Initial coin offerings (ICOs) to finance new ventures

By Christian Fisch. Journal of Business Venturing, 2018

477 citations recorded by the source corpus.

In an initial coin offering (ICO), new ventures raise capital by selling tokens to a crowd of investors. Often, this token is a cryptocurrency, a digital medium of value exchange based on the distributed ledger technology. Both the number of ICOs and the amount of capital raised have exploded since 2017. Despite attracting significant attention from ventures, investors, and policy makers, little is known about the dynamics of ICOs. This initial study therefore assesses the determinants of the amount raised in 423 ICOs. Drawing on signaling theory, the study explores the role of signaling ventures' technological capabilities in ICOs. The results show that technical white papers and high-quality source codes increase the amount raised, while patents are not associated with increased amounts of funding. Exploring further determinants of the amount raised, the results indicate that some of the underlying mechanisms in ICOs resemble those found in prior research into entrepreneurial finance, while others are unique to the ICO context. The study's implications are multifold and discussed in detail. Importantly, the results enable investors to more accurately understand crucial determinants of the amount raised (e.g., technical white papers, source code quality, token supply, Ethereum-standard). This reduces the considerable uncertainty that investors face when investing in ICOs and enables more informed decision-making.

Subfields: Accounting, Information Systems, Management Information Systems

View Paper: https://www.semanticscholar.org/paper/5fe0fc6e2a03c6843413ab2033af7d830ad74bd4

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Citations in the corpus

The entrepreneurial finance markets of the future: a comparison of crowdfunding and initial coin offerings (2020, background): “For example, the first ICO (i.e., Mastercoin) emerged in July 2013 (Fisch 2019).”
Motives and profiles of ICO investors (2019, background): “Conversely, the absence of regulation leads to increased investment risk due to misconduct (Cumming, Dannhauser, & Johan, 2015), for example, because tokens often have no current value and do not lead to any legal entitlement (e.g., Fisch, 2019; Huang, Meoli, & Vismara, 2019; SEC, 2017).”
The Use of Signals in New-Venture Financing: A Review and Research Agenda (2021, background): “More specific signals, which have been shown to contribute to IPO performance, include top executive prestige (Certo, 2003; Chahine, Filatotchev, & Zahra, 2011), technological competency (Fisch, 2019), corporate governance characteristics (e.”
Entrepreneurial Finance and Moral Hazard: Evidence from Token Offerings (2020, methodology): “Token offerings or Initial Coin Offerings (ICOs) are smart contracts programmed on distributed ledger technology (DLT), which are designed to raise external finance without the need for an intermediary by issuing tokens or coins that can be publicly traded.1 The main innovations of token offerings a”
A systematic literature review on SME financing: Trends and future directions (2021, background): “The disruption caused by innovative technology has also led to the generation of many new resources and tools for SME financing such as crowdfunding, ICOs, and distributed ledger technology (Fisch, 2019).”
Institutional investors and post-ICO performance: an empirical analysis of investor returns in initial coin offerings (ICOs) (2020, unknown): “An initial coin offering (ICO) (i.e., token offering) is a novel mechanism of entrepreneurial finance that enables ventures to raise capital by selling tokens to a crowd of investors (e.g., Fisch, 2019; Howell et al., 2019; Momtaz, 2020a).”
Are Blockchain Crowdsales the New 'Gold Rush'? Success Determinants of Initial Coin Offerings (2018, unknown): “…2018); but collecting data from the ICO “universe” of websites that require prescreening or listing fees, such as Coinschedule.com and Topicolist.com,3 will likely result in a sample selection bias toward the more promising and larger ICOs (Adhami, Giudici, and Martinazzi, 2018; Fisch, 2019).”
Artificial Intelligence and Entrepreneurship: Implications for Venture Creation in the Fourth Industrial Revolution (2020, background): “This has implications for how entrepreneurs structure and operate their ventures, as they must adapt their operations to benefit from the affordances of establishing technologies such as open source (Lerner & Tirole, 2002), peer- to-peer platforms (P2P; Helfat & Raubitschek, 2018 ) and more recent a”
The non-fungible token (NFT) market and its relationship with Bitcoin and Ethereum (2021, background): “This includes issues related to quality signaling in the context of token pricing or valuation [24], investment returns [25], or legal challenges [26].”
Blockchain disruption and decentralized finance: The rise of decentralized business models (2020, unknown): “Blockchain technology is reshaping the fundraising landscape (Chen, 2018; Fisch, 2019).”