The role of decentralized and traditional entrepreneurial finance in startups financing: an analysis of ICO-funded startups

Abstract The rise of Decentralized Finance (DeFi) has introduced new fundraising mechanisms for startups. This study examines the interplay between Initial Coin Offerings (ICOs) and traditional entrepreneurial finance investors. Our findings document that while ICO funding amounts do not predict future funding success, prior business angel investment significantly increases the likelihood of securing follow-on funding. Co-investment by crypto funds during the ICO enhances follow-on funding opportunities, particularly for firms backed by hedge-style crypto investors. This research contributes to the entrepreneurial finance literature by examining how blockchain-based financing mechanisms integrate into the broader venture funding ecosystem.