Financing decentralized digital platform growth: The role of crypto funds in blockchain-based startups

Douglas Cumming, Wolfgang Drobetz, Paul P. Momtaz and Niclas Schermann

Journal of Business Venturing, 2025, vol. 40, issue 1

Abstract: Coordination frictions prevent the efficient adoption and governance of blockchain-based platforms. Crypto funds (CFs) create value by smoothing frictions on decentralized digital platforms (DDPs). CF-backed DDPs obtain higher valuations in the primary token market, outperform their peers after issuing tokens, and benefit from token price appreciation around CF investment disclosure in the secondary market. Primary transaction data from the Ethereum ledger shows that the valuations of DDPs with meager adoption and a higher centralization of token ownership benefit more from CF backing. The positive valuation and performance effects for CF-backed DDPs are more pronounced for CFs that are more central in investor networks.

Keywords: Crypto funds (CFs); Initial coin offering (ICO); Digital platform adoption and governance; Blockchain-based crowdfunding; Decentralized finance (DeFi) (search for similar items in EconPapers)
JEL-codes: G24 G32 K22 L26 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbvent:v:40:y:2025:i:1:s0883902624000727

DOI: 10.1016/j.jbusvent.2024.106450

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