Are You Looking at a Visionary or an Opportunist? A Comparison Chart for Blockchain ICO Investors

by A. Horrigan
21 Aug 2017

Wouldn’t it be nice if there were a simple comparison chart to tell investors which blockchain ICO to pick? Well scroll down, because now there is.

In this fast-moving market, there are several reasons investors may not be as aware as they should be (see my related post, The Rise of the ICO and Bad Actors: Three Hazards for Blockchain Investors). Fortunately, venture capital investor Tim Draper and others offer some guideposts for analyzing ICOs to determine if they are a good bet.

“My job is to filter out the opportunists from the visionaries,” said Draper, founder of Draper Associates, at the recent 100X Blockchain Investors Summit. “There are more opportunists than visionaries right now.”

Opportunist or Visionary?

How do potential investors tell the difference between an opportunist and a visionary?

A visionary ICO has a strong raison d'être—an innovative model and clear avenue for the coin to expand in usage, with a viral effect. Draper provided these examples: credo (viral effect), Tezos (a driving philosophy), Bancor (a new kind of marketplace), and Coinbase (a new trading platform).

An opportunist, in contrast, is simply employing digital tokens as a newfangled way to crowdsource funding for an otherwise conventional business model.

Here's a chart to help investors analyze and compare ICOs:

“There are more opportunists than visionaries right now.” -- Tim Draper
(Chart by A. Horrigan)

Draper suggested investors closely examine the white papers: “Is there a philosophy behind the new token? If the new token is driving a new way of thinking, then you’re onto something.” But “If the new token is just, ‘Hey, we’re raising money so we can go do a new medical device,’ that’s somebody saying, ‘I wasn’t able to raise money in the private sector from venture capitalists—now I’m going to go try this because it seems like easy money.’”

A Team, a Product and an App Token

The ICO should have not just any token, but an “app token” -- one “closely integrated into the platform and necessary for use of the platform,” said Emma Channing, general counsel at the Argon Group. “It can’t just be a bolt-on.”

Like this heirloom tomato I got at the Fairfield, Connecticut farmer's market, you want your ICO to look as good on the inside...(photo by A. Horrigan)

Channing predicted ICOs with badly designed app tokens are probably going to be “hit by the Securities and Exchange Commission (SEC) first for enforcement.” She strongly emphasized the importance of an ICO having a team and a product—even if only a minimally viable product (MVP)—in place at the time of the ICO. It’s also vital for an ICO to have legal advice to ensure it is staying within the law in the USA, to help interpret the recent, rather vague guidance from the SEC.

...as it does on the outside. (photo by A. Horrigan)

“There’s a lot of irrational exuberance in this market,” said Spencer Bogart, managing director of Blockchain Capital, an investor in blockchain startups. The excitement is great, but “some of these projects raising multiple hundreds of millions of dollars for a pre-product company are not entirely sane.”

Bogart was among several speakers at the 100X Blockchain Investors Summit August 8-9 who extol the disruptive virtues of blockchain and bitcoin but rely on an old saw when it came to investment advice: “Buyer beware.”