Are you interested in investing in blockchain but not sure how to properly evaluate potential opportunities? The following list is a great starting point and can help you eliminate 95% of potential investment opportunities. This is by no means a definitive or comprehensive list of questions that you should be asking. However, these are some of the most important and they could help prevent you from making a bad investment.
1. How good is the team behind the project?
This is by far the most important thing when evaluating any potential investment. It can be the best idea in the world, but it is destined to fail without a proper team managing it. Some things to look at in regards to the team are as follows:
Is the team fully dedicated to the project and working full-time? Or are they working on this project along with 3 other unrelated ones? In mose cases, if they are not fully dedicated to the project, you can immediately move on.
Do they have the technical skills needed to build the end product? Are any of the team members experienced in blockchain development? These are important things to look at, but a lack of technical skills isn’t always a deal-breaker. Great teams can always hire developers as needed while scaling, but it is important to know how they plan to address the lack of experience in these cases.
Do the team members tend to jump from company to company every 2-3 months? Or do they stick around for longer periods of time? Many companies have teams that start a new project every 2-3 months and hold an ICO each time. After the ICO, these companies essentially cease work on the projects (aside from very basic updates) and just move on to the next round of funding.
2. Is there actually a need for a token?
It is important to remember that tokens aren’t like stock shares. The value of the token is directly related to the demand for it. If there is no actual utility of the token, then it is essentially worthless. Think about the target market and how easily they would be able to adopt the token. For a good company, you should be able to identify the utility of the token almost immediately.
3. Does blockchain make sense?
Blockchain is great for some applications such as supply-chain, P2P financial transactions, and data security. However, blockchain is slower, less scalable, and in most cases more expensive to develop. You want to always make sure that decentralization is actually needed. Some existing companies will try to move their business over to blockchain just for the sake of raising $60 million (or some other absurd amount) when there is clearly no need for decentralization.
4. Do they have an MVP (Minimal Viable Product)?
This is very important. If they are unable to provide a basic proof-of-concept, why would anyone trust that the team will be able to develop the project after funding?
5. What is the company’s valuation?
Have a look at the hardcap and ask yourself if it really makes sense for the company to raise that much money. If they are selling 25% of the total token supply for $40 million, they are giving themselves a total valuation of $160 million. In order to get a 10x return on your investment, they would need to become a $1.6 billion company. Scaling a company to this point is hardly a simple task and very few startups ever achieve this number.
6. How are they handling the community?
Are they responding well to questions being posed to them in their Telegram channel? Or are the admins constantly ignoring or dodging tough questions? If they seem to be dodging questions, they are probably hiding something that would be unfavorable to potential investors. Good companies are generally very approachable and open to answer any tough questions from potential investors.
7. How professional is the overall quality of the brand and website?
While they don’t need to win any awards for the design, it is still important that they brand themselves professionally. Websites are very important to the success of the crowd sale. A tech company that can’t even handle building a professional website is discouraging to investors.
8. Who are the advisors and what do they bring to the table?
Think about how each of the individual advisors will be able to help with the project. Are they an expert in their industry? Or are they just a friend of the founder? Sometimes there are big names attached to projects and that can helps with the company getting publicity.
9. What are the bonuses or discounts being offered at each stage of the sale?
Did the first round of investors get a 2000% bonus on their investment? Are they offering a 50% bonus during the crowd sale? It is good to keep in mind how the bonus structure affects you. If you are investing in the pre-sale with a 50% bonus over the crowd sale participants, that is great. If you investing in the crowd sale, the 50% bonus in pre-sale is obviously a negative. If the early investors get a huge bonus or discount, it is important to understand what portion of the total supply of tokens they will be receiving and how long they are locked. Knowing these things can keep you from investing in a token that will be sold off immediately after the ICO ends.
10. What kind of lockup and vesting schedule are the company and team tokens subject to?
If the team’s tokens are locked for a longer period of time, they will have more incentive to make sure the company keeps moving things forward. If it will be 4 years before they are able to take their tokens, they will be much less likely to move on from the project in order to start a new one.
You should always research as much as you possibly can about a company before you invest your hard earned money. If something feels like a scam, it most likely is. Remember to always do your own research when investing in anything, blockchain related or not.