Emotions in New Venture Teams: Affects as Signals, Emotional Diversity, and Valuation Effects in Initial Coin Offerings (ICOs)

Abstract

New Venture Teams' (NVTs') collective emotions impact startup valuations through their intensity and diversity. I identify NVTs' affective traits with artificial emotional intelligence by tracking 2,520 individuals across 165 NVTs during their Initial Coin Offerings (ICOs). The level of NVTs' negative affects correlates with lower valuations, while within-NVT emotional diversity has a value-increasing effect. Intuitively, negative affects are associated with traits that may be prejudicial in dynamic entrepreneurial markets, but could be valuable if balanced by opposite traits in emotionally diverse NVTs. Moderated mediation analyses suggest that NVT affects have pronounced direct valuation effects. Overall, I extend the focus of the affective entrepreneurship literature from the entrepreneur to the team level, introduce the concept of emotional diversity, and explore the role of emotions in entrepreneurial finance.

Keywords: Emotions, Affects, Diversity, Entrepreneurship, Entrepreneurial Finance, Initial Coin Offering, ICO, Tokens, Blockchain, Crowdfunding, Artificial Intelligence

JEL Classification: G30, L26, M12, M13, M14