Any entrepreneur knows that change is unavoidable in any business sector. More than that, if you are the type of entrepreneur that wants to revolutionise the world, change and innovation can be your best allies. Blockchain, Cryptocurrencies, FinTech, PropTech, EduTech, etc. are transforming our reality from a Cinderella into a beautiful princess, and everything is happening in front of our eyes. No more working for the stepmother and stepsisters – aka the middlemen like bankers, realtors, notaries, etc. that charge unjustified fees from the hardworking citizen.
When it comes to investing in ICOs, any businessperson needs a sharp sixth sense, or better said a smart, visionary way of analysing the potential of the project. You need to know what can make it, as well as what can break it. Based on that, here are some important criteria to follow when choosing an ICO project.
Problem Solving – Who, What, Why, When
The key to any successful startup is addressing a real problem and coming with an easy to use solution. Thereby, the ICO has to prove that it solves an essential problem and comes with an easy and effective manner to fix it. Entrepreneurs believe in concrete ideas that are structured as applicable plans, with a real basis. We hear everybody saying that Blockchain has the potential to revolutionize and disrupt many traditional fields, but from potential to real could be a long way. Based on a realistic and rational analysis, people need to see a project that is disruptive itself or has a solution for an important problem in the marketplace. Blockchain technology alone is not a solid foundation for a lasting business. It has to be backed by a tangible and viable solution for an actual problem.
Identifying a problem in the marketplace and offering a solution for it are just the first steps towards creating a good startup. In this scenario, the competition, your edge and value to the client, and market size are very important. The Blockchain-based ICO has to be integrated into an existing market that is large enough in order to transform your project into a profitable business. The viability of the project depends very much on the existing market and the possibility of adopting your vision as a solution to the problem. As a metaphorical comparison, we could say that if you are a chef that cooks amazing meat dishes, but you work in a vegan restaurant, nobody will be impressed. The same way, if the market you need is non-existent or not large enough, you will not succeed. So spending more time doing your research and studying the market size before starting an ICO, you will convince many people to join you as a partner.
Team Is Key
Many entrepreneurs invest when they see the right people involved in a project. Behind every great realisation is a great team. You can’t do anything significant based only on theory. The people that carry into effect the project are the ones that can make it or break it. This applies to any field, but for an ICO it’s even more important, as it is a new way of doing business and it needs people that give it credibility. We’ve all seen that many successful Blockchain-based projects are run by very young men coming from the IT field, but are these businesses going to pass the test of time? Is it enough to be a bold and intelligent IT person to create a project that will last in time, or is entrepreneurial experience necessary as well?
The background of the team has to be complex. If an ICO has a whole bunch of branded advisors on the team with their names on multiple ICOs, it means that the ICO’s core team cannot stand alone and has to depend heavily on others ‘bought’ brand at this stage. The experience of the people involved should be relevant for the project. For example, for a PropTech project, you should find a team that incorporates people with a background in business, property, IT, accounting, marketing, etc. A team with mainly technology-based experience is not sufficient for a real estate fund, even if it’s a business based on blockchain.
Considering that they promote a decentralized disruptive technology, investors need to see people that truly believe in the decentralised revolutionary technology they use. Also, the experience in cryptocurrency is essential. When a project aims to disrupt a well-established activity, it needs to have veterans. People that know how the industry works are the ones that know the best what flaws it has and why does it need to be changed. If an engineer says the banking industry is obsolete and needs to be changed, nobody will really believe him, but when a financier tells that and gives arguments, then nobody has any reason to doubt that he is right. Also, the project must include distributed system experts and game theory designers.
Keep It Simple
The Whitepaper is the CV of the ICO. If you want to convince people to invest in your project, you have to make it easy to understand. A well-explained project that is simple to understand and offers the exact information is the best business card for a business worth investing in. The Whitepaper should be written in a catchy and understandable way, with enough information to make you know if it is the right project for you, and not too much data to bore you.
If the ICO has these criteria, it most certainly is an interesting project to invest in it. Blockchain and its disruptive power will revolutionise our world. After all, time and money are two of the most important resources we have, and using the distributed ledger technology saves us both money and time. The days of the 10x of ICOs at launch are over, as it’s more about the strength of your offering that is a safe bet with an established team and a sizeable private round for due diligence investors.
Author: Mru Patel, Partner and COO of Flash Group, CEO of Sapian Capital