ICOs or Initial Coin Offerings, are a new way for entrepreneurs to raise capital using cryptocurrencies. Today I will look at what I would consider important points to consider before purchasing any “initial” coins.
My focus will be on selecting projects for the longer term, that is, not for short term speculation.
We can cluster the basic questions into a few main areas:
Startup Business Qualities
These would be qualities that an investor would traditionally look for – the business fundamentals, the market the team, the potential, etc.
- Team capabilities
- Who is on the team and what makes them right for this project?
- Is the team composed of the right balance of people to push the project forward, do they have all the skills onboard? If not, will they be able to attract the people that do?
- The Proposed Business Model
- What is unique / interesting about the project? How is it better than existing solutions?
- Who are the customers, who pay for this thing? How big is this customer base?
- How is money made? What drives revenue?
- What is the growth potential?
- What is the industry?
- How big is the market?
- What are the trends in the industry and market? Up, down?
- USP – Unique Selling Proposition
- What is the business and how is it different from existing solutions
- What will the money raised be used for?
- Is there a plan in place to use the money? Is it wise?
- Will it be enough money?
Crypto / Blockchain Questions
- Correct Application of Technology
- Should this be executed with a blockchain or be a cryptocurrency? Or is this just an attempt at money raising with the trend?
- Tokens / Coins
- What will the tokens / coins be used for? What will their final utility be once the project is realised?
- How will the coin owners make their money back when the project is a success and the coins are supposedly worth what they should be worth?
Trustworthiness of overall project and ICO
- How much has the project has already progressed before the ICO?
- Does it have Prototypes or demos? If not, this is a big red flag!
- Users – does the demo have users? What do they say about the project?
- Roadmap – is there a well thought out roadmap to use all the money raised in the ICO to make an effective company that delivers on the initial idea??
- Code / assets can we see them?
- Online reputation of creators and project
- Age (older is better) of:
- Social media profiles
- Brand registration
- Domain name registration
- Googleing the main people involved
- Googleing what is being said of the project
- Age (older is better) of:
- How is the company set up? Location, type of company, shareholders, etc.
- Brand name – is it registered? Will it have copyright issues?
- How the ICO is being handled
- Where it is being held (which platform)
- How will ALL the tokens be distributed? What is the overall plan and is it fair / honest?
- Can we see the code for the solidity code (if Ethereum) for the token?
- Could regulation kill the project in the near future?
- Is this something borderline illegal?
- BS detector
- Does it sound too good to be true?
- Does it smell like BS?
As you might be able to tell, this is a lot of work just to discard a potential ICO.
In the near future I hope to explore some tools that will be able to speed this process up a bit.