In 2017, the initial coin offering model promised to disrupt the venture capital finding paradigm, providing innovative blockchain platforms with the means to generate capital outside of the traditional financial ecosystem. As institutional interest in the volatile and profitable cryptocurrency market increases, however, venture capital is now entering the fray in an unexpected place — blockchain accelerators, incubators, and pre-ICO startups. The cryptocurrency ecosystem is proving to be fertile ground for venture capital investment but presents a number of legal concerns regarding the regulatory status of initial coin offerings.

As a result, institutional funding is now being funneled not toward initial coin offerings themselves, but instead to early-stage blockchain projects in a pre-ICO stage, or blockchain accelerators and incubator programs. The purpose of accelerators and incubators in the blockchain sector is to support new concepts and the entrepreneurs behind them, assisting them with business development and connecting them to VC funds that aim to capitalize on the cryptocurrency market. The benefits of investing in a promising project at a pre-ICO stage are obvious — institutional investors are shielded from the regulatory risk associated with investing directly into initial coin offerings, and are able to capitalize on the success of an ICO from an equity state in a project.

Although initial coin offerings are still the de facto capital generation vehicle of the blockchain industry — generating five times more capital than VC investment in 2017 —venture capital influence on the blockchain ecosystem is increasing. With institutional interest in distributed ledger technology set to dramatically increase over the course of 2018, the blockchain ecosystem is set to receive a much-needed boost in available capital — but that doesn’t necessarily mean trading volumes will increase.

What it has resulted in, however, is the legitimization and maturation of the blockchain startup ecosystem and the creation of a number of VC-backed funds designed specifically to identify and invest in promising blockchain projects. Recent movement within the venture capital space has seen Blockchain Capital, a new venture capital firm focused solely on the blockchain technology sector, generate an additional $150 million in the fourth round of fundraising, contributing to the $100 million worth of assets under the firm’s management.

Blockchain Capital is already heavily invested within the blockchain ecosystem, holding a diverse portfolio that includes Coinbase, Ripple, Waves, ShapeShift, and Power Ledger. It’s not only new crypto-specific VC funds investing in distributed ledger technology, either. Read more from…

thumbnail courtesy of