Growing Entrepreneurship with Crypto Tokens

The advent of crypto tokens has enabled ventures to raise funding through initial coin offerings (ICOs). As of 2019, ventures worldwide have raised over $27 billion from token-based financing. Yet, crypto tokens’ developmental value to ventures is less understood but of significant interest to entrepreneurs and policymakers. In this study, we examine the developmental value of crypto tokens through the lens of token liquidity obtained on secondary market exchanges. Specifically, we study how exchange-listed tokens affect a venture’s growth toward application development. We study a sample of 1,285 ventures that have collectively raised $15.6 billion in ICO funding and committed 28.4 million code updates to application development. We find that ventures with exchange-listed tokens experienced more tangible growth relative to counterpart ventures without tokens listed on exchanges. The mechanism centers on demand discovery and price change that facilitate application development. Heterogeneous impacts across the cryptocurrency market waves and regulatory stances of countries further confirm these mechanisms. Finally, exchange listing is positively associated with project survival and popularity in application development, indicating that access to token liquidity has important implications for venture growth.