It’s been a wild 12 months for ICOs (Initial Coin Offerings). In many cases, we’ve seen $10-40 million dollars raised in a few minutes. A lot of people have become rich by investing in ICOs, but a lot of people have been scammed too. With so many opportunities out there, how do you know which ICOs to invest in?
We’ve been through it all — the good days and the bad days. We’ve seen people scammed, we’ve seen people get rich. We’re lucky enough to have done quite well ourselves, too.
Now, we’re here to help guide you to do it.
The number of ICOs on the market that offer little to render themselves a unique opportunity is highly frustrating. Long story short: yes, there are plenty of plain awful projects out there. The good news, though: in this guide, we’ll help you to weed them out and find the good ones so that you only invest in the most promising ICOs.
(If you’re not yet confident with your knowledge of ICOs, read our What is an ICO guide before starting this one)
If you’re ready to start finding ICOs to invest in, let’s jump right in!
What You Should Look For to Find ICOs to Invest In
Using our own experience and the collaborative advice of various experts, we have put together a checklist of some of the key things you should look for and assess when researching ICOs to invest in.
1. Do They Have a Whitepaper?
You’d think this was a given with every ICO. Well, it should be!
So, if you come across an ICO that hasn’t even released its whitepaper yet, we’d advise not to consider investing in it until it does!
No one in their right mind would launch an ICO without a whitepaper.
2. Avoiding Exit Scams 101: Research the Team
The next, and one of the most crucial factors involved in identifying ICOs to invest in, is determining whether the ICO is legitimate.
The most common indicator that an ICO is an ‘exit’ scam is a fake team. An exit scam ends with the people behind it running off with the money once the funds have been raised, so it’d be extremely stupid for these people to use their own faces and/or names on the project website.
So, instead of seeing a legitimate team on their website, you’ll likely see a bunch of stock images, or selfies stolen from random social media accounts.
One of the ways in which you can test this is to search for them on YouTube and see if they are exposing their faces publicly. (Legit projects are often all over YouTube — the team can usually be seen doing interviews, conferences etc.). This doesn’t provide 100% proof that the ICO isn’t a scam of course, but it makes it much less likely and reassures you that the faces do actually belong to the people behind it.
You could also send them an email or join their Telegram chat to ask them to prove their identity. Try to get them to take two different selfies holding up a piece of paper that says ‘Hello *insert your name here*, I am *insert their alleged name here* from the *insert project name here* ICO.
The second method may seem extensive and intrusive, but any team member of a legitimate ICO shouldn’t have any problem doing that to prove their identity and reassure their community.
If they have sufficient proof online already in the form of YouTube videos etc., though, they may just link you to that, which is fine along as you feel that the videos suffice as proof.
3. How Crucial is their Idea?
Just how necessary is their idea? Is it a solution for a huge problem that affects lots of people? How important is it? These are the questions you need to ask yourself when you read into their concept and study their whitepaper.
Let’s imagine a new blockchain that can perform 100,000 transactions per second and enables cross-chain smart contracts vs. an app that allows you to buy toilet brushes using Dogecoin.
Fair enough, some Dogecoin holders might be vitally in need of a bulk order of fresh toilet brushes right now, but in all seriousness, which is the bigger deal? Which is solving the biggest problem? Which has more use cases?
4. How Unique is their Idea?
If the project isn’t a first mover, you then need to assess their competitor(s) and see what advantages they hold over them.
Why would users choose their product over that of their competition? Does the team have the experience required to succeed despite the competition?
A good way to get your answers is to read the whitepaper(s) of the competition and then the whitepaper of the ICO you’re interested in afterward. This way, you can try to make the fairest comparison possible and identify any key advantages or disadvantages apparent from the whitepapers.
You could also ask in their Telegram group chats about the advantages they have over their competitor(s). Ask how they are different and why their product will succeed.
Remember, though, never make a decision based on what someone else has said. Whether it be a team member, a supporter, someone on a forum, or a YouTube influencer with 100,000 subscribers. Seriously. The key is to do your own research and only invest in projects you truly believe in.
Note: It also needs to be made clear that you should never invest more than you can afford to lose. Before making any investments, consider speaking to a financial advisor about your plans and what your objectives are etc.
5. How Relevant is the Team’s Experience?
When searching for ICOs to invest in, you should always assess the team’s experience. ICO websites often include links to LinkedIn profiles for their team members, which can be a convenient way to check what each of them have done in the past, what they achieved etc.
You should be looking for anything of significant relevance to the concept of their ICO or expertise that may be useful in developing their product.
A good example would be an ICO that ran earlier this year, named Fusion. It gained a substantial amount of interest and raised $42 million extremely quickly, which is a fair reflection of how solid the team’s experience is.
Fusion is a blockchain that offers a new solution to cross-chain interoperability, including multi-token smart contracts and an abundance of other innovative features.
From the point at which the ICO launched, it was easy to see why their project was expected to do well — their team is led by DJ Qian, the founder of BitSe, a tech company that incubated VeChain and QTUM.
If you research further into DJ Qian’s affiliation with VeChain, you learn that he was actually registered as the CEO of VeChain during its infant stages. In fact, he can be seen on YouTube leading presentations for VeChain and signing important deals. Not only that, but his LinkedIn profile also states he was the Regional Manager at IBM before he begun embarking on his own ventures.
DJ is clearly a highly experienced individual and his experience is very relevant as it all regards technology, computer science and leadership.
Fusion’s other team members all have relevant experience too, with most having worked for IBM, and some also being a part of BitSe, like DJ.
6. Is The Tech Good? Do They Have a Working Product?
Finding ICOs to invest in is tricky business, especially when things don’t do what they’re supposed to.
We recommend ruling out any projects that lack an Alpha/MVP (Minimum Viable Product) or that haven’t satisfied with their technology — anything that meets either of these criteria carries substantial risk.
Unfortunately, we aren’t all computer-science whiz kids.
So, unless you know what you’re doing, there isn’t much point in inspecting the code yourself. What you should do is check, first of all, to see if they actually have an MVP, Alpha or any Github repository posted to their account. If they do, see if any credible developers have reviewed it.
For example, when Credits came into the spotlight boasting a capability of 1,000,000 tx/s, the first thing we did was search for things like ‘developers review of Credits’ etc.
Eventually, we found one by Ivan on Tech (a popular programmer on YouTube). It wasn’t good for Credits — Ivan had taken a look into their MVP (Minimum Viable Product), which was a wallet. He discovered of a lot of things he found to be rather dubious; one of these things included a hashing algorithm being used that is obsolete due to its vulnerabilities.
The above is just one example of many that you can find online regarding flaws in code shared by sketchy ICO projects.
Granted, some of these projects may very well go on to correct their flaws and become a surprisingly remarkable project, but you have to understand the risks involved if you wish to take a gamble on one.
Tip: If you’re unsure of whether or not a project has an MVP or any Github repository posted and you can’t find it online, just ask them in their Telegram chat!
7. Take a Look at their Roadmap
You can normally find a project’s roadmap on their website or in their whitepaper. It provides you with a timeline structure for what they plan to do, so that you can see how long you should expect to be waiting until the product is ready.
Events such as ‘mainnet release’, ‘full app release’ etc. are a big deal. If you look at an ICO’s roadmap and see that just two months after the ICO is over, the mainnet goes live, you know that you don’t have to wait long to start seeing some action.
You can then see whether the team did what they said they were going to do, which should help you decide whether you’d like to remain invested. It is around these events that token prices seem to experience an increase in price, provided that the release went to plan and depending on overall market conditions.
If this wasn’t the case, and the roadmap stated the mainnet was due 12 months later instead, you should expect to be waiting 12 months (give or take) to see a real return on your money (provided the mainnet is a success). Of course, anything can happen, but our aim here is to provide sensible instructions based on probability.
8. What Will Their Market Cap Be?
This is where spotting ICOs to invest in becomes a little more formulaic — market caps.
You should always check the number of tokens being released upon completion of the ICO, along with the price of each token. From this, you can calculate what the market cap will be when the tokens are released provided that the ICO reaches its hard cap.
This is very useful because you can then determine how much of a return you see as plausible from your investment, which is important as you should always establish a plan for your investment before making it.
Here’s an example:
Let’s imagine you were going to invest in an ICO named Verify. You search through their whitepaper and identify the number of tokens due to be released at the end of the ICO as 10,000,000. You also find that the final price of each token in the ICO mainsale is $1.50.
You multiply these two figures and calculate that when the token is released, the market cap will be $15,000,000. Of course, this only accounts for tokens sold in the sale. In reality, the development team and advisors etc. may be given their tokens upon the completion of the ICO too — this differs from project to project and is something you will have to check in the whitepaper.
(If you’re ever in doubt, you can always ask the team or the community in their Telegram chat)
Now that you know what the market cap will start at, you can compare it to existing projects that you believe to be of the same potential size, i.e. projects that have similarly-sized goals.
Verify, our imaginary ICO project, is a decentralized identity platform. This puts it in the same category as projects like Civic.
You look at Civic and see that it is currently worth a market cap of $140 million. That’s almost 10 times greater than what the market cap of Verify will be if it hits its hard cap. From this, you can get a rough a feel of what you can expect from Verify provided that it is operated well and meets its objectives.
You may dig deeper than that, though, and find that Civic isn’t completely developed either. It’s yet to release its full product, which means there could be plenty of room for growth from its current $140 million market cap.
This may lead you to believe Verify could potentially reach more than a $140 million market cap too, especially if it offers unique features and advantages over Civic.
9. How Will They Spend the Money?
Check their whitepaper for this.
Try to determine whether you feel that the way in which they’re spending their money is sensible, appropriate and effective.
You shouldn’t get involved in projects that seem to be money-grabbing, so check to see how the tokens are being distributed too: some ICOs lock up (for a certain amount of time) the tokens that are for their team and advisors.
The above is a great way to keep the team and advisors motivated and ensure that they can’t just sell their tokens immediately after the ICO is complete.
As we close in on the end of our How to Find ICOs to Invest In guide, we thought it’d be a good idea to offer some post-investment advice also.
Yep, it’s one thing finding ICOs to invest in, but you need to do a little more than that after investing to keep tabs on whether the team actually stick to their word. Some of the ways in which you can do this include the following:
- Monitor how well the team stick to their roadmap
- See how they go about keeping their community updated
- Sign up to any announcement email lists or groups they have (some projects update their community via a Telegram announcement channel, BitcoinTalk forum, or subreddit etc.)
- When they announce a date for anything, set a reminder in your calendar to see if they meet their deadline
- Check their Telegram channel or forum to see if they are responding to their community effectively and professionally
Thank you for reading our How to Find ICOs to Invest In guide!
If you feel that we’ve missed anything out or if you have any further questions, please feel free to leave a comment or contact us directly at email@example.com! We are always happy to help and would love to hear from you.
Note: This guide is not financial advice. Please consult a professional financial advisor before investing and always remember not to invest more than you can afford to lose.
If you feel you’re ready now and want to buy some Ether to participate in an ICO but aren’t sure what the best way to purchase it is, check out our How to Buy Ether guide.