How to find the best blockchain companies to invest in
Initial Coin Offerings (ICOs) made headlines in 2017 as prices for digital assets climbed through the roof. Would-be investors bought in a feeding frenzy, with little understanding or regard for what the blockchain companies were offering.
Skyrocketing prices aside, the ICO investment industry caught attention for other reasons that are still valid even when prices are lower. One important difference between a blockchain investment and an investment in most other asset classes is that making an investment is easier. Under most circumstances, you only need a wallet to place your investment into and an account at an exchange for buying and selling cryptocurrencies. So the barriers to entry for an ICO investment are a lot lower than in other asset classes.
Digital assets also give investors the opportunity to become involved in the projects that solve problems they face and understand. For example, it’s a lot easier to become an evangelist for your favorite blockchain startups changing the way we treat healthcare, or beta test their solution, and add value to your investment along the way. This ability to contribute to the growth of the project can be fulfilling to some.
Then there is money to be made in ICO investment. However, now that the initial euphoria has worn off, would-be investors are asking more questions about potential investments. The lack of a safety net and thoroughly-defined oversight and regulation has hurt more than one investor, and on the retail level, the idea of jumping into ‘something labelled blockchain’ and coming up with a winner is finally being laid to rest.
The dangers of ICO listing sites
Would-be investors have begun to ask questions. One of those questions boils down to “Where is there a list for finding the best ICOs?” But investors should be asking themselves instead, “Is finding a list a good idea in the first place?”
Finding the best ICOs is a whole set of problems if you’re using lists. First, these lists have a short lifespan – most likely they’re already out of date. Then, the sad truth is that most places on a “best ICO” list are paid for. But don’t let your fear of missing out get in the way of digging a little deeper when you think you’ve found something good. If a listing looks good, check twice.
Verifying information can be a problem. The data in these lists is often inaccurate, incomplete, and hard to verify. There’s no incentive to be accurate when a company trotting out a half-baked ICO is paying to be on someone’s list. There’s no requirement to be accurate, either, at this point, from a regulatory perspective.
So what do you instead?
Find the most promising ICOs
It might sound daunting, but finding the opportunity is just a first step before the most important part - due diligence. One good way to do this, especially when you’re starting out, is to find a resource that is searching for worthy projects.
There are some ICO trackers, though, that you can use to find worthy ICOs:
- ICO Drops
- Hypernum Analytics
- Top 7 ICO
An independent ICO (Token Sale) database that gathers well-structured information on most ICOs on the market. Main value - strictly moderated community (9k english, 12k russian) of sophisticated investors who share information and expertise.
Similar, but the database as itself is more functional and comprehensive, though the community is smaller.
Aggregator of top projects from bloggers and listings, where you can find the most hyped ICOs on the market (and of good quality, mostly).
You can find other potentially useful resources. But always do your own research! It’s getting much easier now, with a variety of tools for fundamental analysis that we’ll discuss further. And remember - rely only on the opinions of the people and groups that prove their expertise through successful investments.
Fundamental analysis with Kepler Finance
Doing your own research can take time, but when you’re done, you’ll actually know something about your investments. Start off answering questions about the company, then look at the industry in which it works.
Here are the main questions you need to investigate:
- Problem that they are trying to solve and its urgency – is there really a problem?
- Project core idea and stage of development – does the project have a solution to the problem, and how far along are they in building it?
- Team and their social activity. You must be sure that these people are able to deliver what is promised.
- Advisors. Are the advisors really more than just a name on the website? Did they work with the team members in the past? That kind of track record is a plus.
- Industry. What are the key trends in the industry? How did other funded companies in the market perform? This is a tricky one because there’s been no go-to resource that provides all the necessary data. Investors had to spend hours and days looking and checking information on various websites. Now you can also find this information on Kepler Finance. It’s a key single source that will save you time, especially if the company’s solution can be used in multiple industries.
- ICO structure with all previous and future deals. You should acknowledge that private sale participants probably bought tokens at discounts of up to 90% off. At the least, you need to know this discount. You should understand all the conditions the ICO proposes.
- Whitepaper, Pitch Deck, Technical description, etc. Any serious ICO will have a document which defines the business plan, the token holder’s privileges, legal information regarding the ICO, product description (including technical details), market research, team introduction, ICO structure and conditions, etc. If you aren’t prepared to read it, don’t invest. If they don’t have it – run away!
- Legal incorporation: is it incorporated at all, and what legal risks are there related to the country of origin? For example, being registered in the US without the necessary licenses or filings most likely will lead to a failed token sale.
- Marketing activity. If nobody knows they exist, the best team and technical solution are likely to fail, and you may lose your investment. Also, there won't be an interest on the secondary market, when the token is already traded
Aim for teams that have experienced tech and business professionals in their core. Is there blockchain experience? Are these people also involved in other projects that might take time away from this one? If the sales director was a software developer previously, you might want to ask how this company will manage to sell its product.
Recheck all the information about them from 2-3 sources. Verifying through LinkedIn is a standard step here: no LinkedIn profile = big red flag. Kepler Finance is also good for verifying current positions within a company, finding executive team members and advisories. If a company doesn’t have a profile on Kepler Finance - it means that the team hasn’t been active yet and hadn’t raised any investments previously.
Your fundamental analysis tools
To sum up, some of this information can be found on the company’s website as well as the Whitepaper and technical description. To find the major part of the data above, here are the go-to websites:
- LinkedIn, as we mentioned, is a good starting point for understanding the people involved - team, advisors etc.
- Kepler Finance (currently in beta) provides information about the industry, competitors, previous funding rounds, etc. The data there focuses on active companies, so you won’t be mislead with encouraging data about the companies that have shut down. It’s absolutely free and it’s rapidly becoming a fundamental analysis tool #1 for many blockchain investors.
Lastly, here are some pro tips for you to consider while you’re ICO hunting:
- Look for ICOs with an available product prototype (alpha version) to minimize the risk of scams.
- Look for projects with a strong network of partners, advisors and adopters (but find out if they are really involved).
- Don’t enter projects with huge bonuses (consider that if you’re buying on the last round with x % bonus - actually you have no bonus and buying at the highest price). At the same time try to follow projects without great discounts for early participants (friends, family, funds, other big investors).
- Never follow projects which promise you profits - they are scams.
- ICO is not about just investing - contribute to the projects you are supporting with your own effort: articles, posts / reposts, development, bug reports, testing, talking it up.
- Always invest only the amount of funds you can lose and never get back.
- Keep in mind that the name of the project often doesn't match the name of the company behind it. That can be confusing while you're doing your research. To save your time, check that information on Kepler.Finance. It's easy searchable and aggregates both info on the companies and the projects associated with it.
- And - this can’t be said enough - don’t blindly follow the hype, always do your fundamental research.
Finding what ICOs to invest is well worth the effort, and can be deeply satisfying. And with the right tools, it doesn’t have to be hard!