Energy-related blockchain firms are looking for new sources of funding as their preferred financing route, the initial coin offering, loses its luster.
Greeneum and Hive Power are among the startups affected by the slowdown in ICOs, which are unregulated fundraising drives where investors can buy an initial tranche of cryptocoins or tokens on a blockchain-based platform.
Greeneum’s Chief Marketing Officer, Guillermo Wajner, told GTM: “The drop in bitcoin and other cryptocurrencies has slowed the market.”
The company, which aims to let stakeholders produce, trade and consume clean energy worldwide, is now “looking for new, exciting projects with real solutions and assets,” Wajner said.
At Hive Power, a June ICO failed to reach its target, and the company said participants would get a refund.
CEO Gianluca Corbellini said Hive’s decentralized energy community concept will continue “with different forms of funding.”
Davide Rivola, Hive's chief operating officer, commented: “I think market conditions are affecting every ICO, not only energy projects.”
Maria McKavanagh, Verv’s chief operating officer, said some blockchain firms are thinking of delaying ICOs or extending fundraising periods.
GTM Research’s Colleen Metelitsa said at least three other energy blockchain companies have canceled their ICOs in recent months.
Prosume had a presale but canceled a main sale; ReNu Coin was due to raise $5 million early this year but has issued no updates since last year; and Nexis Energy shut down its website and ceased social media activity in March.
Are we seeing the limits of the ICO model?
Although theoretically open to a much wider range of investors than traditional public offerings, ICOs are highly risky and most likely to appeal to tech-savvy customers.
Perceptions of blockchain investment risk have not been helped by growing evidence of ICO scams, or the fact that Russia and Estonia are two of the top five countries worldwide for ICOs. Around 5 percent of ICOs have been found to fail a know-your-customer test.
If an investor has risk appetite, then they will find a dazzling array of opportunities. ICObench lists more than 3,950 ICOs, in industries ranging from art to artificial intelligence.
There were 217 ICOs per month on average in the first six months of 2018. As of July, the amount of capital raised worldwide through ICOs in 2018 is heading north of $8.6 billion.
This frenzied level of activity raises questions around how long the blockchain ICO funding bubble can last, particularly since blockchain’s biggest cryptocurrency, bitcoin, shows little sign of returning to its all-time high in December last year.
Carbon Grid Protocol co-founder and CEO Andy Tan, a former financial services executive, said: “This is something that everybody talks about, because last year everything crypto just exploded. But I think last year was just an abnormal market. Today the market has changed.”
The blockchain world is experiencing a natural correction, he said, which could help make it more sustainable in the long run. “If the markets do recover toward the end of the year, people will be regretting...not [doing] an ICO at this point in time,” he said.
Nikolaj Martyniuk, CEO and co-founder of WePower, which in February raised $40 million in one of the largest energy-related ICOs ever, said, “The ICO model of raising capital was a very interesting addition to other forms of financing projects.”
He added: “The ICO world will not disappear. It depends a lot on sentiment, but then people are getting more educated. Funds are very active in this space, still. Funds are quite optimistic about the future, and I share that opinion.”
Join us along with innovators from utilities, start-ups, investors and policymakers for Blockchain in Energy Forum on September 11 in San Francisco. Come learn more about what the future may hold for this technology.