The Impact of the Founding Team’s Human Capital on Token Sale Success: An analysis of European ICOs between 2016-2021

Abstract: The emergence of blockchain technology enables entrepreneurs to raise capital in an innovative way, by addressing a crowd of online investors without the need for an intermediary. This phenomenon is known as token sales, and it may have the potential to revolutionize entrepreneurial finance. However, information asymmetry is particularly severe in this context, and the need for entrepreneurs to send signals to investors arises as an essential challenge to venture financing. We explore the possible impact that human capital may play as a signal for initial coin offerings (ICOs), a type of token sale. By looking at the education of the entrepreneurial team, as well as the relevant skills of its members, our findings suggest that human capital does not play a significant role in ICO success. Interestingly, we found that the number of Twitter followers is significant in relation to ICO success. We believe that herd behavior and a lack of due diligence may explain these results. We open the discussion for further investigation.