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This paper examines the market for initial coin offerings (ICOs). ICOs are smart contracts based on blockchain technology that are designed for entrepreneurs to raise external finance by issuing tokens without an intermediary. Unlike existing mechanisms for earlystage finance, tokens potentially provide investors with rapid opportunities thanks to liquid trading platforms. The marketability of tokens offers novel insights into entrepreneurial finance, which I explore in this paper. First, I document that investors earn on average 8.2% on the first day of trading. However, about 40% of all ICOs destroy investor value on the first day of trading. Second, I explore the determinants of market outcomes and find that management quality and the ICO profile are positively correlated with the funding amount and returns, whereas highly visionary projects have a negative effect. Among the 21% of all tokens that get delisted from a major exchange platform, highly visionary projects are more likely to fail, which investors anticipate. Third, I explore the sensitivity of the ICO market to adverse industry events such as China's ban of ICOs, the hack of leading ledgers, and the marketing ban on FaceBook. I find that the ICO market is highly susceptible to such environmental shocks, resulting in substantial welfare losses for investors.

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Research Summary How emotions impact firm valuation is empirically understudied because affective traits are difficult to quantify. However, using artificial emotional intelligence, positive and negative affects can be identified from facial muscle contraction‐relaxation patterns obtained from public CEO photos during initial coin offerings, that is, blockchain‐based issuances of cryptocurrency tokens to raise growth capital. The results suggest that CEO affects impact firm valuation in two ways. First, CEOs' own firm valuations conform more to those of industry peers if negative affects are pronounced (conformity mechanism). Second, investors use CEO affects as signals about firm value and discount when negative affects are salient (signaling mechanism). Both mechanisms are stronger in the presence of asymmetric information. Managerial Summary The purpose of this paper is to advance our understanding of how CEOs' affective traits influence firm valuation by both, CEOs themselves and investors. The effect of CEO emotions is plausibly particularly pronounced for start‐up firms, whose success prospects critically depend on their leaders. My results suggest that CEO emotions impact underpricing in initial coin offerings twofold. First, negative emotions are associated with CEOs choosing an underpricing level that closely conforms to their peer firms' average. Second, investors react to negative CEO emotions by demanding higher discounts on firm value. These effects are more pronounced when there is relatively little public information about the ICO firm. My paper is accompanied by artificial emotional intelligence software for implementation in practice and future research.