Review of Corporate Finance > Vol 1 > Issue 3-4

Attracting Investors in Initial Coin Offerings: The Relevance of Specific Technological Capabilities for Fundraising Success

Stephan Philippi, Department for Technology, Innovation, and Start-up Management at Justus Liebig University Giessen, Germany, Stephan.Philippi@wirtschaft.uni-giessen.de , Monika C. Schuhmacher, Department for Technology, Innovation, and Start-up Management at Justus Liebig University Giessen, Germany, Monika.Schuhmacher@wirtschaft.uni-giessen.de , Nicolai Bastian, Department for Technology, Innovation, and Start-up Management at Justus Liebig University Giessen, Germany
 
Suggested Citation
Stephan Philippi, Monika C. Schuhmacher and Nicolai Bastian (2021), "Attracting Investors in Initial Coin Offerings: The Relevance of Specific Technological Capabilities for Fundraising Success", Review of Corporate Finance: Vol. 1: No. 3-4, pp 455-485. http://dx.doi.org/10.1561/114.00000010

Publication Date: 13 Jul 2021
© 2021 S. Philippi, M.C. Schuhmacher and N. Bastian
 
Subjects
Financial markets,  Knowledge, innovation, and technology,  New business financing,  Asymmetric information
 
Keywords
E22G11M13O16
Initial coin offeringentrepreneurial financetechnological capabilitiessignaling theory
 

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In this article:
1. Introduction 
2. Theory and Hypotheses 
3. Research Design 
4. Results 
5. Discussion 
References 

Abstract

Drawing on signaling theory, we argue that signal vehicles for technological capabilities determine the fundraising success of initial coin offerings (ICOs). We analyze data from 357 ICOs between 2014 and 2020 using linear regressions. In addition to the effects of signal vehicles for technological capabilities, we account for campaign and venture characteristics. Our results reveal that ICO start-ups raise funds more successfully when they publish their source code. By following the logic of diffusion theory, we also find that ICO investors have characteristics similar to those of adopters of innovations. In this regard, we show that the effectiveness of signal vehicles for technological capabilities changes over time. Specifically, the early majority of adopters prefers a public source code, while the late majority prefers an own blockchain. Furthermore, patents do not serve as signal vehicle for technological capabilities. Consequently, we provide guidance for start-ups on how to conduct successful ICO fundraising.

DOI:10.1561/114.00000010