MMC Ventures research concludes activity and investment remain strong in the UK blockchain ecosystem, despite “crypto winter”


New research released today from venture capital fund MMC Ventures, shows that while 2,700 blockchain companies have been created in the UK since 2008, only 9 per cent of these have been equity funded. Initial Coin Offerings (ICOs) had been the ‘go-to’ source of funding for blockchain companies until early 2018. As the ICO funding model has become increasingly difficult since the crash in crypto prices in the beginning of 2018, companies are shifting back to equity finance and placing a greater emphasis on company fundamentals.

FieldHouse Associates

The report “Crypto Winter or Crypto Spring? Reasons to be Optimistic on the UK’s Blockchain Ecosystem” shows that between January 2017 and December 2019, UK blockchain companies raised £1.2 billion via ICOs compared to £525 million invested in equity. The cheap access to capital, combined with a lack of in-depth understanding, contributed to the ICO-craze in 2017/18. In an environment where entrepreneurs were focused on the token price rather than the business proposition, few were interested in creating long-term value, and a large number of ICOs have since been deemed scams.


The ecosystem is maturing though, and investors have paid attention. More than 85% of the equity funding for UK blockchain startups has occurred since 2017. In 2019, startups attracted £168 million in equity funding – the second strongest year for blockchain startups raising equity capital.


The report also highlights interesting capital dynamics between equity-funded startups in the UK and US ecosystems. The UK ecosystem is still less mature and home to a higher proportion of seed and pre-seed blockchain companies compared to the US. More than 60% of the UK blockchain companies have raised less than $2 million in capital. The UK has 5x fewer blockchain companies than the US, but the equity investment has been 10x lower. MMC’s report shows that the average early-stage startup has raised similar funding between the UK and US, suggesting that the funding discrepancy may come from a lack of later-stage capital to scale in the UK.


Unsurprisingly, the report finds that financial services remains a core focus for UK equity-funded blockchain companies, with 6 in 10 B2B (businesses selling to other business customers) focused startups serving the financial sector. Most B2B startups that have raised equity funding focus on addressing sector specific challenges; blockchain businesses with specific use-cases find it easier to monetise in today’s market. MMC recently closed its first blockchain investment in; which provides the infrastructure for the secure custody, trading and transfer of cryptocurrencies. Since launch in 2018, Copper has quickly grown its client base with crypto funds, institutions and HNW private traders.


Along with the rise in blockchain adoption in the financial services sector, companies across various verticals are increasingly investing in the technology. Supply chain management is a core use-case for blockchain technologies. The media and advertising sectors are also seeing strong levels of activity, with 11% of blockchain businesses targeting this vertical. In the media industry, new consumer behaviours present new opportunities for content monetisation, but outdated rights management systems prevent content creators, IP holders and artists to fully benefit from them. Blockchain addresses these issues by enabling efficient traceability via digital asset management and micropayments, allowing content registries to quickly and autonomously identify assets and establish ownership every time the content is consumed.


Author, Asen Kostadinov, commented:“While capital may be less abundant than it was during the ICO bubble, resources are being deployed more efficiently and targeted at fundamental areas of the technology stack. The innovation occurring at the infrastructure layer over the past 18 months might not be as easy to appreciate from a distance, but it is laying the foundations for more sustainable growth in both business and consumer adoption.


“The growing share of ‘live’ blockchain, or ‘blockchain-inspired’, deployments suggests we are seeing the first signs of maturity in the technology. While it took the internet approximately 30 years to become ‘usable’ by businesses, blockchain has made that transition in a third of the time.


“At MMC Ventures, blockchain will continue to be an area of research and investment focus. We back entrepreneurs that are changing industries at the most fundamental level and we believe that applications of blockchain technology in the enterprise will have that kind of transformative impact in the coming years.”