Most investors are familiar with the term “due diligence.” Before making any decision, they conduct a proper analysis of the business in question and evaluate whether their practices are sound and they can expect to see returns over time. Blockchain startups are no different. The sensible thing to do before participating in any ICO is to go through a similar process, albeit, one adjusted to the conditions of the blockchain market.
There already are hundreds of services that seek to provide these evaluations in the blockchain market. It’s not uncommon to resort to investment scoring matrices as a way to save time on doing these analyses. Many of these third-party systems belong to reliable companies such as ICO Box. However, investors should be aware of the methods they employ if they choose to go with the mantra of DYOR, or “Do Your Own Research.”
This investigation always starts by taking a look at the documentation that every project should provide. Besides painting a clear picture of the business model, they should allow the investor to analyze three core elements that determine the viability of an investment. These are the startup’s plans in regards to marketing, legal, and more importantly, technology. A proper execution of these elements during the ICO process says a lot about a team’s capabilities going forward.
Investors should always be thorough and go beyond the one-pager. It’s necessary to peruse a startup’s white paper and evaluate its presentation for a good idea into its marketing plan. Likewise, it’s impossible to stand above the noise of other projects without having an active online community. A good marketing strategy will always have team members engaging with token holders directly through platforms such as Telegram and Twitter.
A legal opinion is also key. Startups count on the counsel of lawyers who can certify that its token economy is in full compliance with relevant regulations. A look into this document ensures ICO participants that they are passing the Howey test when purchasing a certain token.
Finally, it is always a good sign when the code for a proposed blockchain is shared on GitHub. This is a transparent practice. It offers investors a chance to take a look at the nitty gritty of the project. With the help of technical experts, they can evaluate how the proposed platform will work, if it works at all.
Altogether, these three elements determine a blockchain startup’s success once conditions are met for a good business model and token economy. However, investors should know that, at the root level, it all depends on the team. Direct communication with a project’s developers, managers, and marketers is always an option worth seeking. Investors shouldn’t hesitate to enquire about their expertise, goals, or any general information.
“Regardless of the business model and the amount of the documentation, the most important factor are the people behind the business. It’s the team that creates a startup.” — ICO Box founder Nick Evdokimov
- Visit Nick’s website to stay in touch.
- Watch Nick’s YouTube channel
- Follow Nick on Facebook and Telegram
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