A recent study from Boston College has found that the survival rate of startups after their Initial Coin Offering (ICO) drives is only around 44 percent.

The researchers – Hugo Benedetti and Leonard Kostovetsky – created a dataset of 4,003 ICOs, including 2390 ICOs which were completed before April 30, 2018, and 1613 ICOs which are ongoing as of that date or planned for the future. They found that:

“Startups sell their tokens at a significant discount to the opening market price, generating an average return for ICO investors of 179%, accrued over an average holding period of 16 days from the ICO end date to the listing date. Even after imputing large negative returns to tokens that are not listed within 60 days, the representative investor nearly doubles her money by investing in an ICO.”

In an interview with Bloomberg, Kostovetsky said that purchasing coins in an ICO and selling them on the first day is the safest investment strategy. The report stated that “the first day’s average abnormal returns range from 14% to 16%, 30-day average abnormal returns range from 41% to 67%, and 180-day average abnormal returns range from 150% to 430%.”

Kostovetsky, however, cautioned against such investments, saying:

"People often look at returns and say this is a great deal, but we teach in finance that return is a compensation for risk. These are stakes in platforms that have not yet been built, that have no participants yet. There’s a lot of risk. The majority of ICOs do fail."

The researchers analysed the activity of the official Twitter accounts of these projects for estimating their survival rate. The study found that the “survival rate for startups after 120 days (from the end of the ICO) is only 44.2%, assuming that all firms inactive on Twitter in the fifth month did not survive.” It added:

“83% of the 694 ICOs that don’t report capital and don’t list on an exchange are inactive after 120 days. For the 420 ICOs that raise some capital but don’t list, this figure falls to 52%, and for the 440 ICOs that list on an exchange, only 16% are inactive in the fifth month.”