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=2100276.0I 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.
