Initial Coin Offerings (ICOs) to Finance New Ventures

48 Pages Posted: 2 Apr 2018 Last revised: 14 Nov 2018

See all articles by Christian Fisch

Christian Fisch

University of Luxembourg - Interdisciplinary Centre for Security, Reliability and Trust (SnT)

Date Written: September 29, 2018


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.

Keywords: Initial coin offering (ICO), Token sale, Distributed ledger technology (DLT), Blockchain, Cryptocurrency, Signaling theory, Technological capabilities, Ethereum

JEL Classification: G11, E22, M13, O16

Suggested Citation

Fisch, Christian, Initial Coin Offerings (ICOs) to Finance New Ventures (September 29, 2018). Journal of Business Venturing, 34(1), January 2019, 1–22., Available at SSRN: or

Christian Fisch (Contact Author)

University of Luxembourg - Interdisciplinary Centre for Security, Reliability and Trust (SnT) ( email )

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29, Avenue J.F Kennedy
Luxembourg, L-1885

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