We are in the boom of startups and innovative ideas. However, have a good idea is not good enough. You also need money to make it happen. Sometimes is hard to raise money and find investors, especially if you are located in a foreigner country. Because of this, the startups are using initial coin offerings, also called ICOs or token sales, to raise capital. In an ICO, a company creates a new virtual coin or token that they offer for sale and disseminate to purchasers using blockchain technology. This is simply brilliant! With an ICO, you don’t need to be a big fish or have an investment wallet to invest, literally anybody with a crypto wallet can invest, making it more accessible. Also, is really cheap!
An ICO allows small investors to fund the projects they like. 2017 carried thousands of successful ICO stories. The motivation is quite clear, the price of the token would be higher (or much higher) than the token’s price during the ICO.
In this article, I gathered the main keys to pay attention when you are evaluating an ICO investment.
Please, bear in mind that like any investment, ICOs are also a high-risk way of fundraising. Never invest anything you can’t completely afford to lose. Due to a lack of regulation, you will have difficulty getting back your lost money in case of any failures.
My Top Criteria
It is crucial to have a wide open supporting community like Telegram or Slack for all investors. Try to grasp the atmosphere within the community. Look at the size of the community and its activity. Check also if there’s a thread on BitcoinTalk.org, as BitcoinTalk is the biggest forum for Bitcoin and crypto related issues. Search for words like “scam” or “MLM”.Finally, check their GitHub code. ICO projects are usually open source. Check the integrity of the code, details like functions with not over 50 lines of code and of course, the commits and activity.
It is crucial to have a wide open supporting community like Telegram or Slack for all investors.
2. Supply and Token Distribution
You want to look for something that is not too much and also not too little. With this, we make sure there’s enough space for growth. To check this, you can visit https://coinmarketcap.com/ and check the field “Circulating Supply”. A good circulation supply will be around 200–500 million.
You may also check the token distribution. A good project will link its token distribution to the roadmap. Because each phase or milestone of the project requires a certain amount of funding.
You want to look for something that is not too much and also not too little.
For the team, we are looking for 3 key points: superstars, tech & depth implementation of the vision.
It is important that they have superstars in the niche they are attacking. Second, the tech, do they have the right tech to make an effective product/service and the right people in the right positions to handle the workflow? Do they describe how are they gonna do it? If they have all of these aligned with the vision, then is a good indicator.
Google their names. Visit their LinkedIn profiles. Look for famous names among the advisory board of the project. Find out if the team has any crypto experience and more importantly — in which projects, or ICOs, they were involved with and the impact they had.
Google their names. Visit their LinkedIn profiles
4. Token Rewards
By having token rewards you make sure to get the holder support. You are looking for long-term investments not to buy and sell fast this token. So if a token has good benefits and rewards will make you hold it longer, helping the company and also increasing your profit. If the token doesn’t have any reward, then, why should I keep it so long?
If the token doesn’t have any reward, then, why should I keep it so long?
5. Vision & white paper
We are looking for a unique value proposition to solve a big problem. Doesn’t need to be an expensive problem. If you solve the problem of 1 million users, you only need to charge 1USD and you will have an amazing profit.
Check also the quality of the whitepaper, most typical investors actually don’t read through the whitepaper, even though it contains all the necessary information about the upcoming project and the ICO.
So please, read it, or at least the majority of it. Note the strong and negative aspects and add in some of your own research. In the end, the whitepaper is the silver platter to potential investors. After reading it you should be able to answer a simple question: What kind of value does this project bring?
What kind of value does this project bring?
Once you find a project with all these 5 requirements, then you have a jackpot!
Of course, it’s essential to read and investigate as much as you can. Also always be aware you can lose your money and that’s completely ok. I always tell people, if you are not willing to lose all the money you are gonna invest, then investments are not for you.