ICOs as new financing tools: What factors are important for the measurement of its success?

Abstract

Initial Coin Offerings (ICOs), being unregulated fundraising means with lower transactional costs, attract large pool of small and big investors. This paper is aimed to give theoretical and technical background for this new phenomenon in equity crowdfunding, and by empirical study of 90 ICOs launched during 2017 and 2018, determine the important factors to be considered by potential investors in their decision-making process. This being said, I further examined Amsden & Schweizer’s newly developed model (2018) of measuring ICO success on the theoretical framework of venture uncertainty, venture quality and investor opportunity set with an emphasis to first two factors being venture uncertainty and quality. With regards to those two theoretical measures of success, two observational variables were added to Amsden & Schweizer’s model. Variable indicating number of platforms where token is listed was added to ICO characteristics set of variables with an intention to decrease the venture uncertainty component hindering the success of an ICO while variable indicating the presence of a law practitioner among the team was added to the team characteristics set of variables with an intention to both increase the venture quality by enhancing the human capital and decrease the venture uncertainty. Both variables added have proven their positive impact on the measurement of ICO Success.