Crowd’s contagion and decentralised finance funding

Abstract

We examine how coverage by mainstream media affects start-ups in raising funds through decentralised finance (DeFi). Building on contagion theory, we propose the concept of crowd contagion, arguing that the coverage by a reputable international financial newspaper can rapidly spread interest among investors. Using data from a highly reputable newspaper, we find that such coverage is positively associated with the likelihood that innovative, high-tech start-ups reach their funding goals. We suggest that this happens because the coverage by a reputable international financial newspaper helps raise awareness about a new asset class and builds legitimacy. Our results are robust against reverse causality and omitted variable bias. We discuss implications for research, practitioners and policy making.