Why Do Businesses Go Crypto? An Empirical Analysis of Initial Coin Offerings

TLDR: It is found that the probability of an ICO’s success is higher if the code source is available, when a token presale is organized, and when tokens allow contributors to access a specific service (or to share profits).

Abstract: In this work, we provide the first comprehensive description of the Initial Coin Offering (ICO) phenomenon, which by the end of 2017 allowed startups around the world to raise more than $5.3 billion, according to market observers. We analyze the determinants of the success of these token offerings by considering a sample of 253 campaigns. We find that the probability of an ICO’s success is higher if the code source is available when a token presale is organized, and when tokens allow contributors to access a specific service (or to share profits). Our results provide valuable insights into this new source of capital for businesses and the key determinants of fundraising success.