The Emperor's New Coins - Venture quality signals in Initial Coin Offerings

Sammanfattning: Entrepreneurs are raising billions of dollars through an emerging funding mechanism called initial coin offering (ICO). ICOs take place on blockchains, outside the traditional financial system, allowing rapid fundraising without friction. Amount of investment in ICOs have surged-$5.6 billion was invested in 2017. Some argue that this surge of investment is irrational, and that the ventures raising funds have no intrinsic quality. This study aims to examine this by investigating signals of venture quality that entrepreneurs send to investors in ICOs. A quantitative study is performed by collecting data on 136 Initial Coin Offerings that took place in September 2017-November 2017. Regression analysis is then used to find causality between ventures' quality signals and ICO funding. The empirical findings are that signals of human capital, social alliance capital and signals related to product and business artefacts are valued in an ICO setting.