How to Self Analyse an ICO for Potential Investment

With the huge amount of Initial Coin Offerings (ICOs) at the moment, with an array of different problems they are trying to solve and the promises they are making, it's hard to say what is good, what is bad and what is an outright scam and should be avoided at all costs.

This article isn't a final process but rather a guide that I personally use, update, tweak and refine. It breaks down the process I go through in regards to identifying a rocketing token and company compared to a stinking hot turd that should be avoided at all costs.

For every ICO that I personally partake in, it has to personally pass my selection criteria for me to feel safe to put some money into. I speak to the people on the project, I read the whitepaper, third party sources on the Company and ICO along with the community itself.

My Criteria List

1. Utility & Company
2. Revenue & Business Model
3. Team
4. Development & Progress
5. Token Generation Process
6. Token usage
7. Community

Utility & Company

Utility and the Company itself is the first indicator.

• Is the company behind the ICO trying to solve a valid problem? (Yes/No)
• Does it need to be done with blockchain technology? (Yes/No)
• Could the company have easily raised capital and shared equity with investors to achieve their goals? (Yes/No)
• Did they really need an ICO and how is that money being spent? (Yes/No)
• Have they team actually formed a Company structure and ready to operate? (Yes/No)

Quite a few questions under utility for me but it really defines if the ICO is a scam, money grab or have a valid reason for trying to raise money.

Revenue & Business Model

Does Company has a solid way of generating revenue? This revenue may not be tied directly to the token itself but there may be factors in play which will affect token usage in the future which means a successful company can dictate token usage.

• How is revenue generated?
• Is the Business model easy to understand for the end consumer? e.g Marketplace, advertising portal, revenue sharing?

Team

Looking at the people and the team behind the company is very important. As many experienced business owners and entrepreneurs know, 90% of startups fail and that last oddity of the 10% somehow succeed.

(Insert Vitalik photo to give article credibility)

• Are the people in the team experienced business people that have worked in the blockchain or start up space before?
• Are there people on the team that understand the legalities and intricacies of the emerging technology
• Have the developers on the team successfully launched over blockchain projects or been a part of other successful startups, ICOs or IPOs?
• Have the team decided to put a picture of Vitalik Buterin, Ethereum's creator to make it seem like they have some ounce of credibility?

The last point may seem a little ridiculous but there have been tweets from Vitalik himself stating just that. Bitnews Today reference aritcle

Development and Progress

This part looks at the development of the D-app, platform or whatever the Company is trying to create.

• Have they started building the project?
• What have they accomplished to date?
• Is there a working prototype or demo?
• Are there any sort of partnerships formed with other large well known organisations or Companies?
• What is the roadmap like for future work?
• Have previous milestones been met?

I personally prefer projects that have a working prototype and simply need the funds from an ICO to scale up. Projects at this stage are mature, have a working product and are ready to go.

Token Generation Process

This process looks at how the Company is executing the ICO or Token Generation Event.

Since there have been a lot of problems in the past with ICOs and the process getting hacked due to the inexperience of the market, people executing the ICOs and the developers behind it all, it is important to see if the process has been audited, secured and done in a manner that is deemed secure for hundreds and thousands of potential participants to join in and contribute funds.

Token Usage

An important question to ask is what is the token for and will there be a demand for it. For the Steemit community, earning Steem as two benefits.

1. It can be earnt and traded out to other cryptocurrencies or transferred to fiat currency. That means anything that is earnt via the social network can be converted to real world currency.
2. It can be used to push and promote articles and work on the network.

This drives demand for the token itself and can influence the price of a token. This also give it meaning and a purpose to existing (and here I am pondering the meaning of life).

Having a desirable token that is actually used also proved a the validity of creating a token in the first place. Many alt coins on the other hand I personally find pointless as they serve no purpose, e.g Bitcoin Gold.

Community

Lastly the community! Is there a large community behind the currency. Are people interested in it or is it just you and a handful of other people. Check out the Company's forums on Bitcointalk, Reddit, Slack, Telegram, Medium or where ever else their community may be. Find out what they are saying about the Company and the token as well. If there is a large community, there can potentially be a large quantity of tokens on the market to trade in the future giving exchanges high volume and more stable trade values.

Go Forth and Seek Out Good ICOs

Armed with this breakdown of an ICO and Company I feel safer in regards to investing money into the Ether. If you have feedback on the process or any input I'd love to hear it. Contributing to this process can help many others refine the list of ICOs they may participate in and avoid bursting in an ICO bubble.

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