Initial coin offerings (ICOs) to finance new ventures

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...

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Vydáno v:Journal of business venturing Ročník 34; číslo 1; s. 1 - 22
Hlavní autor: Fisch, Christian
Médium: Journal Article
Jazyk:angličtina
Vydáno: Elsevier Inc 01.01.2019
Témata:
Blockchain
Cryptocurrency
Distributed ledger technology (DLT)
Ethereum
Initial coin offering (ICO)
Signaling theory
Technological capabilities
Token sale
E22
O16
Initial coin offering (ICO)
G11
Blockchain
Ethereum
Token sale
Technological capabilities
Cryptocurrency
Signaling theory
M13
Distributed ledger technology (DLT)
ISSN:0883-9026, 1873-2003
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Popis
Shrnutí: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. •Empirical study of 423 ICOs carried out between 2016 and 2018•Draws on signaling theory to explore the role technological capabilities in ICOs•Technological white papers and high-quality sources code increase the amount raised.•Patents do not seem to have a significant influence on the amount raised.•Identifies various determinants of the amount raised unique to the context of ICOs
ISSN:0883-9026
1873-2003
DOI:10.1016/j.jbusvent.2018.09.007