An initial coin offering (ICO) is a fundraising method that trades future crypto coins for cryptocurrencies which have an immediate, liquid value.
Usually, a percentage of the tokens is sold to ICO participants and a percentage kept for the company’s needs (private investors, etc. Terms differ from one ICO to another).
An ICO allows both big and small investors to fund the projects they like. The recent year carried thousands of successful ICO stories. The motivation for the project is obvious. The motivation for the investors of the ICO is that the price of the token would be higher (or much higher) than the token’s price during the ICO.
ICOs are really hot among the crypto investors. Recently, Hdac and Filecoin collected respectively astonishing amounts of $258 and $275 million. The success of an ICO is influenced by many aspects. Investors should bear in mind following key elements discussed in this article.
At this point it is right to mention less successful stories like the Mycelium ICO. Its team members just disappeared after raising the money, and later it was reported they used the funds to pay for their own vacation.
The lack of regulation might be one of the reasons it happened. Just days ago, $7 millions were stolen as CoinDash’s ICO started. Right before the start of the token sale, their website was hacked and the ICO wallet address was changed to the hacker’s address.
Find out everything you can about the team, especially the development team and the advisory board. Look up each team member for relevant experience. Google their names. Visit their LinkedIn profiles. Look for famous names among the advisory board of the project.
Find out if the team has any crypto experience and more importantly – in which projects, or ICOs, they were involved with and the impact they had.
Bitcointalk is the biggest forum for Bitcoin and crypto related issues. It is strongly recommended that you read the messages carefully.
Investor’s concerns will be answered (or may be unanswered) in this thread. It is a bad sign when the developers avoid answering certain questions or aren’t collaborating. Sending devs a personal message to see how responsive they are is also a good idea.
Each message on Bitcointalk contains the rank and activity degree (number of past messages) of the sender. Be aware of newbies and low-ranking writers. Reputation has become very important and significant.
Be aware of experienced writers comments, and also look for negative messages, sometimes it could be a warning sign. Use Select [All] to see all comments in the thread and use CTRL + F (Windows) to search for red flag words like ‘scam’, ‘con’, ‘MLM’.
Evaluate the stage of the project. Does it only have a whitepaper? A beta version? Is there a launched product with limited functionality? Prefer projects which have “some lines” of working code, however, many ICOs have proven they can become success stories without any code written.
VCs (venture capital) tend to invest and support projects from early stages. Look for this information usually on the main page of the project’s website. It’s likely to be considerable if a well-known crypto VC is involved, like Blockchain Capital or Fenbushi (belongs to Vitalik Buterin – founder of Ethereum).