Separating Quality Signals from Noise in ICO Whitepapers for Financing of Entrepreneurial Projects

This event will discuss how a prospective investor can separate whitepaper quality signals from noise to make a well-informed investment decision. 

Dr Luca Sabia is an Assistant Professor in Marketing and Digital Marketing at Coventry University. An ASPiRE Fellow at the Centre for Business in Society (CBiS), he also serves as the Course Director for the MSc in Digital Marketing Management.

Dr Kaddijatou Manneh is an entrepreneur and Lecturer in Enterprise and Entrepreneurship at Coventry University's School of Management, where she serves as the Course Director for the MSc in International Entrepreneurship.

The whitepaper in an Initial Coin Offering (ICO) serves as both a pitch and a strategic tool, presenting key project characteristics to attract investor interest and funding. Unlike the regulated prospectus in IPOs, whitepapers lack strict regulatory oversight, allowing entrepreneurs to potentially manipulate investor decisions. This raises concerns about false quality signals and investor exploitation, especially in an environment characterized by information asymmetry. Research suggests that factors like content uniqueness, readability, length, and technical complexity of whitepapers serve as quality indicators. However, the challenge remains in distinguishing genuine signals from noise. By a combination of content and netnographic analysis and through the lenses of Signalling Theory and the Prototype-Willingness Model, the study finds that ICO issuers often provide broad but weak economic signals, leading to a polarization between trend-driven and analytical investment approaches. The contribution is threefold: it identifies how to separate quality signals from noise, explains short-term trading behaviours in ICOs, and advances the application of the Signalling Theory and the Prototype-Willingness Model in understanding investor behaviour in emerging financial technologies. Implications for both practitioners and policymakers are also discussed.