slump? Blockchain startups are raising a lot of cash


With over $4 billion flooding the industry in just a few months, venture investors are puzzled by the drop in cryptocurrency prices.

Funding for blockchain start-ups topped $4 billion for the first time in the second quarter, despite a sharp drop in cryptocurrency prices.

Companies in the nascent industry raised a record $4.4 billion, an increase of more than 50 percent from the previous quarter and nearly nine times the same period a year ago, according to data from analytics company CB Insights.

blockchain is underlying technology Behind most cryptocurrencies. It is essentially a digital ledger of virtual currency transactions that is distributed across a global network of computers.

The largest financing round for a blockchain company in the second quarter was a $440 million investment in Circle, a payments and digital currency firm. circle recently announced plans to make public Through a $4.5 billion merger with the Blanc-Check company.

Ledger, which develops hardware wallets for people to store their digital currencies, raised $380 million in the second-largest round in the quarter. In a December interview, Ledger CEO Pascal Gauthier told CNBC that the crypto market was maturing, with major institutional players joining in.

“In 2018, when we raised our final round, financial institutions were not in the game,” he said, adding that now, “every major financial institution in the world either has a plan or is working on a plan” in crypto. to invest .

The record funding highlights how investors are finding alternative ways of exposure to the crypto industry by securing a stake in private start-ups developing technology for digital currencies and the distributed networks that underpin them.

Venture investors are puzzled by the drop in cryptocurrency prices. Bitcoin Since reaching an all-time high of around $65,000 in April, when US crypto exchange crypto coinbase went public.

Ether, the world’s second-largest digital coin, has also fallen more than 50 percent since hitting a record high of more than $4,000 in May.

“At the current rate, blockchain funding will break the record set at the end of last year – more than three times the total raised in 2018,” Chris Bendsen, senior analyst at CB Insights, told CNBC.

“Blockchain’s record funding year is driven by growing consumer and institutional demand for cryptocurrencies,” he added. “Despite short-term price volatility, VC firms are still optimistic on the future of crypto as a mainstream asset class and the potential of blockchain to make financial markets more efficient, accessible and secure.”

Last month, Andreessen Horowitz launched a $2.2 billion cryptocurrency-focused fund. “We believe the next wave of computing innovation will be driven by crypto,” the Silicon Valley venture capital firm wrote in a blog post.

Fintech Funding Frenzy

Funding for fintech companies also set a new record. According to CB Insights, fintech start-ups generated $30.8 billion in Q2, a 30 percent increase from the previous quarter and nearly triple the amount fintechs raised in the second quarter of 2020.

Europe’s fintech sector gained significant traction, with 50 percent of top venture deals in the quarter going to European firms. The trend was fueled by increased interest from foreign investors in the continent’s booming tech industry.

German stock-trading app Trade Republic raises largest round in Europe receiving $900 million From the likes of Sequoia Capital and Peter Thiel’s Founders Fund. Molly, a Dutch rival to payments firms Square, Stripe and Aiden, total $800 million.

Private fintech valuations are also on the rise with Swedish buy-now-pay-later firm Klarna Market value of approximately $46 billion in June.

This has raised fears of a potential bubble in fintech. Ina Dimitrova, CEO of UK fintech start-up Openpaid, told CNBC that the uptrend in the private financing round was “detrimental to the long-term stability of our industry”. According to CB Insights, the average size of fintech deals grew 28 percent in the second quarter.

Is Fintech in a Bubble?

Another fintech boss, Stefano Vaccino of London-based Yapili, disagrees. “I wouldn’t look at it as a bubble,” he said. “We have seen an uptick in financial services over the past 12 to 18 months.” Andreas Wieskam, a partner at Yapili investor Sapphire Ventures, said this is a “reflection of the great opportunity” in digital finance.

Yapily, which this week raised $51 million in fresh funding, is one of several companies developing technology to advance a new movement in finance called open banking, which aims to open up the introduction of banks’ data and payments to fintechs and other third parties.

Recently with Visa, Open Banking is gaining a lot of momentum agreed to acquire Tink, a Swedish open banking start-up, after $2.1 billion failed to acquire plaid, a similar firm in the US due to regulatory pressure. plaid went on to raise $425 million in its April funding round at a valuation of $13.4 billion, while British rival TrueLayer raised $70 million.

Meanwhile, a growing number of fintechs are tapping the public markets for the first time, with 19 firms going public or announcing IPO plans in the second quarter.

British Money TransferWise went public in London earlier this month at a valuation of $11 billion, while several firms include better.comhandjob dave, and chestnut Announced plans to go public through mergers with Special Purpose Acquisition Companies, or SPACs.

In the crypto world, virtual currency exchange Coinbase went public in one Blockbuster Nasdaq Debut in April.

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