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The Hidden Costs of Initial Coin Offerings

By: Jeffrey J. Bussgang and Ramana Nanda
  • Format:Electronic
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Abstract

In recent years, much has been written about how the Blockchain is poised to transform traditional industries such as banking, real estate, and healthcare. More recently, it has gained attention as a way to finance new ventures, through what is known as an Initial Coin Offering (ICO). Less noticed, though, is ICOs appear almost antithetical to the standard approach to financing a risky venture. Structured experimentation, popularized by Eric Ries' The Lean Startup, has been widely embraced as the gold standard for how to approach the commercialization of radical new ideas. From Boston to Beijing to Bangalore, entrepreneurs and investors rattle off the importance of designing focused experiments to test hypotheses in a capital-efficient fashion in order to achieve product-market fit. But ICOs substantially limit the benefits associated with such staged experimentation, for three reasons.

Keywords

Initial Coin Offerings; Business Ventures; Entrepreneurship; Finance

Citation

Bussgang, Jeffrey J., and Ramana Nanda. "The Hidden Costs of Initial Coin Offerings." Harvard Business Review (website) (November 7, 2018).
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About The Authors

Jeffrey J. Bussgang

Entrepreneurial Management
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Ramana Nanda

Entrepreneurial Management
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