What can explain the performance of Initial Coin Offerings?

Abstract

I study features the most successful initial coin offerings (ICOs) have in common and analyze factors which can predict post-ICO token performance. I find that 79% of startups did have a working prototype, minimum viable product or open-source code available before the start of ICO campaign; 84% of ICOs had an active Reddit discussion channel at the moment of token sale and showed on average 93% increase in subscribers over the two weeks before ICO end date; 80% of startups did have core team members who worked together on the project more than one year before ICO event, with the average team age of 2.3 years; 81% of core teams did have previous work experience in startups or venture capital industry and 76% work fulltime on the startup project; 91% of startups did have a fixed number of tokens issued during ICO, i.e. hard cap token sale structure. I further document significant ICO underpricing of 200% average token return at the end of the first trading day with median value of 78%. Moreover, I provide evidence that 3-month subsequent token returns can be strongly predicted by ICO underpricing (1st day token returns) along with fixed token issuance (hard cap) during the ICO.