As noted in Part II of our 2017 Year in Review series, 2017’s ICO activity was marked by trends both well-known and more obscure. In an effort to peer behind those trends we became increasingly attracted to the idea of ‘raise bands’ as a useful way to think about the token sale market after repeatedly having our attention drawn to the variety of strong projects raising meaningful amounts in the $5 to $25 million dollar range. Despite both their numbers and quality, these projects have almost gone unnoticed within a media ecosystem too often focused almost exclusively on the largest raises. Framing the market by raise bands, in this context, serves as a useful tool helping to keep a perspective focused across the entire industry.
As we began to think more seriously about the issue of range bands, we settled on five distinct tiers that seemed to us to demarcate useful divisions within the broader ICO industry:
- $1-$5 million,
- $5-$25 million,
- $25-$50 million,
- >$50 million
What emerges from this broader perspective across 2017’s ICOs is a surprisingly complex image of a diverse industry moving forward across a much wider range of fronts than is commonly appreciated. While the 20 ICOs in the top band above raised a collective $2.3 billion, the two tiers below that raised nearly twice as much. This included over 240 ICOs, most of which are largely unknown beyond a relatively narrow range of industry insiders.
Considered in this way, on a percentage basis ICO activity during 2017 broke down as follows:
<$1mil $1-$5mil $5-$25mil $25-$50mil >$50mil
30% 25% 32% 10% 3%
The graph below shows both amounts raised per raise band and the number of ICOs, illustrating how the 3% of ICOs in the top tier raised a virtually identical amount to the 32% of ICOs in the $5 to $25 million price band.
The outsized influence of the largest raises in shaping views of the ICO industry are clearly recognizable when considered in this manner.
The graph below illustrates how 2017’s ICO raise amounts were distributed across the year, and how the different raise bands were represented within the overall monthly amounts raised.
Again, the outsized influence of the few largest raises is clear, given how the small number of ICOs in the top tier contributed nearly half to the total amounts raised during several months in 2017. Also prominent is the place of the $5-25 million tier, which consistently grew in importance as the year progressed.
Raise Bands by Industry
While the above graph explored the overall contributions of the different range bands, looking at the breakdown of raise bands within individual industries can also provide insight into trends within different industries, and how the projects and ICOs in each are best characterized.
The financial sector, for instance, saw the bulk of ICOs in the middle tier of $5 – $25 million, with that group also representing the largest cumulative amount raised. The two larger tiers included smaller number of ICOs and amounts raised. Overall, a fairly standard distribution across the industry.
A chart of the media industry has a somewhat different pattern. A large number of mid-sized ranges, similar to the finance industry, shows a significant amount raised within that group, but also a substantial amount raised by the largest ICOs even though only a small number of sales were completed.
For the information industry, the distribution across raise bands looks somewhat different, with a much larger amount raised by a few large projects: a skewed pattern of token sales that is the most unequal of the major industries in our data.
Overall, while classifying 2017’s ICOs into a series of raise bands is in part an exercise in imposing a series of artificial divisions upon the larger continuum of ICO raises, several useful insights do emerge from the effort. One is that doing so allows us to appreciate the diversity of projects that completed token sales. Also, just as looking at the composition of ICOs within different industries provided perspective upon the range of ICO activity, looking across the distribution of raise amounts provides a different sense of that same diversity. As well, looking at the distribution of raise amounts within different industries also provides unique insight into the composition of particular industries.
Examples include the way the information sector, which includes blockchains and smart contract platforms, hosts many of the larger raises across the entire industry, and as a result a skewed distribution on an industry-specific basis, or the way the finance industry hosts few truly outsized sales but a very large number of solid mid-range projects that are poised to deliver initial products on a relatively near-term basis.
A final argument for thinking about ICOs by raise bands is related to the idea of returns realized by ICOs within the different tiers. While this article did not consider this angle, it is a subject about which we will have much more to say during 2018. For now, we can conclude with a few observations and some initial thoughts. Looking at the 20 ICOs in the top tier, average raise amounts were $115 million for the group that included Bancor, Tezos, Filecoin, and Qash. While several of these are not yet trading, amongst those that are, returns are generally quite modest. Examples include Bancor at 45% higher than its ICO price, Sirin Labs, down 49% from its own ICO price, or Comsa, down 19% from its ICO price. Combined with the reality that these large raises are usually related to complex projects with extended timelines and meaningful execution risk, and in many cases extended waiting periods before tokens even begin to trade, it is clear that ICOs returns have been relatively modest while risks are considerable.