As many traditional e-commerce and fortune 500 companies have started to accept crypto payments, many more people are entering into the crypto space. As a result, there is a large volume of transactions on crypto exchanges. However, for many crypto beginners, it is often difficult to assess if a new blockchain project has potential for growth and whether they should join its fundraising opportunities. Indeed, many novice crypto investors are in need of a comprehensive checklist of criteria for assessing projects listed on an Initial Coin Offering (ICO) platform.
Motivated by the growing demand for educating new crypto investors, we’ve put together the following 10 definitive factors for assessing a successful ICO project.
1. Legal Team
The first and foremost factor is to see if a crypto project has an attorney on its core team or advisory board. Alternatively, check to see if a project has any law firm as its partners. Many reputable Exchanges would not list a project that does not have essential legal documents in place.
Some of the essential legal documents are as follows:
- Business entity adoption and registration
- Legal opinion on token type (utility vs security)
- KYC/AML Simple Agreement For Future Tokens or SAFT for investors
- Legal contracts for team, advisors, service providers, and partners.
2. Security Audits
Nowadays the importance of cybersecurity is apparent to anyone who is familiar with the technology. Of higher importance is the security of blockchain projects that deal with people's money. Thus, the more comprehensive a project is audited against the latest blockchain security threats, the more people can trust the project for holding and exchanging their crypto.
3. Liquidity and Market Making
Going to a reputable Exchange is one thing and maintaining or increasing the market value of a token is another. After all, investors and public buyers rely on increasing the value of the token price to make a 5x - 10x profit.
As a result, most Exchanges rely on third-party Money Maker or MM service providers to offer the following:
- Maintaining and increasing value of token price
- Reducing volatility in the token price
- Increasing liquidity
4. Active Community
For a public blockchain project listed as an ICO, having an active community is a must.
Indeed, the support of the community plays a vital role in 3 stages:
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ICO fundraising
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Product Development & testing and
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Post-Product launch as end-users.
Some marketing initiatives for acquiring community and retaining more users are airdrop, bounty program, art contest, random contests, and more.
RealBig NFT project, for example, started in Nov 2021; however, they acquired 60k people in their community in 2 months through launching 2 successful airdrops.
5. Crypto Exchanges
The more reputable the exchange, the higher the value of token price would be. Also, some Exchanges offer marketing services to sell project tokens via Initial Exchange Offering (IEO) service. It creates a good market for tokens and boosts token value once it is listed in Exchanges. The requirements and onboarding process and timing for an IEO are different from the main exchange listings.
6. Core Team and Advisory Board
It is out of the question that a crypto project makes or breaks with the team. Indeed, the role of the team is vital in the said 3 stages. The more competent and experienced the core team is, the more investors and the public can trust a project. In addition, a seasoned advisory board is vital for the sustainability of a crypto project since regulations and markets are rapidly changing.
7. Project Tokenomics and Roadmap
A well-thought-out tokenomics includes all aspects of business operation from marketing to finance. It should also include both short-term and long-term goals for the project. Thorough consideration should also be given to a fair and well-balanced allocation of tokens among the team, public and project itself.
At the same time, a well-planned roadmap should be realistically designed and managed based on best practices in project management by taking into consideration both technical and non-technical aspects of the project.
8. Foundation and DAO
Investors and the public would appreciate as much transparency as possible from the ICO project and its team. That is one of the reasons why the concepts of Decentralized Authority (DAO) or crypto foundations are becoming so popular. Also, some top exchanges may require audits conducted by an independent company to track and record the allocation of raised funds and project progress reports.
9. Democratic Fundraising
Unlike traditional fundraising where capital fundraising and terms of the transaction were dictated by big institutional investors, in an ICO project that follows democratic fundraising, small contributors are included in the fundraising. Indeed, democratic fundraising makes it possible for a project to be supported financially by its community. Also, using a decentralized exchange for crypto fundraising often allows small investors to contribute via Initial Dex Offering or IDO.
10. International Community
Unlike traditional businesses that mostly cater toward local communities (same language, culture and region), most crypto projects aim at a global market where cultural and linguistic diversity are taken into consideration. Indeed, the long-term success and sustainability of a crypto project depend to large extent on its acceptance by the global community.
As such, it is advisable for a crypto project to translate its White Paper and Pitch Deck into multiple languages. Also, creating regional Telegram groups as well as regional ambassador programs would be great means for sustaining and expanding global followers.
Summary: Assessing an ICO
In this article, we covered 10 essential checklists for assessing a new crypto project that is planning to raise funds via ICO or Exchanges. Other factors worth considering are the novelty of the idea, a three-year revenue projection with cash flows, project revenue models, business model, and blockchain platform (and gas fees).
Finally, most investors and Exchanges want to see a calculated marketing plan which includes a list of Key Opinion Leaders and Influencers that are willing to support the project during its fundraising. Along similar lines, participating in an Ask Me Anything (AMA) session with the core project team would be a great place to discuss your specific questions.