The impact of governance signals on ICO fundraising success

The blockchain technology is one of the grand challenges for the governance of new entrepreneurial projects. Thanks to this decentralized mechanism of certification, teams are now able to organize Initial Coin Offerings (ICOs) and raise money on the Internet offering digital tokens, bypassing any screening or control from central entities and independent auditors. While many of the governance mechanisms applied in traditional venture financing do not apply to ICOs, contributors may rely ex ante on the quality of the team and on unaudited information disclosed in a 'white paper', ex post on the development on enforcing digital 'smart contracts'. In this work we study the governance signals of ICO-backed projects (token rights, institutional setting, team quality), analyzing a sample of 935 offerings. We examine the relationship between governance issues and the fundraising success and we find that both the project team and advisory committee size is positively and significantly correlated with the success. When the fraction of tokens retained by insiders and managers is larger, the probability of fundraising success is also larger, but to a lower extent if the token gives access to a service ('utility token'). Specific provisions about the future jurisdiction and incorporation of the project are not considered as a credible governance signal. On the contrary, past managerial experience of the proponents is a valuable asset for contributors.