Abstract

Initial Coin Offerings (ICOs) have emerged as an alternative funding method for startups, bypassing the need for traditional financing. This study analyses the relationship between Environmental, Social, and Governance (ESG) classification and the amount of funding startups raise through ICOs. The research also aims to identify other variables affecting fundraising through ICOs. The study examined 6,513 ICOs conducted between 2017 and 2021, using data collected from the ICOmark platform. A machine learning-based calculation mechanism was used to identify offers that target ESG, following the method proposed by Monsouri and Momtaz. Linear regression approach Ordinary Least Squares (OLS) and Generalized Least Squares (GLS) estimation methods were implemented to analyze the relationship between ESG rating and the funding raised through ICOs. The study found a negative relationship between ESG rating and the amount of funding raised through ICOs. Additionally, the study highlights that startups that adopt Know Your Customer (KYC) procedures tend to obtain more funding than others. Furthermore, the Minimum Viable Product (MVP) factor does not directly correlate with higher fundraising.

Keywords: ESG, ICOs, Startups, KYC, MVP