Initial coin offerings (ICOs): Why do they succeed?

Abstract

Recent literature has addressed initial coin offering (ICO) projects, which are an innovative form of venture financing through cryptocurrencies using blockchain technology. Many features of ICOs remain unexplored, leaving much room for additional research, including the success factors of ICO projects. We investigate the success of ICO projects, with our main purpose being to identify factors that influence a project’s outcome. Following a literature review, from which several potential variables were collected, we used a database comprising 428 ICO projects in the banking/financial sector to regress several econometric models. We confirmed the impacts of several variables and obtained particularly valuable results concerning project and campaign variables. We confirmed the importance of a well-structured and informative whitepaper. The proximity to certain markets with high availability of financial and human capital is also an important determinant of the success of an ICO. We also confirm the strong dependency on cryptocurrency and the impact of cryptocurrency valuations on the success of a project. Furthermore, we confirm the importance of social media in ICO projects, as well as the importance of human capital characteristics. Our research contributes to the ICO literature by capturing most of the success factors previously identified and testing their impacts based on a large database. The current research contributes to the building of systems theory and signaling theory by adapting their frameworks to the ICO environment. Our results are also important for regulators, as ICOs are mainly unregulated and have vast future potential, and for investors, who can benefit from our analysis and use it in their due diligence.