TITLE:
Decentralized Venture Capital: Who Can Benefit from Initial Coin Offerings (ICOs)?
AUTHORS:
Mason Arditi
KEYWORDS:
Blockchain, Venture Capital, Private Equity, Entrepreneur, Investor, ICO, IPO, Cryptocurrency
JOURNAL NAME:
Open Journal of Business and Management,
Vol.11 No.4,
July
12,
2023
ABSTRACT: In this paper, we evaluate the potential for
blockchain technology to disrupt venture capital. To accomplish this, we
compare initial coin offering (ICO) data with initial public offering (IPO)
data on different characteristics: 1) accessibility to raise capital, 2)
liquidity, 3) investor protection, and 4) equitability. Our objective is to
identify: 1) how entrepreneurs may realize value by fundraising through
decentralized venture capital and 2) how investors may realize value by
investing in tokenized ventures. We find that ICOs may benefit entrepreneurs by
increasing access to capital and expanding access for ethnic minorities and
geographically restricted entrepreneurs, however traditional ventures are
likely to raise more funds than decentralized enterprises. Additionally, ICOs
may benefit investors by increasing access to low-budget speculators, yet serve
as higher risk investments lacking investor protection. This paper serves as a
non-empirical, observational overview of ICOs’ key advantages and key
shortcomings in venture capital.