Financing The Blockchain Revolution
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Date
2023-05
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Publisher
The Ohio State University
Abstract
Blockchain technology has attracted widespread interest in the past few years. Initially, this technology emerged to support cryptocurrencies, such as Bitcoin and Ethereum. However, its applications are vast and constantly expanding, inducing many observers to view it as a general-purpose technology. While few question its potential to have a significant impact on the economy, critics highlight its limitations and risks. Therefore, the blockchain is currently the object of substantial debate in business, engineering, and government policy. At the core, the blockchain is simply a decentralized system to record and communicate information. Its generality makes it applicable to a variety of commercial domains, making it an attractive area for entrepreneurs. Unsurprisingly, venture capital firms and other investors have taken note of the opportunity and started paying attention to this nascent industry. However, the ambiguity of the technology continues to make this an especially risky space.
In this thesis, I investigate how entrepreneurs have been seeking to fund their blockchain startups and how investors have responded. More precisely, I examine whether there are any common characteristics within the companies that have been successful in receiving funding. The answer to this question would help us understand the factors shaping the future investment landscape in the blockchain space.
To shed light on this question, I employ an inductive qualitative approach. First, I review the existing academic literature on blockchain and venture financing. Second, I identify a set of ten blockchain-based startups, representative of the most common spaces where the blockchain is used and examine their funding process in depth. I collect data from a variety of sources, including existing databases, social media, news outlets, and interviews with startups' management teams. Finally, I make generalized conclusions based on my observations to generate hypotheses that can be tested in the future using deductive reasoning.
Noteworthy results that emerged out of the universe of matched pairs include more founders being involved in the startups equating to more funding, geographical location of startups in startup-dense cities leading to more funding, product price availability on startup websites leading to more funding, and past experience in blockchain not having a huge effect on funding. However, further analysis must be done to have comprehensive results. Ultimately, I expect that this thesis will provide a series of insights that will be helpful for academics, business leaders, and policy makers.
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Keywords
Blockchain, Venture Capital, Investment, Startup, Seed Funding, Bitcoin