With the emergence of cryptocurrencies, many aspects of the finance and business world have been revolutionized, and are headed towards a significant change.
Not only is the way we look at currency, and global transactions changing but also the way we invest. Moreover, to allow for new paths of investment, there has emerged the trend where entrepreneurs design their own token currencies to pool resources for their start-ups.
However, in spite of its convenience, investment in the ‘Initial Coin Offerings’ made by blockchain-based companies are prone to greater risks as compared to the traditional Initial Public Offering made by an emerging firm.
Therefore, if you are looking to invest in an ICO, there are particular points which you should look out for before making your decision.
1. No Real Traction:
If an ICO cannot create real, organic buzz around itself, it means that it does not elicit enough interest within the investor community.
Are people talking about it?
Is it being discussed as a serious investment opportunity?
If yes, then the ICO has some value in it. If no, or the buzz seems all too concentrated and emanating only from the company’s social media handles, it means that it may not be an exciting opportunity to invest in.
And oh! You sure should hope that the more than 50K followers on social media within a short time aren’t obtained through bots.
2. No Hard cap:
Most teams provide both a soft cap and a hard cap for their tokens. The Hard Cap refers to the absolute maximum amount up to which the company will accept investments.
The soft cap applies to a more flexible figure or the minimum target which they are aiming to reach. These figures are based on complex estimations, and reflects the clarity of the team’s vision regarding the project.
Therefore, if the team does not have an estimated hard cap, then it should be a red signal for the investor.
3. Absence of a Whitelist/KYC:
Whitelists and KYCs stand for the commitment of the company towards ethical and fair practices.
This, in the long term, would mean more stability for the business and more value for the investment. So while investing if you notice that the company does not have any whitelist or KYC it is better to avoid investing in the company.
Also, find out that the project is compliant with the new GDPR regulations and treats user data as sacrosanct.
4. No KYC manager:
Talking of KYCs, if the firm does not claim to have an official KYC manager, that is the team claims to deal with registration issues for the investors themselves, it is again a wailing red sign.
5. Not Ethereum based:
Ethereum-based currencies are gaining much leverage. In fact, they cover more than 90% of the market. Therefore, if the token is based on the ERC20 protocol, is at least convertible to ETH, it is definitely a plus. in fact, it is safer to invest in a token that is ERC20–compliant.
Here, we are talking especially about the ICO token, that we believe should be based on ERC20. Once the ICO is over, the project may shift to an entirely new blockchain.
6. Not on Github:
A company whose source codes are not stored on Github shows a lack of transparency in the working and development of the processes, which is a deal breaker. It is a given that as an investor you would like to know how the investment is being utilized.
7. No relevant experience of the team
If the team wishes to build a financial platform, it is only obvious that they have relevant experience in this field.
One or more founders need to have deep insights and experience of how financial markets work to appreciate the problems and to come up with a workable solution.
However, if the vision of the platform is to create a solution for a problem for a sector the team knows nothing about, the project isn’t going too far.
8. Absence of an MVP:
Without an MVP an idea remains an abstract entity, but only when you put it up in the market and allow users to adopt it in their daily lives can you prove the viability of your idea, and it is only then that it becomes a real, working product.
Also, many projects create a complex product that is difficult for users to check out and hence they lose interest in it.
MVPs should be exactly that — minimum. They should be like teasers that should give the promise of greater, more exciting things to come, while giving a workable product to play around with.
9. Less than six months of teamwork:
While investing in an ICO while you are looking at all the technical and financial aspects including market demand, you are also investing in a team.
Thus, if the team does not show a record of stability of working together for at least six months, it becomes risky to invest in them.
10. Not able to satisfactorily answer Cocoricos’ 114-question long comprehensive questionnaire
At Cocoricos, we are extremely picky in choosing our ICOs. After all, our reputation is at stake here too!
We ask potential ICOS who wish to be listed on our site 114 questions, most of them pretty awkward. Only if the ICO is able to satisfactorily answer all of the questions do we consider them worthy of getting on the platform.
Once on the platform, we will do whatever we can to advertise it to our customers as a great opportunity for investment, because we too believe in the ICO that has passed our rigorous scrutiny process.
Parting thoughts
Investing in an ICO can be a real game changer — only if the right ICO is chosen. Cocoricos makes investing in ICOs a breeze, by eliminating the tedious and painful process that is currently in place.
It also chooses from the best ICOs through a rigorous screening process and presents them to the investors for perusal. With Cocoricos, you can never be wrong.
