Ok, you decided to put some money in ICO and planning to “do your own research” on a project (DYOR) as a smart guy. Some money, which you are ready to loose, of course… Don’t forget, you are a smart guy! You hear lot of stories about big ICO investment returns, but at the same time, that market becomes more complicated… It’s true! It is more complicated, and you need to know how to analyze your potential investment.
In this article I will not give you a recipe of a successful investment, but we will review the questions and points professional investors are looking at, based on my experience.
In Part 1 we reviewed the traditional business aspects of a project we should look at.
In Part 2 we will study more ICO related topics, which help to evaluate potential success of the token. I will also explain why certain points are important and how not to misunderstand some of them.
So, let’s go…
I. Community & ICO Marketing
- Active social media community or strong community management
No, no… Not 100K telegram group, but ACTIVE community. In other words, it’s much better to have a 20K telegram group, which LIVES and is active, rather than 100K group full of bots or “dead” bounty hunters. Try to see if people are really engaged, if they are asking questions related to the project, etc.
Remember, ACTIVE community members are potential investors. And the more investors (token holders) ICO has, it’s better for token volatility.
- PR or media logos on the ICO website
This one is tricky. It’s a good instrument for ICO to get attention of publics and convert it in potential investors or at least community members. PR is important and it’s a “must have” for a strong project. Just remember, that all these instruments are paid. So, if you see an article in Forbes, don’t get very excited, that it’s Forbes who decided to publish about the project on their own.
- ICO reviews on YouTube, etc.
Again… These YouTube reviews are a good way to look at ICO from certain angle, but keep in mind that usually it is not an expert review, but a content provided by ICO on a paid basis.
- Now, expert reviews
Might be difficult to recognize it if you are not familiar with experts community, but sometimes you might see really heavy guys giving a comment on certain ICO. It also can be paid on a consultancy fee basis, but usually real experts do not risk their reputation and do a positive review or a comment on a crappy project. Try to look at expert’s background and how solid is his experience in a certain field.
A good example: a solid tech expert with heavy projects in his experience, PhD in maths and computing, is giving an explained positive review on a tech paper of certain new blockchain protocol project.
A bad example: a pretty girl or a handsome guy, claiming (s)he is blockchain expert or crypto enthusiast since 2010, without any proven experience in business, tech and or solid education background, is saying in a video selfie mode, that project is “cool and promising”.
- Transparency and current progress
Make sure team is transparent, registered in major Social Media, updates you on their current stage and answers the questions of community. You also can ask any questions you want regarding the project.
Most of blockchain projects are promising tech innovation. Make sure their GitHub account is active and team is transparent about product development update.
- Who are the existing partners and what is the role of each
Be careful, because ICOs like to do tricks like claiming Amazon being their partner if project uses, for example, their cloud services. On the other hand, partners can be early adopters (users) of the product or business development partners which will help to move project forward. Make sure, you understand the role of these partners.
III. Exchanges listing strategy
- First exchanges
Sometimes projects announce agreements with exchanges before ICO ends. This is good.
If they don’t, feel free to ask it their community manager and keep in mind the points below.
- Size of exchange (by volume) & geography
Make sure the exchange(s) project is targeting has a reasonable trading volume based on ICO size. Make sure, they it’s popular in the regions, which are key for the project and you are allowed or comfortable to trade there.
- Listing plan & timeline
Here we can’t know the truth, but still it’s good to ask to make sure, that project is looking forward to have an active plan of listings. More exchanges means more token holders, volume and a higher token price (if the project is doing well).
IV. Regulations and type of token
- Jurisdiction & corporate structure
Today investors tend to avoid offshore jurisdictions and prefer regulated countries as their governments will make sure, that investors passed AML procedures and money can’t be stolen that simple.
Also, investors like when the operating company is the same one doing an ICO. This structure is more transparent and safe.
- Target industry & jurisdiction compliance
Regulated industries prefer to partners with ICOs from regulated jurisdictions. Make sure, it matches.
Imagine, I’m doing a blockchain solution for financial or healthcare sector. Will a bank or an insurance company from Switzerland deal with a company, which raised money from whoever knows and operates in Cayman Islands? No…
- Target market, jurisdiction and operating office
Same here. Remember, we were checking go to market strategy in Part 1? Would be strange if company is claiming EU b2b target market as the first one to enter, while being registered in Caymans with operating office in Hong Kong.
Yes, yes… I know what you are thinking now. All ICOs are saying, they are building international companies. It’s often true, but in reality, you can’t conquer the whole world in one month. Whether its online or offline customer acquisition, you need to go step by step, market to market…
- Type of token
2018 is claimed to be the era of STO and security tokens. The truth is that professional investors want to be protected and in regulated countries even for “utility tokens” ICOs their token is a security unless they have an operating product, where this utility token is actively used and has a clear role.
In other words, today investors are cautious with “utility tokens” of projects on a paper stage.
V. Roadmap, planning and current progress
- Roadmap with soft & hard cap scenarios
A project should have a plan of product and business development adapted to different scenarios of raising funds. Often hard cap is bigger than soft cap more than X5 times. Obviously, execution plan can’t be the same.
- Current progress
The project should always be developing. Partners, product updates, etc. Make sure they are not just grabbing money on ICO, but also working on the business and/or tech side meanwhile.
So, here it is, guys… There are some more things big investors ask in private like: financial planning, how else you are going to manage volatility and if there is a market making strategy, etc. You won’t see these answers in public, but for you it mostly means – make sure, that project team has a plan to work not only on the product execution, but on developing token as well.
And remember, that ICO is a fast-changing world. Things which work today, might not work tomorrow. However, in my future posts and articles I will do my best to update you on significant changes going on in the industry.
And the traditional warning: remember… >90% of all startups fail as any new business model is always a risk! ICO is not an exception. Please, don’t put your last money in ICO and always DYOR! ;-)