Publication in Entrepreneur­ship Theory and Practice

Professor Dr. Lars Hornuf has published a new article in Entrepreneurship Theory and Practice titled "Token-Based Crowdfunding: Investor Choice and the Optimal Timing of Initial Coin Offerings.“ The journal is listed in the FT50 ranking and was given an “A” rating in the current VHB Jourqual. The article emerged in collaboration with Wolfgang Drobetz, Paul P. Motaz, and Niclas Schermann.

The article examines the operating and financial performance of venture firms conducting initial coin offerings (ICOs) with different types of investors and at different points along a venture’s life-cycle. Relative to purely crowdfunded ICO ventures, institutional investor-backed ICO ventures exhibit weaker operating performance and fail earlier. However, conditional on survival, these ventures financially outperform their peers that do not receive institutional investor support. The diverging effects of investor backing on financial and operating performance are consistent with the authors’ theory of “certification exploitation” through a new form of a pump-and-dump scheme. Institutional investors exploit their reputation to drive up ICO valuations and quickly exit the venture post-ICO, with the difference in pre- versus post-certification token prices being their exploitation profit in liquid markets for startups. The findings further indicate that there is an inverted U-shaped relationship between the financial success of an ICO and the timing along a venture’s life-cycle, with the product piloting phase representing the pivotal point.