Initial Coin Offerings: Financing Growth with Cryptocurrency Token Sales

TLDR

ICOs have emerged as a new mechanism for entrepreneurial finance, paralleling IPOs, venture capital, and presale crowdfunding. The study examines which issuer and ICO characteristics predict successful real outcomes such as increased employment and avoidance of enterprise failure. The analysis draws on a sample of more than 1,500 ICOs that collectively raised $12.9 billion to assess these characteristics. Success is linked to disclosure, credible commitment, and quality signals, and an instrumental‑variables analysis shows that token exchange listing raises future employment, underscoring the real‑world impact of token liquidity. Authors provide an Internet Appendix on the Oxford University Press website alongside the final published paper online.

Abstract

Abstract Initial coin offerings (ICOs) have emerged as a new mechanism for entrepreneurial finance, with parallels to initial public offerings, venture capital, and presale crowdfunding. In a sample of more than 1,500 ICOs that collectively raise ${\$}$12.9 billion, we examine which issuer and ICO characteristics predict successful real outcomes (increasing issuer employment and avoiding enterprise failure). Success is associated with disclosure, credible commitment to the project, and quality signals. An instrumental variables analysis finds that ICO token exchange listing causes higher future employment, indicating that access to token liquidity has important real consequences for the enterprise. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.