ICO’s are undoubtedly the most significant trend in the crypto space, these days. These fundraising mechanisms allow new ventures, projects, and applications to sell their crypto tokens in exchange for Bitcoin or Ether. Since 2013, ICOs are being brought into play for funding the development of new cryptocurrencies and today; we have enormously successful ICOs to look forward to. But still there lies a dilemma about its incremental improvement and how reliable these ICOs are for investing money. If you are also perplexed about these fundraisers, have a look at these five things that you should know before investing in any ICO.
- Is ICO an Incremental Improvement or a Copy Cat or a Disruptive Tech?
Cryptocurrency is exceptionally theoretical, and so are ICOs. If you are planning on investing, then you should be aware of the project’s capabilities. Is it anything new? Is it anything interesting? You should ask yourself if you need another cryptocurrency, which is faster than Bitcoin. Maybe not. Whenever you evaluate cryptocurrency, make sure to understand how the coin differentiates itself from others.
Here, the main question is: Does the coin do something different or the same thing? For instance, Dogecoin was developed mainly to lock at Bitcoin. The nature of its marketing kept it from vanishing into thin air, but it doesn’t mean it can’t play the long game because of its industry differentiators.
The question you need to ask here is: Does it solve a problem within a particular industry, which requires disruption and which hasn’t been touched by other coins? For instance, Augur is creating a speculative market for forecasting. IOTA removes the whole blockchain and is intended to emphasize on being the currency for the Internet of Things.
How good is their strategy?
It’s great to design the project in detail and to have a whitepaper on it. But how detailed is it? Has the team thought it through?
If their whitepaper is short and crisp without any details, then avoid it at all costs. The whitepaper should contain all the core details you need to know and understand about the crypto. Once it is there, go to various forums and groups, and read about the discrepancies that may have lurked in those whitepapers. Check if the developers have apparently and actively addressed the concerns or have ignored them. The more details available, the higher will be the debate, and the more clear the team is about the technology, the better it is for someone to invest in.
If they don’t have a clear roadmap, then avoid it entirely. What is the team doing to develop and market the roadmap? Is it apparently defined and makes sense? Have they designated a time frame and is it feasible? Is the team ready to stay on top of the schedule before the ICO? These are the pertinent questions you should ask yourself before embarking on your big journey.
Is their technology adequately developed?
One of the primary aspects of any ICO is the development of the system that surrounds the crypto. So has their team begun the development? Any project that is trying to raise capital through an ICO should define this.
During the internet boom, it was quite easy and straightforward for anyone to raise enough funds, even without having a Minimum Viable Product (MVP), and this led to several startup businesses from succeeding. All one needed to be was a basic plan. One just had to write something attractive on paper or prepare a stunning powerpoint presentation. And with a smart salesman on the team, they could raise millions. The ICO is quite similar now.
Who constitutes the Advisory Board and the Team?
The first and the foremost thing is that you need to make sure if the team has a good experience in the arena they are trying to coinify. If yes, then how much experience do they have? What about the industry experts who have the potential to take the project higher? Finally, your investment is riding on the people behind the coin and not the coin itself. Your investment is nothing but the vote of confidence that their team can pull through. It’s an incredible feat if they do that.
So it’s important to know who their team members are and what technology they are developing. Ensure you do your homework and try to know the background of everyone involved in the project. Ask yourself if they are working full time. One of the worst things is to have team members who are working part-time. Their project should be the prime focus! So make sure their team is dedicated to carrying out the vision one full-time basis.
Get to know how many years of experience they have in the field. It’s entirely all right if there are some young members on the team, but make sure they have all the support from more experienced members of the group. If not, then it could prove to be a hindrance. Having expert team members can help a great deal to navigate through tough times, which is more likely to happen.
Are they well-versed in every aspect? Development, marketing, architecture, etc. If the team is comprised of only technology builders, that can also prove to be fatal. It’s always important to have a well-balanced team, one that can develop, market, and build relationships to grow and prosper.
Also, if the project only has a single technology developer, it’s also considered a failure. If something happens to that person, the whole project falls apart. So ensure there are several expert developers in the team at all costs.
Why do they need to raise so much money?
Look around. There are many projects that are trying to raise, say, about Rs.10 crores! But is it a good thing? It’s hard to say. It depends on a lot of factors. But usually, it’s not a good thing to do. A small team that develops not-so-great technology probably requires more money to prove they are worth it. From that point onwards, they should work on raising more capital when there is some growth in user base and real use case.
Any investor would question a small team trying to raise a capital of Rs.10 crores. Why do they need it? And for that, they should have a solid answer as to how they intend to use the funds. For this to work out well, they need to have a solid plan.
In the end, bear in mind that this, the ICO world, is not a regulated space. But it doesn’t mean that you can’t be successful in it. The risks are probably high, so consider the facts thoroughly and only then invest in what you can comfortably afford to lose.