A new study released by venture capital firm, MMC Ventures, found that UK blockchain companies are turning to traditional capital raising strategies, noting that the Initial Coin Offering, or ICO, model is becoming “increasingly” difficult to utilize.

According to the research published on April 30, ICOs represent a “valuable” funding source for open-source projects.

However, they allege that cheap access to capital combined with a lack of understanding of the esoteric concepts involved in most crypto projects, generated the perfect conditions for a “bubble.” The research further quotes a study, previously reported by Cointelegraph, on the fact that almost 80% of ICOs conducted in 2017 were identified as scams.

By creating an environment in which entrepreneurs focused more on price action than on the business proposition, ICO funding decelerated towards the end of 2018.

The historical context realized that the lack of regulation, technology hype, and faster-increasing prices of cryptocurrencies helped boost ICOs as a funding method between 2017 and early 2018.

Eyes shift towards the company fundamentals

MMC Ventures cites ICObench statistics which show that UK blockchain companies raised $1.5 billion via ICOs between January 2017 and December 2019, which was quite a high number compared to the $656 million invested in equity funding raised by startups.

The study affirms the following regarding this change in the dynamics of funding strategies:

“This has prompted founders to place more focus on company fundamentals.”

Another point highlighted by the research is that the UK is home to a higher proportion of seed and pre-seed blockchain firms compared to the global average.

Companies may not be scaling enough

Although the UK has five times fewer blockchain companies than the US, the equity investment has been ten times less. On this point, MMC Ventures commented the following:

“It is difficult to pinpoint the main driver behind these dynamics - it could be that companies are not successfully scaling or it could be related to less capital being available for later stage financing. Further, European late stage investors are more conservative than the US and thus require more traction before committing to large raises. This is what a lot of blockchain companies lack.”

The statistics presented in the study contrast with the ICObench research, as reported by Cointelegraph in May 2019.

According to the token rating platform, the ICO sector showed signs of an uptick due to positive sentiment. They state that this was fueled at that time by a crypto market rally.