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Blockchain and Cloud Storage: Transactions

This is the second in a multi-part series that will focus on the growth, investment, and M&A trends in the blockchain and cloud storage industry.

While transactions in the blockchain cloud storage market are still few, breaking the industries apart shows an evolving blockchain market and a maturing cloud industry.

Despite the industry being very young, the blockchain cloud storage industry already has a market cap of over $1 billion, for only 13 coins related to storage[1]. ICO Funding for Sia, MaidSafe, Storj and Filecoin add up to $300 million with $1.5, $7, $30, and $257 million respectively[2]. Technically, Sia performed a TSO – Tokenized Security Offering – to differentiate between utility and fundraising tokens. This excludes the numerous coins for which data is unavailable, or that have only recently had an ICO. The blockchain market in general had over $2 billion in funding in 2017 alone[3]. A large amount comes from ICOs, but equity funding still accounts for a substantial part. The cloud storage market size captured $30.7 billion in 2017 and is expected to grow[4]. Being embedded in cloud computing and associated cloud mobility industry, the sector is dense with possibilities.

Blockchain Cloud Storage Market in its infancy

As the market and business within the cloud storage market remain small, the report continues to focus on the major four: Storj, Sia, FileCoin and MaidSafe, as introduced in the previous industry overview.

[2]

Filecoin had the largest ICO ever but dropped in value over the first few months. Other storage providers had smaller ICOs but a more stable value throughout the year. The price of the token can give directional advice on how much is invested in the business. Several blockchain storage businesses use their token purely as a method of payment, though, and the token price in the market itself can be misleading from the value of the business.

[5]

The blockchain market is evolving

Industry
Various industries ranging from finance (J.P.Morgan) and trade (Maersk) to pharmaceutics (Pfizer) and retail (Walmart) are experimenting with blockchain implementations. While interest and investments are increasing, consumer confidence and adaptation has yet to settle. While most companies are founded in the financial space (cryptocurrencies, exchanges, or payment services), the most money is invested in and raised by enterprise blockchain solutions (e.g. healthcare and insurance).

[6]

Investors and Investments
The most notable deals include a $1.5 million investment from Andreesen Horowitz and Union Square Ventures in MediaChain, and a $5 million investment from various investors including CrunchFund, Cowboy Ventures and SV Angel. In 2017, Coinbase raised $100 million led by Institutional Venture Partners. Bitcoin wallet provider Blockchain raised $40 million from investors including Digital Currency Group, GV, Lakestar and Virgin. Bitfury raised $30 million by Credit China Fintech. The most active blockchain VC firms are Digital Currency Group, Blockchain Capital and Pantera Capital. The most funded companies include Coinbase, an online platform for digital currency trading, 21 Inc, which aims at making bitcoin accessible to the public, and Circle, which recently transitioned to become a more general payments platform.

Risks
The large funding of ICOs as opposed to equity may indicate an over-capitalization of the industry, with $1,327 million for ICOs, compared to $259 million blockchain equity funding.

However, Venture Capital total funding increased from $876 million in 2017 to $1,715 million in 2018, with number of rounds spiking from 153 to 323[7]. Another caution to keep in mind is that blockchain companies fail more frequently than other tech startups, increasing the risk of investment. Pivots away from the blockchain industry include Circle, which focuses on mobile payments instead of bitcoin exchange, and 21 Inc. towards IoT. Promising are companies that expand from a focus on cryptocurrency only towards wider blockchain applications, such as Paxos and BitFury.

Cloud storage market expected to mature

Cloud storage is only one of many features of the cloud, which most notably accounts for cloud computing technologies, and embeds industries from cloud management to cloud security a large and growing field. In the current traditional cloud storage market, Amazon’s AWS has 47% market share, Microsoft’s Azure 10% but growing quickly, Google’s Cloud Platform 4% and IBM’s Softlayer 3%[8].

Investors and Investments

In the cloud storage market, most notable deals include mergers and acquisitions of data centers, and acquisitions of smaller start-ups in the cloud computing industry[9].

Notable deals include:

  • Microsoft’s acquisition of Avere Systems (2018; amount undisclosed)
  • Cisco’s acquisition of Cmpute.io (2017; amount undisclosed)
  • Apple’s acquisition of Buddybuild (2018; amount undisclosed)
  • McAfee’s acquisition of Skyhigh Networks (2018; amount undisclosed)
  • Carbonite’s acquisition of Datacastle (2017; $9.6M)
  • Google’s acquisition of Velostrata (2018; amount undisclosed)



But also smaller deals rise in numbers, such as Cloudian’s acquisition of Infinity storage or Marlin’s acquisition of Zetta.net and subsequent merge with Arcserve. Newcomers in the field include Zadara Storage (2011) with $20 million funding, OwnBackup (2012) with $30 million funding, Wasabi Technologies (2017) with $10.8 million and Panzura (2008) with $84 million[10].

Metrics currently assessing the state of a company (see table below) are only somewhat helpful in looking at coin based companies. As the market matures, new metrics will emerge to assess the industry.

Anna Pauxberger contributed to this report.

Sources

[1] Storage Cryptocurrencies (2018), https://cryptoslate.com/category/cryptos/storage/ (last visited July 20, 2018)

[2] Coin Gecko (2018), https://www.coingecko.com/en/ (last visited July 20, 2018)

[3] Blockchain Investment Trends in Review (2017), https://www.cbinsights.com/research/report/blockchain-trends-opportunities/ (last visited July 20, 2018)

[4] PR Newswire. (2018, February 13). The cloud storage market size is expected to grow from USD 30.70 billion in 2017 to USD 88.91 billion by 2022, at a Compound Annual Growth Rate (CAGR) of 23.7%. Retrieved July 20, 2018, from https://www.prnewswire.com/news-releases/the-cloud-storage-market-size-is-expected-to-grow-from-usd-3070-billion-in-2017-to-usd-8891-billion-by-2022-at-a-compound-annual-growth-rate-cagr-of-237-300597852.html

[5] Top 50 Tokens Based on ROI Since ICO (2018), https://www.coinist.io/best-ico-roi/ (last visited July 20, 2018)

[6] PitchBook_4Q_2017_Blockchain_Company_Profiles_XLS (2017), http://files.pitchbook.com/website/files/xls/PitchBook_4Q_2017_Blockchain_Company_Profiles_XLS.xlsx (last visited July 20, 2018)

[7] Blockchain Venture Capital (2018], https://www.coindesk.com/bitcoin-venture-capital/ (last visited July 20, 2018)

[8] AWS vs Azure vs Google Cloud Market Share 2017 (2018), https://www.skyhighnetworks.com/cloud-security-blog/microsoft-azure-closes-iaas-adoption-gap-with-amazon-aws/ (last visited July 20, 2018)

[9] 7 Acquisitions that Point to Cloud Maturity (2018), https://www.informationweek.com/cloud/7-acquisitions-that-point-to-cloud-maturity/d/d-id/1330802?page_number=1 (last visited July 20, 2018)

[10] Cloud Storage (2018), https://index.co/market/cloud-storage/companies (last visited July 20, 2018)

[11] YCharts (2018), https://ycharts.com/ (last visited July 25, 2018)

[12] GuruFocus (2018), https://www.gurufocus.com/ (last visited July 25, 2018)

[13] Yahoo! Finance (2018), https://finance.yahoo.com/ (last visited July 25, 2018)

Corbin Bridge on Linkedin
Corbin Bridge
Corbin Bridge is a licensed investment banker at InvestmentBank.com. He has prior experience assisting private companies in developing and executing acquisition strategies. Corbin works with middle-market corporate clients looking to acquire, sell, divest or raise growth capital from qualified buyers and institutional investors. His areas of interest include Blockchain, AdTech, and Entertainment. Reliance Worldwide Investments, LLC a member of FINRA and SIPC and registered with the SEC and MSRB. Corbin resides in Las Vegas, Nevada.
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