50+ Questions To Ask When Evaluating An Initial Coin Offering (ICO)

Note: This is not investment advice and should not ever be taken as if it is any kind of investment advice. These reflect my personal thoughts, opinions, and findings. Nothing more.

“ICO”. Ugh, I’m so sick of hearing it. Every time I come across the acronym I find someone blabbing about a new up and coming token that is “going to be the next big thing”. While I typically question if the pusher is delusional or simply talking their wallet, I’ve come to learn that on average the investor (typically retail) has done little to no research beyond maybe reading a whitepaper. We can see this through the abundance of ICO scams to date, as well as the inevitable cliff dive coins typically face upon first entering the market. Both of which being a direct result over allocating capital.

As of today an ICO typically goes like this: a web domain is registered, a well written and convincing whitepaper is thrown online, some marketing is done here and there, and before you know it the hype train begins screaming “ALL ABOARD TO THE MOOOOONNNNN!” They say a sucker is born every minute, but in the crypto world that seems like a bit of an understatement….

Don’t get me wrong, I think the advent of ICOs will surely change the way capital is raised in the decade to come. We’re on the brink of doing away with the notion that making > $200K a year or having a net worth of > $1M (Accredited Investor) implies investment competence. On top of that, new technologies can come to the market faster than before thanks to easier fundraising; a net positive for the domestic/global economy.

While everyone wants to get the A+, not everyone wants to study for the exam. The ICO market is incredibly oversaturated, due in part to simplicity behind raising capital under this structure. Some of the greatest minds in the Crypto space have come out and argued that a majority of ICOs will fail or are scams. Like any other technological breakthrough, hype and expectations typically grow out of proportion. FOMO begins creeping around the corner and valuations take off to absurd levels. Because ICOs and the CryptoAsset world is still so young, frameworks for assessing the underlying value of ICOs and existing tokens are absent. Hopefully the market will find a proper valuation framework as it goes through its boom & bust cycle.

Below are 50+ questions, among many, that I’ve put together and believe are worth keeping in mind when investing in or marketing an ICO/CryptoAsset. I’ve also highlighted and briefly touched on 10 questions I believe are most important.

The Project

  • Can your project be explained in < 60 seconds?
  • What purpose does the blockchain have in your project?
  • What are the biggest challenges you expect to face and how do you plan to overcome these challenges?
  • What role does the coin have?
  • Who will want to buy this coin?
  • Is your service already offered by a centralized entity? If so, why does decentralizing it make it better?
  • Who is/are your competitors?
  • What is your competitive advantage?
  • What are your biggest weaknesses?
  • What is your total addressable market (TAM) and what do you estimate is the max share your network will take?
  • How long do you estimate it will take for the network to launch and see adoption?
  • What exchange(s) will/do you plan to be listed on?
  • What is your Fiscal Policy? Instamines, premines, buying, spending, icing, discounting, and/or burning any tokens?
  • What is your Monetary Policy? Inflationary? Deflationary? Fixed supply forever or additional tokens to be issued?
  • If the project is forked off another coin, what is different and why the need for a new asset?
  • What is the consensus algorithm used by the project and how was it picked?
  • What languages will your website, whitepaper, and marketing initiatives be in?

The Fundraising

  • How many coins will be sold during the ICO?
  • When does the ICO start and end?
  • How did you determine the number of coins to be sold?
  • What is your minimum and/or maximum fundraising threshold? How did you come up with each?
  • What will you do with unsold tokens?
  • What kind of discounts are offered to early investors?
  • How were said discounts determined? Do the discounts incentivize HODLing or profit taking upon launch?
  • Will your ICO include a roadshow? Where can I find your roadshow schedule?
  • Are the instructions for participating in the ICO clear?
  • Are you taking an precautionary measures to ensure scammers will not be able to mislead investors into sending funds to the wrong address?

The Team, Partners, & Goals

  • Who is on the team, what are their backgrounds & credentials, and do they have any public track records?
  • Where are you physically based out of?
  • How many tokens will be owned by the foundation & founders? Is there a vesting schedule?
  • Who are your advisers?
  • What do your advisers bring to the table?
  • Are there any earlier backers of your project?
  • What companies are you partnered with or seeking to partner with?
  • Is there a clear, concise, and well written road map available for investors?
  • What milestones do you have in place? How will you inform investors when milestones are achieved?
  • Will your team be conducting any online events, such as webinars, Q&As, or AMA on Reddit?

The Legal

  • Is your ICO project structured as a corporate or non-corporate entity?
  • Does your ICO fall within SEC jurisdiction?
  • Are you SEC compliant?
  • Where do the tokens fall on the Howey Test?
  • Are you offering a guaranteed rate of return to investors? (RED FLAG)

The Financials

  • What are the assets & liabilities of your project?
  • What will be the use of the proceeds raised?
  • What kind of expenses do you expect to incur?
  • What is your cash burn for the year(s) to come?
  • How much are your employees getting paid?
  • Are employees going to be paid in tokens? If so, do they have a lockup period before they can sell in the open market?

The Code & Contact

  • Is the project open source?
  • Where can I find the source code?
  • Does your project have a bug bounty program?
  • Where can I find your GitHub, Twitter, Facebook, LinkedIn, Slack and/or Subreddit?
  • What is the web address for your project?
  • How can we get in contact with you?

The Top 10 Most Important Questions

Is your service already offered by a centralized entity?
Avoid projects with a service or platform that is already successfully offered by a centralized entity. Bootstrapping blockchain onto an already perfectly good service or platform offers zero marginal utility. If it ain’t broken, why fix it?

What is your Fiscal Policy? Instamines, premines, buying, spending, icing, discounting, and/or burning any tokens?
It’s incredibly important that the fiscal policy of the project is questioned. We’ve seen time and time again projects that have had rocky starts because of unattractive fiscal policies that have led to questioning a project’s legitimacy. Dash is a good example with its 1.9M instamined coinsin the first 24 hours.

What languages will your website, whitepaper, and marketing be offered in?
I’m an American AND a millennial, so I suppose its in my DNA to think the world revolves around me… Don’t forget that this is a GLOBAL market with investors from all over the world! Why not cater to as many investors as possible?

How were said discounts determined? Do the discounts incentivize HODLing or profit taking upon launch?
Discounts are often used to incentivize investors to get involved early on, as seen in the the public equity market. However, there comes a point where a discount begins to encourage flipping. This creates bad economics and is a recipe for a disastrous sell off right out the gate. Attracting new investors after this can become incredibly difficult.

Are you taking any precautionary measures to ensure scammers will not be able to mislead investors into sending coins to the wrong address?
Plenty of ICOs have fallen prey to scammers who copy and slightly alter an ICO’s original website, Facebook, Twitter, etc. By doing this they can trick investors into sending funds to the wrong address. Some of these copy cats are rather impressive and can easily be mistaken. Taking the precautionary measures to ensure investors are directed toward the right address can save headaches and fiat for the investors and the project. Hopefully the team does so…

Who is on the team, what are their backgrounds & credentials, and do they have any public track records?
People often seem to forget that when making an investment into a product or service they’re also investing in the people running the show. Doing the proper due diligence to ensure that the team behind the coin is experienced, competent, and REAL is above all the most important (besides security) aspect of an ICO.

What milestones do you have in place? How will you let investors know when said milestones are achieved?
Investors expect to eventually receive their original investment back and some more. Thus, its paramount that transparency is in place to ensure that the project is picking up traction and your investors are aware.

Does your ICO fall within SEC jurisdiction? Are you SEC compliant?
Depending on where you live, initial coin offerings are treated no differently than any other security listing. The proper precautions must be taken to be in compliance with the SEC, and trust me when I say the SEC is watching. No one wants to be at the mercy of the SEC and get shut down after having just launched.

What will be the use of the proceeds raised?
I think the importance of this one is pretty self explanatory…

Where can I find the source code?
When all is said and done, the source code is everything. One of the things that attracts me to the CryptoAsset world is all the various skill sets one needs to be competent in assessing a token’s value. Because the code is the meat and potatoes of the coin, understanding the ins and outs of the source code is vital. The code should be accessible for audits and should be able to provide token legitimacy.

If you enjoyed this post feel free to give a “clap” and/or leave a comment below. If you think I missed something, don’t be afraid to drop a comment. Any and all feedback is appreciated.

-Pete