The most active corporate investors in blockchain companies are Google and Goldman Sachs, says a new report.
Cryptocurrencies like bitcoin are based on the blockchain technology. But promising cheaper and faster processes, from industries from finance to insurance, it is also being developed for use.
according to a report by data firm CBI Insights published recently, just behind the 95 venture capital firms in the space, the number of corporate investors in blockchain companies hit a record high of 91 this year.
Totaling $327 million, there have been 42 equity investment deals by corporates so far this year. The $390 million for the whole of 2016 is just ahead of this figure.
having stakes in eight blockchain firms, the most active corporate investor is Japanese financial services firm SBI Holdings. Kraken, which is an exchange for people to trade cryptocurrency and R3, a consortium of banks working on new applications for blockchain technology are among the invested companies.
With investments in Ripple, a company that is working on money transfers using blockchain technology and in bitcoin wallet company Blockchain, Alphabet-owned Google is the second-most active corporate.
While U.S. banks Citi and Goldman Sachs are in fourth and fifth place respectively, Overstock.com is third.
“Big banks and financial services firms were the first corporate players to make direct blockchain investments en masse — unsurprising, given how Bitcoin’s underlying technology lends itself, both technically and in popular thought, to financial services,” CB Insights notes in its report.
From trade finance, to moving money are the ways that blockchain technology could be used which are being experimented by large financial institutions.
The report said that nine rounds totaling $267 million in disclosed funding to six blockchain companies have been raised by the 10 largest U.S. banks by assets since June 2014.
Consortia aimed at exploring and developing blockchain technology, on the other hand include many banks. Examples of consortia working with banks include R3, Ripple, Hyperledger and the Enterprise Ethereum Alliance.
bigger investment from other sources such as venture capitalists and so-called initial coin offerings (ICOs) have also been bought by the rising number of blockchain companies and interest in the technology.
CB Insights said that up from 138 and $545 million in 2016, 2017 is on pace for 188 equity deals worth more than $830 million, at the current run rate. The figure has been boosted by mega deals such as the $100 million raised by Coinbase and the $107 million raised by R3.
There has been rapid growth in ICOs, where start-ups issue new tokens, similar to shares, in exchange for funds. CB Insights said that for the first time in the second quarter of 2017, total funds raised by ICOs surpassed the total funds raised via traditional equity financing. According to Coinschedule, a website that tracks the offerings, more than $3 billion has been raised via ICOs.
“Blockchain’s consolidation may be tight, with blockchain companies failing at a higher rate than tech startups in other areas,” the report said.
(Adapted from CNBC)