The process of choosing the right ICO can be a bit tricky especially for starters. However, before we tackle how to go about choosing the right ICO, let us first learn what an ICO is.
What is an ICO?
Initial Coin Offering, commonly abbreviated as ICO, is a mechanism for raising funds for startups in a new cryptocurrency venture. ICOs can also be explained as a means of crowdfunding centered on cryptocurrency. Usually, in this crowdfunding, the new projects or ventures sell their crypto tokens in exchange for Ether or Bitcoins. Initial Coin Offering is almost similar to Initial Public Offering (IPO) that is used to purchase shares for a company. ICO is a quick and easy method to use to raise adequate capital for startups. We have good examples of companies that have had very successful ICOs such as Tezos and Filecoin.
ICOs have high risks, and when well picked they can be a high-reward investment. Unlike bank loans or loans from any other financial institution that requires payment schedules and interest after the business is in operation, ICO give start-ups smooth ride to work on it projects without much pressure.
Despite blockchain being termed as a very revolutionary technology, it is facing some challenges. For instance, China banned ICOs but still in support of cryptocurrencies. Additionally, United State securities also directed that security regulations should be subjected on ICOs and that for its citizens to participate in them they must be registered investors. All that aside, you can still choose an ICO and reap many benefits.
ICOs have grown rapidly in the recent past. In another post, we explain some of the tips and strategies for conducting successful ICO.
Below are some tips to consider as an investor when choosing an ICO.
- Technology evaluation
This means evaluating the ability of the venture to work successfully through its proof of concept. Technology that has proof of concept and pilot case studies is usually safer to adopt than one that has none. You cannot compare a venture that has proof of concept (which is available for evaluation) with an ICO, that offers only an idea. The latter has risks that are more consequential.
Having an ICO that has proof of concept, shows that you are confident and know what you are doing. ICOs with technology that has proven records stand a better chance to advance successfully than the ones using a newly developing technology.
- Target market
Understanding your target market is critical. Putting together the company, their products, services, and their technology in line with the target market is very important. These are the ones to be subjected to the regulatory pressures of the target industries. Hence, understanding the environment that you will be operating under will give an idea of the chances of advancing and the problems faced by these ventures.
Take for instance, supply chain blockchain service may bring possibilities of tracking goods from the time they leave suppliers premises to the time they are received by the buyer. This enables proper record keeping, as the parties involved will be getting updates of what happened where, an important area where the usefulness of blockchain technology can be experienced. Nevertheless, the already established companies are joining this space posing great competition to the startups.
- Who are the people behind the ICO?
Knowing the people behind the ICOs and the nature of the company is very important. Newly incorporated companies are most of the time founded by people who have already been involved in an already established company. It is advisable to search for the founders of the company with the ICO on Google, study their profiles and check the achievements of the projects that they have previously incorporated.
The team behind the ICO with proven records of accomplishment and excellent expertise are the best to place your bet. This is because they will definitely disrupt the industry they are targeting.
- What are the coins for?
The tokens or coins are the basics of ICOs. Coins do not only act as a form of security, they have other functions too. For instance, they can be exchanged for fiat currencies, such as Dollars and Euros or the common cryptocurrencies such as Ether and Bitcoin. Notably, not all commodities, may it be in digital or real form, can be tokenized and be traded online like Ether or Bitcoin.
Do not settle for tokens that have no other use other than raising money for a startup. Choose tokens that have long-term value and the ones that you can sell for profit.
- Choose an innovative idea
There is a tendency of startups being victims of the me-too trap and coming up with something similar to an existing service, but avail it at a cheaper and faster manner. Unless the ICO is offering something unique and valuable, it will end up competing rather than disrupting the industry.
Go for an ICO that uses revolutionary solutions and address real needs of the targeted market. Embrace ideas that are focused on disrupting the existing state of affairs of a particular business or service by influencing the robustness of blockchain.
- Fault find the whitepaper
A whitepaper is an authoritative detailed report on a specific topic. A whitepaper presents a problem and offers solutions at the same time. It is a crucial tool for marketing a project, hence should be written with caution, providing reasons as to why individuals should invest in a project. The needs addressed and their solutions can all be unveiled through faultfinding the whitepaper. Study it carefully evaluating every point with caution. The competence of the team behind the ICO can be weighed by studying the whitepaper. This will help know if they did their homework thoroughly depending on the content contained in the whitepaper. Notably take note of the citations and figures in the whitepaper.
- Consider different opinions
While marketing ICOs, most companies prefer using various forums on social media such as Facebook, Reddit and many more. Take time go through all those sites and read the opinions given by different viewers. Some people are experts in evaluating ICOs and their advices and opinion can help you make a choice on an ICO that will cater for your needs.
- Transparency of funds
Investing in an ICO means that your money will be used to help launch a project. Choose a company that makes all its processes known by all investors. A company that shares all the information about the allocation of funds, the number of tokens to be released and the amount to be shared by the development team. Through such transparency, one will have clear information on what all the money that he or she invested was used for.
- Company’s long term goal
A company with a well-developed plan is the best to work with. A company that clearly outlines the expected development stages and the plans after a successful ICO. Such a company is expected to last longer and chances of the value of their token increasing are much higher.
Having the above tips in mind is important. However, it is also advisable to look out for swindles. ICO are on the increase and finding out the one with the most promising return on investments can be a bit difficult. Do your researches thoroughly and always risk what you are ready to lose.