A brand new report from multinational skilled companies agency PricewaterhouseCoopers (PwC) launched on Monday, April sixth, discovered that the rise of Bitcoin all through Q2 and Q3 of 2019 didn’t forestall funding from dropping off; subsequently, the report mentioned that the crypto trade ought to be ready that funding offers will doubtless be affected much more negatively all through 2020 because the financial fallout from the coronavirus disaster continues.
“The global headwinds caused by the coronavirus and other related events are having an impact on many industries globally, including the crypto industry,” the report mentioned. “We believe that the crypto industry is not immune to these conditions and the number and value of fundraising and M&A deals may be impacted as a consequence in 2020.”
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Funding is more and more going to later-stage rounds, infrastructure initiatives, and companies in Asia
Indeed, the overall quantity of funding fell 40 p.c from $3.72 billion to $2.24 billion from 2018 to 2019, and the variety of offers fell 18 p.c from 662 to 540. Equity fundraising fell by 18 p.c.
The report additionally discovered a number of noteworthy tendencies within the motion of capital that’s nonetheless flowing into the house.
For one factor, an 8 p.c enhance of funding into post-seed rounds by way of total fundraising offers appears to point that the trade is maturing: extra firms are within the later levels of their progress. Arslanian additionally mentioned that this re-allocation of capital into later-stage funding rounds is “something we should expect to see as well as the industry matures.”
According to Arslanian, this could deliver wins for VCs who’re funding the trade: “there will be enough deal flow, and there will be enough exits as well to allow many of the crypto VCs to be successful,” he mentioned.
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There was additionally a shift in the kind of firms receiving funding. In 2018, most VC funding went to blockchain infrastructure initiatives, whereas in 2019, crypto compliance and regulatory firms had been extra common.
Many VCs are additionally shifting away from firms in Europe and looking out extra towards the Asian market. “We’ve definitely seen a number of the large players from the U.S. and from Europe really look at Asia,” mentioned Henri Arslanian, PwC’s Global Crypto Lead, in an interview with CoinDesk. “Not solely from an enlargement perspective but additionally as a degree of fundraising from strategic traders.”
Arslanian mentioned that specifically, firms looking for new institutional shoppers have their sights set on Hong Kong, whereas companies eager on increasing their retail shopper base are heading to Singapore, which lately launched a brand new regulatory framework,
”Unicorns have gotten extra like octopuses”
The report additionally confirmed a serious decline within the variety of merger and acquisition (M&A) offers, in addition to the circulation of funding for these offers within the trade.
Indeed, the overall variety of the report discovered that acquirers native to the cryptocurrency trade had been accountable for 56 p.c of the deal circulation in 2019, up from 42 p.c the prior 12 months. However, the overall variety of M&A offers that had been recognized within the report fell from 189 in 2018 to 114 in 2019 (a 39 p.c decline); over the identical time interval, the worth of those M&A offers fell 76 p.c, from $1.9 billion to $451 million.
However, the report additionally discovered that despite this decline, cryptocurrency companies endured in shopping for each other all through 2019: the M&A offers that did occur all year long appear to be principally situations of bigger firms absorbing smaller firms that offered supporting companies.
Arslanian mentioned that this pattern is prone to proceed: “I think we should expect some of the big players to get bigger, but not by buying direct competitors,” Arslanian defined. “Not by becoming vertically bigger, but by becoming horizontally bigger. Unicorns are becoming more like octopuses where they have their hands in various areas of the crypto ecosystem.”