The emergence of blockchain technology in recent years has brought many novelties in almost every field of human activity. Initial Coin Offerings make part of these novelties and are a new way of crowdfunding. They are similar to IPO but with less red tape and bureaucracy, which is one of their main perks.
Besides, Initial Coin Offerings represent a great investment opportunity if you know to spot the right one. To pick up the right ICO, it’s ultimately important to do your own research and check the ICO calendar to see what’s in store and learn more details about the upcoming projects.
When you venture into ICO investment, you should carefully scrutinize each opportunity. Here are some criteria to bear in mind when choosing your investment opportunity.
Criteria for evaluation of ICO project
1) the composition of the issuer’s team and its ecosystem (network, external collaborator);
2) technological aspects related to investment;
3) the concept and the business plan;
4) legal aspects;
5) marketing strategy and public relations;
6) the investor onboarding process,
7) the phases of the project.
The team behind the project
Concerning the issuer, it appears necessary to carry out a complete background check. Who is it, where is it headquartered, what is its reputation, how long has it been present in the market, has he successfully completed similar projects in the past, do the team members have all the cards in hand (experience, training, etc.) to carry out the project well?
You must also focus on the token to understand what rights it gives and whether these correspond – potentially – to the expected return on investment. Since many fundraisers do not end (because the total amounts raised are not sufficient), it is necessary to verify how the issuer would return the funds in the event of an interruption in the fundraising.
The white paper
The white paper is, in essence, the business plan of the ICO. If you are not familiar enough with all the aspects of an ICO investment, submit the white paper to someone active in the sector to comment on the project’s feasibility.
You must carefully examine both the investment contract and the general conditions. As well as any other legal document made available. If the investors are not familiar with this type of document in the context of ICOs, they should turn to a professional, especially when the potential investment is large.
The risks involved
Here are some examples of the risks when it comes to ICO.
Fraud: As mentioned above, there are many fraudulent ICOs. People who succumb to it usually lose their entire investment.
Cyber attacks and security: both the investor and the issuer can be victims of hackers. The blockchain structure and/or the smart contract created by the issuer is also likely to contain shortcomings.
The project is not completed: uncertainties abound, as are the factors that influence many start-up-type initiatives: the initial quality of the idea, its feasibility, the team’s capacities, the management of the budget, etc. Recent reports suggest that the risks of an ICO-based start-up going bankrupt are even greater than those of a “normal” start-up. For the investor, there is still the risk of ending up with utility tokens that provide access to poor or incomplete, unusable service or investment tokens whose value is greatly reduced.