Investor Guide to Smart ICO Investments

Investor Guide to Smart ICO Investments

by July 5, 2018

Over the past 2 years, the crypto space and blockchain projects have gained popularity across the globe.  As a result, many dubious players entered the market to get a piece of the crypto pie. It is increasingly difficult for investors to differentiate between legitimate projects and scams.

The Crypto Finance Conference addresses these issues. At all CFC events investment opportunities are being presented, but participants and speakers also discuss and address the risks of investing in crypto projects, how to find the right project and what future trends will bring.

Based on our experience, we created  a short guide to help you evaluate your next crypto investment:

  1. Technology: Is the Blockchain really needed?
    Once you find a project that seems interesting to you, read the Whitepaper and ask yourself: Does this project solve a problem or bring value to people’s lives? Does the blockchain technology serve that purpose, or could (and should) it easily be done without the blockchain? If the blockchain technology isn’t really needed, consider this a red flag.Additionally, check if the project has a Github account (or similar) where the code of the smart contract and  more is being shared. If there’s no account, no code or code identical with other projects, consider this another red flag.
  2. ICO Rating Agencies
    AlethenaTo ensure high quality and legitimacy of the ICOs presented at the CFC events, it was decided to work with a trusted ICO rating agency. And so should you. Many sites offer high-priced listing packages for ICOs, which will give them prominent placements, better ratings and in some cases even fake positive reviews. Read more about how easy it is to get a fake review here. The Swiss rating agency Alethena aims to change that, by conducting independent, transparent and neutral reviews in great detail.
  3. Legal Setup
    Check online registries for the legal registration of the company in their jurisdiction. Start-ups often underestimate the importance of a proper legal set up for an ICO. For instance, founders have to find the right legal form of the future company. As seen in the Tezos case, a foundation is most likely not the ideal legal structure for an ICO. But what is? An LLC or an LLP? A proper legal assessment will lead to the right decision.

Furthermore, the right legal setup requires that an experienced legal officer is on board in order to identify potential pitfalls. Examples include the qualification of the token (in most cases it is a security), compliance with AML-Regulations and conducting a proper KYC process.

All that comes at a cost. It is therefore important that a start-up allocates 20% – 30% of its budget for legal fees and services. This information is usually being shared on the website in the budget and token allocation.

  1. Personal Due Diligence
    Reviews and analysis done by review platforms, crypto bloggers and rating agencies are informative. But to get a clear understanding of how legitimate and trustworthy a project is, personal due diligence is of the highest importance. Here are a few ways to better understand a project:

    1. Telegram: Join the Telegram group, follow the conversations, ask questions and engage with the team behind the project. Are they open, honest and fast to answer? Do they address critical questions? Do they take feedback from the community seriously? Follower count isn’t as important anymore, so don’t shy away from a project with less than 10k Telegram group members. This might mean that they don’t participate in dubious marketing initiatives like (most) bounty programs or buying followers.
    2. Social Media: Follow their social media accounts on major sites like Twitter, Facebook, Medium, Steemit or others. Do they post original content? Do they take the time to create content that adds value to the reader? Do they offer insights about the team and project beyond what’s listed on the website? Are their followers legit or did they get fake followers? (Easy to spot by analyzing follower to engagement ratio.)
    3. Team: Check the team members backgrounds on LinkedIn or similar platforms. Do they have the right expertise? Are they the right fit for this project?
    4. Direct Outreach: Get in touch with the founders and send them your questions via email or even jump on a call with them. Do they take the time to answer your questions? Do they seem genuinely excited about their project and vision?
  1. Events
    If the project is in your region, see if they organize events or meetups. Attend one or two, interact with the team and see what other people think about the project.
  2. Community
    Join a small or closed crypto community. Ask the group what their impression of the project is and discuss it with them. If you’re not a member of a private group – create one with your friends or join one of the many open ones.

Finding the right crypto projects to invest in is not easy. In addition to the existing volatility, there are scams and profiteurs that make it hard to identify the true gems amongst thousands of projects. In addition to following the steps above, the process of choosing your investments also requires trust and a good sense for promising concepts. Only invest what you can afford to lose.

Want to learn more about smart investments and connect with like-minded people? Apply for the world’s most exclusive investor conference to get industry insights and learn most about the recent developments and future trends. The next  Crypto Finance Conference at The Ritz-Carlton, Half Moon Bay, California, takes place from September 5-7 and is an application-only conference in a beautiful, remote setting, which allows participants and speakers to connect in a private and relaxed setting. Apply on


Author: Andrea-Franco Stöhr, CEO Crypto Finance Conference


Featured image via Freepik