A new study issued by venture capital firm, MMC Ventures, discovered that UK blockchain companies are shifting to traditional capital raising strategies, seeing that the Initial Coin Offering, or ICO, model is becoming “increasingly” challenging to use.

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

Nevertheless, they claim that cheap access to capital, coupled with a lack of perception of the esoteric concepts included in most crypto projects, produced the ideal conditions for a “bubble.” The research additionally quotes a study, on the fact that approximately 80% of ICOs led in 2017 were classified as scams.

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

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

Eyes shift towards the company fundamentals.

MMC Ventures quotes ICObench statistics, which reveal that UK blockchain companies raised $1.5 billion through ICOs between January 2017 and December 2019, which was quite a large number compared to the $656 million funded in equity funding raised by startups.

The study asserts the following concerning 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 greater 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 said 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.”

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