The 2017 rise of the initial coin offering (ICO) enabled anyone with an entrepreneurial idea to create a token and invite people to invest in it. However, with cryptocurrency exchanges listing thousands of tokens, choosing where and when to invest often seems like an impossible task.
The Crypto-Industry Is Becoming Smarter and so Are Its Investors
Despite the volatility and the lack of regulation, cryptocurrencies are often associated with, an increasing number of conservative venture capital investors have entered the blockchain industry.
The older the cryptocurrency market the more predictable it becomes. The ability to foresee future changes in what was only recently an extremely unreliable market attracts high-end investors. The fiat money flocking into ICOs improves the ability to analyze new projects and screen out unreliable companies.
Forward-thinking governments embracing blockchain innovations have also helped stabilize the market. Regulating the industry’s development could also be one of the main deciding factors when it comes to attracting new investors.
Redirecting the flow of what would otherwise be wasted money from unreliable projects to ICOs that have a real future is not an unattainable goal. The industry is changing, and the change is undoubtedly for the better. However, the road to development is a rocky one and educating both large funds and small private investors on how to spot fraudulent start-ups should be the industry’s number one priority.
When assessing a start-up’s reliability, a combination of inside information, real-life experience, and old-fashioned investing principles is always a good start.
Why Is the Company Launching the ICO?
Knowing that almost anyone can launch an ICO, it becomes inevitable that almost everyone will. Digging a bit deeper into the company’s mission and history will help you determine whether or not they actually need their own cryptocurrency or blockchain.
Make sure the company’s product has a real-world use and be wary of aggressive and overly-optimistic marketing. The reasons behind launching the ICO will also help you determine the long-term viability of the idea, i.e. will it be possible and retain its value in the next 5 to 10 years.
Who Are the People Behind the ICO?
According to many successful ICO investors, the team behind the company is a very good indicator of the ICO’s success.
Looking into the GitHub repositories associated with the company will help you learn about the developers and find out project metrics such as the number of contributors and issues resolved in the project.
Successful projects attract a vocal community – a large number of members participating in GitHub, Reddit, Twitter, and Slack is a good sign for the longevity and success of the project.
LinkedIn as also an invaluable resource when it comes to evaluating ICOs. Many scams and unreliable projects list team members with profiles that are either fake or without relevant industry experience.
Where is the Support Coming From?
Another good indicator of an ICOs success is institutional support. If the innovation a start-up is offering really is valuable, both bigger and older companies will voice their support.
A new, more secure way of selling and cashing policies will surely attract the attention of insurance companies, both in the media and in close-knit, semi-closed communities such as Telegram.
Make sure the founders of the company have invested their own money. Owners of unreliable start-ups often count on celebrity or influencer support to attract investors, and would rather steer clear of such a risky endeavor.
What Does the White Paper Say?
A well researched and well-written whitepaper is the basis of every successful ICO. If you’re left confused after reading through the company’s whitepaper, chances are its developers are, too.
Clearly defined goals, viable use-cases of the technology and a unique value proposition are what you should look for in a whitepaper. Another thing to pay attention to is what percentage of the ICO raised funds are going towards marketing. While it is a necessity for the success of a crypto project, marketing shouldn’t be the company’s biggest expense.
ICO roadmaps get plagiarized more often than one might think. Checking for duplicates online might save you the trouble of pouring your money into a company that’s bound to fail.