Due to increasing amount of exit-scams and overall low returns from ICOs, investors became either cautious or even left the market temporarily. That is why proper assessment and research of the project is now more important than ever
Assessment of the startup is one of the most challenging tasks while identifying the investment opportunity, both in traditional VC and new ICO markets. How to assess the team, what should be considered in the financial analysis, how to see the real market potential, how strong is the business model and what are the risks to pay attention to? These and many other questions should be considered while the procedure of startup assessment and due diligence.
On November 23-24, 2018 InnMind organised the Blockchain Leadership Summit in Basel, Switzerland. During the event, we held the startup competition and organised a number of activities for startups so that their businesses could benefit to the fullest from this event. Several experts from the blockchain industry, investors, legal advisors supported projects in finalising their pitches and improving them.
The official partner of the competition ICO Rating was in charge of the overall assessment procedure of competition participants. And we asked Kirill Kozlov, head of analytics in ICO Rating, about how do they analyse ICO startups and what are the major factors for assessment and scoring of the ICOs.
Analysing ICO, STO and post-ICO projects: tips by ICO Rating
When the market is falling, it becomes even more important to identify good-quality projects which are looking for investors. Furthermore, due to increasing amount of exit-scams and overall low returns from ICOs, investors became either cautious or even left the market temporarily. That is why proper assessment and research of the project is now more important than ever.
When ICO Rating experts analyze the project, we take into account the following matters:
Presence of the problem which in theory needs to be solved, in other words, the presence of the market. And, of course, not every problem needs to be solved with blockchain.
Business model of the project – will it be able to monetize and become self-sufficient while still remaining cost-efficient solution. In the best case scenario, we would like to see an in-depth financial model of the project with the justification of all underlying assumptions
Token model – we assess whether there is a need for a token at all. Does it have embedded value when using a token? How may investors benefit from it?
Technical solution and development progress – in an ideal situation, we would like to see fully developed and ready-to-market product, however, it is not always the case. So, we expect from a good project at least working blockchain prototype with basic functions. We also pay attention to the technical architecture of the product in terms of governance, distribution of roles, consensus model and other aspects. In addition to that, we analyze technological stack which project team is using and check the code for plagiarism and likely matters. We also analyze the project’s smart contracts for adequacy and consistency.
Among ICO/STO metrics – we analyze offering terms like hardcap, softcap, discounts and bonuses, lockups and token distribution for reasonableness and check whether they are fixed in the respective smart contract
Legal matters – we pay special attention to legal aspects which the project has like the country of registration, applicable regulatory framework, KYC/AML procedures and overall legal compliance. We pay high attention to token jurisdiction, restricted list of investors as well as the availability of any required documentation like STO prospectus, regulatory filings, for example, BaFin/SEC filings, etc
Team – we look at the combined team experience as well as the experience of each individual member/area of responsibility. When doing so, we look for evidence of prior working experience on LinkedIn (assuming that good specialist would have recommendations or references from its former colleagues) or other media sources. We also take into account project’s advisors, investors and partnerships in terms of whether or not they can contribute to a project’s success
About ICO Rating:
ICORating is an analytical agency that delivers independent research on the crypto market to an extensive network of investors.
They have been collecting and analyzing a wide range of data from the crypto market since 2016: detailed information about token sales, exchanges, funds, influence of the media background on the market and more. The ICO Rating company specializes in the detailed assessment of ICO, STO, and post-ICO projects, analyzing them as potential investment objects.