Report: blockchain and cryptocurrency-focused startups have raised nearly $3.9B through VC investments in the first three quarters of this year, up 280% YoY
As the crypto industry sees a decline in initial coin offerings (ICOs) amid regulatory concerns and major losses across token markets …
Context & Ripple Effects
Earlier this year, Crunchbase data showed ICOs had raised roughly $4.5B since January 2017 — about 3.5x the ~$1.3B blockchain startups pulled in through traditional VC rounds (the ICO-versus-VC gap). By May, even VC investment excluding ICOs had hit $1.3B for 2018 alone, exceeding the prior 18 months combined (that inflection point).
Today's report completes the rotation: nearly $3.9B in VC across the first three quarters, up 280% YoY, arriving just as ICO volume declines under regulatory pressure and token market losses. Capital isn't leaving crypto — it's changing channels, from unregulated token sales to priced equity rounds.
First-order effects
- Startups that would have funded themselves with token sales in 2017 are now selling equity to VCs, trading fast unregulated raises for dilution, board seats, and compliance overhead.
- Token issuers and ICO-facing service providers lose their primary customer base as founders reroute fundraising toward institutional investors.
Second-order effects
- VCs gain pricing power over a deal flow that no longer has an ICO alternative, letting them impose equity terms, vesting, and regulatory hygiene that token sales never required.
- Exchanges and launch platforms that monetized ICO issuance face shrinking fee pools, pushing them toward serving secondary trading or VC-backed projects instead.
Third-order effects
- If the pattern holds, crypto company formation consolidates around VC-governed equity structures, narrowing the field to teams that can pass institutional diligence — the dynamic behind the sharp pullback to ~$850M in Q1 2019 (the following year's retrenchment).
- Regulators effectively get their preferred outcome without new rules: as ICOs fade, oversight shifts from policing millions of retail token buyers to supervising a smaller set of licensed funds and exchanges.
The trend: Crypto startup financing is rotating from unregulated token issuance to institutional VC equity, with regulatory pressure and token-market losses setting the pace of the shift.