Blockchain capital falls as fintech funding plummets

According to the latest research from KPMG and CB Insights, for three consecutive quarters, the investment in startups using distributed ledgers has been declining, because there are not many proofs of concept in the market. However, investors are still very interested in financial technology, and some companies have entered the second and third rounds of financing, but if there is no real application, everything is just empty talk.

New research from KPMG and CB Insights suggests that bitcoin and blockchain startups are running out of cash as fintech funding plummets.

Venture capital investment in startups using distributed ledgers is falling for the third consecutive quarter, a report released today shows.

While enthusiasm for the technology remains, the report says companies shouldn't expect more funding until substantial proof of concepts emerge on the market.

The report is as follows:

“It is not very simple to take blockchain from proof of concept to adoption and put it into use. Although the market still gives blockchain companies enough room to prove themselves, investors are also paying more and more attention to results.”

According to the report, a total of $87 million was invested in Bitcoin and blockchain startups in the third quarter of 2016, down $119 million from the second quarter and down $153 million from the first quarter.

However, another key factor from the Pulse of Fintech report is that financial technology funding has fallen globally, with total deal value also falling.

Anand Sanwal

Anand Sanwal, CEO of CB Insights, said in a statement:

“While we are seeing significant investment in financial technology companies around the world, the enthusiasm for large-scale deals that we saw in the second half of 2015 has diminished.”

Overall, blockchain was listed alongside robo-advisors and artificial intelligence as a FinTech tool that will continue to “attract more attention in the coming quarters,” but this may depend on the success of proofs of concept.

Travel around the world

But while venture capital investment in blockchain innovation is falling, different regions are telling different stories.

The United States and Denmark were ranked as the most active countries in blockchain investment, while Europe had a very slow quarter, partly due to uncertainty following the United Kingdom’s decision to leave the European Union.

The “uptick” in blockchain and financial technology investment in Asia is attributed to the region’s belief in blockchain’s potential to help it break through traditional boundaries.

Therefore, Zhang Xiaoming, financial technology and innovation partner of KPMG China, said that investors are still very interested in this, just not on a very large scale.

Zhang Xiaoming said in the report:

“Venture capital investors are investing a lot of money in small blockchain technology companies in Asia, and some very new companies have entered their second or third round of financing.”