The long-run performance of Initial Coin Offerings

Abstract

This study investigates the follow-on funding scenario of token-backed companies (e.g., companies that issued ICOs and STOs). Our sample comprises 523 successfully funded STOs and ICOs issued in the USA and Europe from 2015 to 2021 and combines data from token portals, CrunchBase, CryptoFund Research, and Orbis. 12% of the ventures failed after the token offerings while 31% went after at least one follow-on round, an IPO, or an M&A. Adopting competing risk proportional hazards models we investigate the determinants of follow-on rounds. Our results show that previous investment rounds, the presence of crypto funds during the token offerings, and the type of token issued affect the probability of raising additional money. In particular, utility token-backed companies are more attractive to subsequent investors than security-token-backed companies. Our results suggest different roles of token offering over the firm financing life cycle.