I was recently asked how I select the projects I invest in. I wanted to put this post together to provide some insights into the fundamental analysis I do when evaluating a project so others could benefit from this thinking.
Technical analysis is usually the very last thing I do, the fundamentals are much more important than price action.
Here is my list of 7 things I believe everyone should look into when it comes to ICOs...
1. Working Product / Demo
If the project doesn't have a working product (or at very least a demo), 90% of the time I'm pretty skeptical right out of the gate. This is #1 for a reason. This should always be the first question anyone asks in my opinion.
2. Github Activity / Code Quality
Even if you are not technical enough to dig in the repos and understand what is going on, you can use tools like Cryptomiso to get a better idea of how a project measures up in overall activity / commits. Even if you don't code, you can identify the main programming language being used, you may have a subject matter expert you might know who has deep knowledge of that language and ask them what they think about the code quality.
3. Team / Experience
The number one thing I look for is whether the founders have had an exit and some previous business experience. If they don't have any, then it's not a red flag, it's just a mark against them and I immediately put them in a different bucket.
4. Fraud / Transparency
I scan everything related to the founders and website. Whois information, linkedin, twitter, company histories in their bio information, etc... If they said they worked at X company, then I'll look for proof. I run search operators for any keyword + brand combinations that would bring up wrong doing as well. I've always said there needs to be a service to fact check ICO founders & teams work / experience claims for crypto-centric investment groups. Someone start a company doing that, it's a service that is needed.
5. Associations / Advisors
Does the project have any notable advisors? Are they real or fake? If you can't find proof anywhere and I have legit suspicions, I have gone as far as to screencap the page and Tweet at the person they are saying is an advisor to confirm (do it from a sock puppet account if possible, there are some pretty slimy folks out there and if there is shade you don't want any of that pointed at your real identity for calling them out).
6. Utility / Tokenomics
What practical utility does the coin actually have? Have you thoroughly reviewed their whitepaper to see if the business model is sound? Are there existing use cases that can show how / why the project is needed? How is the distribution being handled? Does the project embrace sound tokenomics / cryptoeconomic incentive structures or is their coin too heavily consolidated by a few whales?
7. Marketing / Community
Is the team able to build a good community? If the project doesn't know how to market or communicate effectively, that's usually a red flag. I'm don't think a project should be making news for the sake of making news, but if a project is putting out relevant news in a coordinated fashion, that is obviously more desirable than not doing it at all.
Conclusion
A lot of this may seem like common sense, but as they say "common sense isn't all that common" - and that is especially true when it comes to ICOs and crypto.
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Disclaimer: This should not be taken as financial advise as I am not a licensed financial advisor. Cryptocurrency is volatile, invest at your own risk.
Connect with me:
Twitter: @stevefloyds
LinkedIn: linkedin.com/in/stevefloyds
This is a perfect cheatsheet for ICO investing. Most people seem to go on what others say about an ICO, without doing their own invesigating. I can understand that if you do not know what to look for it can seem overwelming but the way you broke this down makes it really easy to form your own educated decision. Thanks!
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Thanks for the invite! I will contact you soon.
Great article, thanks for sharing. I've smashed the upvote button for you! I think there is an issue with some many ICOs that it is hard for new users to tell what is a good and what is a poor ICO. I would focus on earning tokens until you learn what you should be seeing in a good project.
I use Crowdholding to earn tokens (https://www.crowdholding.com). They are a co-creation platform were you get rewarded for giving feedback to crypto startups on the platform. You can earn Crowdholding's token as well as DeepOnion, ITT, Smartcash and many other ERC-20 tokens.
Resteem!
Very very good
Very cool sheet and a solid basis from which to evaluate an ICO from. I also like to look at the whitepaper and the roadmap as well the market cap of the industry they're looking to enter, the coins total and circulating supply and finally the exchanges they aim to be on!
For me, that falls under #4 & #6 and is part of an overall evaluation of the viability of what the project is trying to accomplish. Perhaps I should have mentioned the whitepaper implicitly, but I assume even the relatively inexperienced understands to review all top level project materials (website, whitepaper, etc...) to look for inconsistencies.
an interesting point of view is that if facebook had made an ICO they would never made it through anyone diligence nowadays and yet there he is coming from his rented Californian house a nobody computer science harvard student creates a multi billions worth corporation with 2Billion users database.
following 2018 ICO strategies diligence, facebook would fall in the scam ico ;-)
It's useful to give a baseline, but not intended as an end all, as with anything else.
This is really cool stuff. Really nice to get another perspective. I recently made a video on the same thing but had completely different points for the large part:
Thx for the perspective :)