According to icodata.com, there have been 1134 ICOs undertaken so far globally in 2018 (writing in mid-October), raising a total of $7,109,053,324 - already smashing past the totals for 2017 of 875 raising $6,213,002,958.
For the average individual investor then, there’s quite a few to choose between. Earlier this year when LocalCoinSwap was in its token sale phase the choice was obvious, but having successfully closed the only LCS Cryptoshare funding round in June 2018, it leaves the smart investor having to look at other possibilities for a good return.
This blog will never advise you about how to invest your money, but we can discuss some of the things we’d recommend looking out for, when you’re thinking about backing a new token sale. And the LCS team know a thing or two about identifying a promising project - more news on that later. For now, some things you might want to consider:
Firstly, take a look at the problem they’re solving, the actual product being created. If this doesn’t leap out strongly to you on the website, on page 1 of the whitepaper, then there’s something wrong. Ultimately they will need to convince a wide range of investors and end customers that there’s a business use-case for whatever they’re developing, and if that doesn’t exist, there’s a big problem. Make sure you don’t back a solution in search of a problem! Forget about the ICO at first, would you buy the final product/service, if it were on the market already?
Then check who’s on board. Take a good look at the team - and if you can’t do that, if they’re not clearly visible, that’s a concern. You should be able to to check them out on LinkedIn. Focus on the actual delivery team, as Advisors can be involved at a wide range of levels. Who is building the product, and what have they developed before?
Look at the Advisors’ LinkedIn profiles though - do they mention the project? Because it wouldn’t be the first time someone has been credited with advising a project they don’t even know about! Check out the tech team, have they worked together before? (not necessarily a dealbreaker, but certainly a plus point. Most important is that they have successfully created products before, separately if not together).
A team isn’t just developers and blockchain experts though, however vital they are. Are there people who have been successful in business before, especially as an entrepreneur or leading a startup? Are there a range of commercial and operational skillsets represented, from marketing to legal? The best product in the world won’t bring itself to market, so make sure you’re putting your money into a complete and rounded team, first and foremost.
Then dig in to the tech and the tokenomics, what can they tell you about what they’re making, and does it add up? What can you glean about the distance between the idea and the state of development? Whilst a whitepaper needs to be accessible from a marketing readability perspective, it also needs to contain a reassuring and consistent level of information about the technical delivery of the project itself, and link out to deeper information as needed - transparency at GitHub, and detailed technical papers, should be available for those who want to dig down further.
Is it an ERC20 token, is it on one of the newer mainnets, or are they using bespoke blockchain? Why? How many tokens are being minted, and how are they distributed? How many tokens are offered for presale (and what criteria, eg minimum investment for discount, does this even mean?) and how about the number of ICO participants, and how many tokens the team reserves for themselves… Look for a consistent and reasonable distribution.
Don’t neglect the old-school financials as well - look at the $ value of what they are seeking to raise, how realistic is it? Could they surely build and launch their product with a fraction of the softcap? Hitting the ground running with a successful startup takes a lot of capital, but if you work back from the roadmap to make your own judgements about the burn rate, you’ll get a sense of how realistic (or not) the raise really is. How exactly do they intend to use the funds raised in the ICO? And does the roadmap go into detail, and make sense?
Transparency above all else is fundamental, and if you sense any degree of trying to obscure details, then that’s a big red flag. Remember how the LocalCoinSwap team were so accessible and accountable throughout their ICO and beyond? They really appreciated the importance of being open to the community - answering questions, working out loud, learning from the feedback and ideas generated. Even though they might have got through sprints more quickly by putting on the blinkers and powering through without this external dialogue, they recognised the value of being part of the conversation, the process which continues to this day via weekly release notes and regular AMAs.
Above all trust your instincts, go with your gut if the slightest thing puts you off - it might not be a scam, the odds are more in favour of competence problems than malign intent. Either way you could lose your money fast, so don’t get caught up in the hype. Investigate the legitimacy of every recommendation, and stay safe out there - until the threatened regulatory catch-up, it remains a wild west world.
We’ll keep doing our part to maintain high standards.