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I am getting a lot of questions about red flags not to invest into an ICO after starting a topic about ICO reviews here
https://bitcointalk.org/index.php?topic=2100276.0

I am trying not to be very critical at the projects doing ICO cause some of them seem to be cencere in their intend to change the world. Alone with that there is a lot of scam or teams that have little chance to survive as a business at least at the first and second look.

There is another problem - there are too many ICOs going on at once. I had found 8 that were supposed to start yesterday (on August 21st).

So I decided to start this topic to share the RED FLAGS that tell me not to invest into an ICO. Please avoid point a finger at concrete ICOs. This is not a scam detection topic. Let`s start by listing main reasons not to invest into a project. I will do it later today. If you have any questions you can start asking here right away.

Here is the list I got so far:


The first thing you should look at when investing into an ICO is a clear idea that makes sense. Project should solve a problem that touches a lot of people who project target audience. If we are talking about blockchain and ICO creation goals in general then we see that the initial goal was to decentralize currency, then use that currency to attract resource to the business or project. The next step right now is producing industry standards cause what is going on right now around ICOs is not always right. That is why SEC (Securities and Exchange Commission) got into it. That is why cryptocurrencies and blockchain is discussed right now in the parliaments, among bankers, etc.
What I would look in the nearest future is the projects that would be doing one of those:
1. Develop an automation to some common things done during an ICO like smart contract creation in a couple clicks, easy token generation, creation of ICO infrastructure for affordable and standard price.
2. Create a platform for crowd intelligence and ability to invest into a lot of projects with small amount of your depot to diversify risks.
3. Introduce blockchain into a new industry that is world wide (like logistics, business automation, etc).


The Team. When venture capitalists invest into projects they invest into teams. When analyzing the project you gotta understand what set of skills will it take to complete it. The team should have most of it and the rest should be covered by the advisory board. What I also looking at is if the team members had worked together before. IT teams are not that easy to build. From my own experience I can tell that a good IT team starts to work with best productivity in 3 to 6 months from the beginning of work. That is why people who worked together before have better chance to provide results on time. Especially if they have strict timeframes like some ICOs do when they are planning to release in a month after the ICO and every month after that they have some new releases.
The red flag in this case for me is if there is (ordered by severity, the worst at the top):
No team at all presented on the ICO website
Team is trying to stay anonymous
No links to social profiles (linkedin for instance)
Team is not skilled enough
Team is not responding in social networks.
Team members reaction in social networks and chats is weird.


Next thing that is important is RoadMap. But the RoadMap should not only be there but it should be detailed. There should be a reason why you ask money and you as ICO team should explain me as investor that reason. That is done in very few cases.
The RED FLAGs for RoadMap section are (ordered by severity):
1. RoadMap is not presented at all.
2. RoadMap contains confusing milestones (we have an MVP but we will show it to you only in a few weeks/months after the ICO, we started the security audit but it will be done a month after the ICO - why not a month before the ICO?).
3. Some RoadMaps make me think sometimes that co-founders are planning to pay employees two-three times bigger wages to produce products cause they are having unrealistic milestones - like releases every month of some significant part of functionality. It is possible, but in most of the cases it all leads team members to quit such team cause of unorganized and stupid way of achieving results. This type of schedule does not allow to have a sustainable team and sustainable business and results as follows.
4. To find RoadMap you have to read 35-40 page WhitePaper instead of having it right on the ICO landing page or homepage (I think website issues most of the ICOs have should be discussed in a separate topic).
5. The RoadMap does not contain anything about money. This part is almost not covered at all. Why do you need $15 million? Where and how will you spend it? New car? Airplane ticket to some islands?
That would be very nice if ICO teams think about details like that.


Token Role is the next one. What role does the token have in the end product? It is hard to identify the best role for a token within the system right now. It is a good idea to if you can exchange token for a service or a product within the project ecosystem. That will allow for the token demand to rise while project evolves. The red flags for me are:
Token is close to security according to Howey test. Remember about SEC. Some may say why not. It is your choice.
Token is not an utility and you can not redeem it within the project ecosystem.
There is no product that company proposes to exchange for the token and the product/service is for a very small group of users.
The future of the token is unclear after ICO. Sometimes it is unclear why some teams add blockchain somewhere where it is not necessary at this moment. Just do it a bit later. Cmon.


Next thing is current results that project has. This part is not hard to identify. The best thing you can have going to ICO is MVP (minimum viable product). I do not personally like alphas, betas, etc. The product should be on the market and should have 1-2 clients or cases when it was used. The other thing that is important is there any significant companies that project has partnered with. It is hard to understand if some unknown company (ICO project) is a partner of another unknown company from their area. But look at example of Enterprise Etherium Alliance. Things like that shows that even when project/company will go through the toughest periods of their growth they will not sink. They will do it.
Red flags for me in this section are:
Project has no results at all: no MVP, no visits of the conferences, no partners, etc.
Project team has nothing to show. Even no prototypes of what they will do.
Team members have nothing that can help new projects survive in competitive market. A good example is DMarket that already has skins.cash. Having such non-blockchain project as skins.cash will for sure help promote new blockchain project because it is the same audience.
Project has some unknown partners (that sometimes do not even have a website).
Team members did not participate in the [Suspicious link removed]munity events or did not mention anything about their project.

The first thing you should look at when investing into an ICO is a clear idea that makes sense. Project should solve a problem that touches a lot of people who project target audience. If we are talking about blockchain and ICO creation goals in general then we see that the initial goal was to decentralize currency, then use that currency to attract resource to the business or project. The next step right now is producing industry standards cause what is going on right now around ICOs is not always right. That is why SEC (Securities and Exchange Commission) got into it. That is why cryptocurrencies and blockchain is discussed right now in the parliaments, among bankers, etc.
What I would look in the nearest future is the projects that would be doing one of those:
1. Develop an automation to some common things done during an ICO like smart contract creation in a couple clicks, easy token generation, creation of ICO infrastructure for affordable and standard price.
2. Create a platform for crowd intelligence and ability to invest into a lot of projects with small amount of your depot to diversify risks.
3. Introduce blockchain into a new industry that is world wide (like logistics, business automation, etc).

I guess standard basic stuff look for transparency of team, whitepaper, product or product road map and eventually does the whole idea make sense...

Indeed the risk is borne so much. But of all that there must be a way or method to provide a solution for this ICO can provide a positive response for investors themselves. If forbid to follow ico or not invest in an ico. In my opinion it is not quite right. Because there are still many ico projects that really provide a good result and in accordance with the vision and mission. Everything is back on the investors' own decisions. The extent to which to analyze well about the ico. In other words How Sare in choosing ICO. :)

But thats upto you whether to trust the ICO or not and you can always do background check to know whether the ICO is legit or not. You are here to earn bucks and invest your money so it is our responsibility that we should go for extensive knowledge about that particular ICO which you think you may invest into it. :-)

Im happy that ICO are there because this is what making me profitable now. ICO is opportunity and of course scams will be always there. But we should be cautious and then we can have good ICO running for long time.

There is about 1 good project doing ICO per month. But you don't need to join the ICO, just wait for exchange when a majority will pump & dump and move on. Buy cheap and hold.

Thanks to everyone contributing to this topic.

The second thing to look at is the team. When venture capitalists invest into projects they invest into teams. When analyzing the project you gotta understand what set of skills will it take to complete it. The team should have most of it and the rest should be covered by the advisory board. What I also looking at is if the team members had worked together before. IT teams are not that easy to build. From my own experience I can tell that a good IT team starts to work with best productivity in 3 to 6 months from the beginning of work. That is why people who worked together before have better chance to provide results on time. Especially if they have strict timeframes like some ICOs do when they are planning to release in a month after the ICO and every month after that they have some new releases.
The red flag in this case for me is if there is (ordered by severity, the worst at the top):
1) No team at all presented on the ICO website
2) Team is trying to stay anonymous
3) No links to social profiles (linkedin for instance)
4) Team is not skilled enough
5) Team is not responding in social networks.
6) Team members reaction in social networks and chats is weird.

Red flag for me is something like gnosis which basically raised hundreds of millions but only have out 5% of the coins.

I look at how much coins the owners r keeping vs how much they are providing to the public

You are right. If you have enough experience please share with us how would you analyze whitepaper. I will get to that part later on.

Just a simple reading and a simple analysis on what you have read and common sense would just need when you tend to read up the whitepaper of a certain project on which if you do find out that it has sense and do really have a real life use then this is one of my main indications on checking a certain project and next the developers transparency and experience on which it somehow assures me that this one would be a successful project later on because of its good foundation.

Unique tokens not being required for project (eg. if ethereum or bitcoin would work just as well)
Projects addressing markets which are only tiny in the real world (prediction markets)
Projects with multiple competitors (eg. 0xproject, kyber, etherdelta, etc)
Projects which don't make sense
Projects without VC funding (sadly it does show that someone has stuck their name to a project)
Projects with dubious foundations (eg. Stox - seems to have grown out of binary options scams)
Projects with minimal code eg. idea only
Projcets with open ended caps - if you want my capital, give me some potential for upside.

That is a good strategy too.

Not all ICO are bad. Afterall Same craziness goes on in conventional Crowdfunding where thousands of projects are funded but only few end up successful.
Just treat your investment in ICO as donation...  this will make you focus more on projects with potentials rather than projects that will earn you lots of money.

This is very good advice!

Transparency and community. i wouldn't make investment to passive community. And some icos are changing things after ico and doesnt care whitepaper.. for example trueflip. it says %5 bounty at whitepaper but they decided to make it %3

thank you for your information, as far as i know, many people didnt care the project and team at all, they do invest just because some bosses invested, they followed the boss and think they will not lose at least

Next thing that is important is RoadMap. But the RoadMap should not only be there but it should be detailed. There should be a reason why you ask money and you as ICO team should explain me as investor that reason. That is done in very few cases.
The RED FLAGs for RoadMap section are (ordered by severity):
1. RoadMap is not presented at all.
2. RoadMap contains confusing milestones (we have an MVP but we will show it to you only in a few weeks/months after the ICO, we started the security audit but it will be done a month after the ICO - why not a month before the ICO?).
3. Some RoadMaps make me think sometimes that co-founders are planning to pay employees two-three times bigger wages to produce products cause they are having unrealistic milestones - like releases every month of some significant part of functionality. It is possible, but in most of the cases it all leads team members to quit such team cause of unorganized and stupid way of achieving results. This type of schedule does not allow to have a sustainable team and sustainable business and results as follows.
4. To find RoadMap you have to read 35-40 page WhitePaper instead of having it right on the ICO landing page or homepage (I think website issues most of the ICOs have should be discussed in a separate topic).
5. The RoadMap does not contain anything about money. This part is almost not covered at all. Why do you need $15 million? Where and how will you spend it? New car? Airplane ticket to some islands?
That would be very nice if ICO teams think about details like that.

you are right, but i have to confess that its very hard to participate in a ICO looking good nowadys, people must do big effort to rush to purchase, there are many guys who will never read the white paper even the road map. they just care if any boss in it

My first red flag is its AN ICO....

This is a double-edge sword. There are lot of projects out there that purports to disrupt such and such industry by introducing a product based on blockchain technology, but many times it's not clear how blockchain can actually help to solve the problem at hand OR help to solve it more efficiently than competing approaches. It seems to me that a lot of projects use blockchain either for marketing purposes or for the opportunity for staging an ICO or simply for a sake of using blockchain.

Also if you find a project interesting, always read its whitepaper (that is if you can find one). Many times it's very hard for the outsider to guesstimate project's worth, but other times there are such glaring and obvious gaps in proposed business plan, that you can safely assume, that project won't be successful (apart from random pumps and dumps)

You are right. There are a lot of outsiders` startups that are trying to catch the hype or just attach blockchain cause they think ICO requires it. I see right now there is a big gap between what is presented on the ICO websites and what can be behind that team/project/company and is there anything at all. Usually having an MVP or examples of cases help me understand what the team is about and does it worth a while.

Another one is: Never invest more than you can afford loosing.

At present, most of the projects have great potential, so after the ICO ended, people got big profits. That is also why many people focus on the ICO, and it is booming.

Yes. We know that. It is good we have different opinions in this topic.

Token Role is the next one. What role does the token have in the end product? It is hard to identify the best role for a token within the system right now. It is a good idea to if you can exchange token for a service or a product within the project ecosystem. That will allow for the token demand to rise while project evolves. The red flags for me are:
Token is close to security according to Howey test. Remember about SEC. Some may say why not. It is your choice.
Token is not an utility and you can not redeem it within the project ecosystem.
There is no product that company proposes to exchange for the token and the product/service is for a very small group of users.
The future of the token is unclear after ICO. Sometimes it is unclear why some teams add blockchain somewhere where it is not necessary at this moment. Just do it a bit later. Cmon.

Next thing is current results that project has. This part is not hard to identify. The best thing you can have going to ICO is MVP (minimum viable product). I do not personally like alphas, betas, etc. The product should be on the market and should have 1-2 clients or cases when it was used. The other thing that is important is there any significant companies that project has partnered with. It is hard to understand if some unknown company (ICO project) is a partner of another unknown company from their area. But look at example of Enterprise Etherium Alliance. Things like that shows that even when project/company will go through the toughest periods of their growth they will not sink. They will do it.
Red flags for me in this section are:
Project has no results at all: no MVP, no visits of the conferences, no partners, etc.
Project team has nothing to show. Even no prototypes of what they will do.
Team members have nothing that can help new projects survive in competitive market. A good example is DMarket that already has skins.cash. Having such non-blockchain project as skins.cash will for sure help promote new blockchain project because it is the same audience.
Project has some unknown partners (that sometimes do not even have a website).
Team members did not participate in the [Suspicious link removed]munity events or did not mention anything about their project.

1) Does it solve a REAL problem/need
2) Is a token/blockchain, as applied, the best or at least novel solution to #1
3) Is this a new approach not already being serviced by another (well developed) coin or token
4) Is the team communicative and do they appear/have credentials that they can deliver #1
4a) IF the team is anonymous there MUST be a clear reason to do so (anonymity driven coins, etc...)
4b) Do team members have other project commitments past/current/future in crypto (use as a measuring stick)
5) Is the sale being conducted transparently, ideally with escrow if applicable (not through a smart contract)

If it passes 1-5 THEN it's worth EVALUATING deeply as a posdible investment.  Many, if not most, ICOs I fear will become vaporware and crash, likely devaluating the crypto-sphere as a whole over time due to so many people wanting to get rich quick.

Caveat Emptor

Checking the company's code and their engagement on Github is a good idea too.

This thread is a really helpful for a lot of people. Thank you so much for starting a thread like this with new alt coins showing up everyday it's hard to tell which coins are worth your money or which coins are just there to steal your money. I've just been in page 1 and I actually learned a lot I've read some red flags that I have never thought about before.

Agree. I value the active developer updating always the community or investor. Also I do check the people behind the project and the industry they belong. Also the projects application in real life solution is a must, I mean its uses to community.

Real life users would really be the main thing for me and an active developer or owner would comes next on which it actively updates regarding on the project and updates the investor of it which i can see that this is the main thing i do seek when i tend to put up money.If these things are absent then i would really pass up on this and going back on seeking on another project.

Thanks for the topic, I want to add some points that important for me:
1. It's a clear blockchain project - not investment in real business. I want to see  transparency in the future transactions.
2. Clear consensus algorithm and economic stimuatuions for every member of this system, Who will support nodes, add value to the system, promote it and so on? Unfortunately, many new ICO projects try to use blockchain as a magic wand without explanaition how this system will be work and what beneffits members get.
3. Token - How I can use a token or what I can buy with the aid of this token and can't buy for the money.
4. Open code - I want to see that guys have code on Github and want to check how many commits they have made. Is it alive project? Also, how many developers has their team - it's imposible to create good blockchain project without good techical background.
5. Advicers- have they take a part in this project development?
6. Community - is it active? People really like the product or they only want to get their bounty?

Make sense but what about some projects that are software projects having the solution based on Blockchain. In this scenarios not creating a blockchain however using an existing one and its functionality.

Thanks a lot for this topic. As someone who is very busy developing my own token (surprise surprise), I found your comments to be quite helpfull. Some things cannot be mitigated, like the general lack of experience in programmers with the specific skills set that I need for my platform. Nonetheless, it is very interesting and educational to read different experiences of ICO investors. Thanks for sharing!

Very good list, i think people get too excited about the technology and the amount of capital getting thrown around that it is easy to forget that investing into ICO's are like any other investment. You need to do your work.

For me there are a few signs to look for in a ICO

- Strong team - Both in development team and also the CEO's / marketing (no point having a great team to create something, if nobody can advertsie it and push the startup in the right direction.
- Realistic vision - not aiming too high or if they do not reach their target everyone who invested will be disappointed
- Solid whitepaper - Well thought out, shows realistic goals, a strong good vision and a plan of action
- Strong social media presence - A social media that shows they are connected with everyone
- Good customer support - Shows they care, and they have invested time and money into making sure the average investor can ask questions
- Good website - A business who is willing to throw time and effort into a good website are less likely to be a scam
- finite supply - ICO's with no cap can be dangerous and can simply just damage their own coin by releasing more for more investment.
-Market they are getting involved with - Is this a new market? or a dying one? who controls the market?

Finally
- Good concept and catchy name - A good ethos and a name that makes them stand out. Personally i would avoid anything that is something "coin".

If these are in place, then it's a good sign. I am looking at Crowdholding at the minute, seems like a good upcoming ICO (They are in their pre-sale). I like this one because it is about co-creation (Which i am interested in) and also you can get more for your investment as they are in their pre-sale.

https://ico.crowdholding.com/

Nice article!!
This week I saw the ICO of Cindicator.
They have a white list and a couple differents for the ICO. Very professional.
There are a lot of differents in every ICO. Some are realy bad.

You explained it very well above and this can be used as a ICO pre-investment guide. For me, if the team is anonymus, I never invest money in there. They should come up with real linkedin accounts, so that I can trust them. And white paper is another factor to select the right ICO for me.

I agree with this they only what to collect on ICO funds are taken token is given but after that they are gone scamming people

It is a good idea to know when tokens will be given to team members because sometimes you can see that a lot of tokens being sold at one moment. That might happen if somebody from the team dump a lot of tokens to the market and drops the price down. All the investors get very upset at that moment because the team knows news way earlier than us. Having tokens being distributed to the team in several months after the ICO is a good thing too.