Initial Coin Offerings (ICOs), has become a major attraction to various startups as a means of raising capital to facilitate the implementation of their intended projects. Despite the first ICO being held in 2013 by Mastercoin, the venture become popular in 2017, where a total of $4 billion was raised for various startups. As an investor who has gotten wind of a possible new way to earning a fortune, below are several useful observations that you can make before financing your elemental ICO.
Scrutinize the white paper
The decision on whether to invest or abandon the move to participate in an ICO lies in its white paper. It is this document that concisely outlines a project’s roadmap, shedding light on the various grey areas that should serve as a warning. Have a thorough study of the manner in which the white paper outlines every stage of a given project; ask yourself vital questions such as, is this project practical? How are the tokens going to be distributed at the end of the ICO? What is the team behind the ICO? And much more.
Study and seek consultation from experts
Before funding a startup via an ICO, it is mandatory that you garner as many insights as possible on how to go about your backing plans. Do not restrict yourself to a few materials as they can constrict your flexibility in making informed investment decisions. You could even go further and set out some consultation funds to seek the counsel of reputable crypto-related experts who have different invaluable views on how to buy into an ICO.
Stake only what you are willing to lose
Just like any other venture, ICOs are prone to failures. Until the set idea is fully realized and profits are yielded, startups stand as a ‘gamble.’ To avoid inconveniences and shocking disappointments upon the failure of an ICO that was promising, only invest an amount that you are willing to lose; and the amount that if lost will not throttle your financial status leading to uncomfortable living.
Investigate the ICO team
Unlike the traditional IPOs (Initial Public Offerings), ICOs are extensively unregulated which means governments and other regulatory bodies have less control over them. Unless you are willing to risk your funds unconditionally, ICOs with anonymous teams should be a no-go zone as they could be potential scamming grounds.
A potential startup project seeking financing via ICO should have all its team members profile open to the public through various platforms especially LinkedIn. Their profiles will not only reflect their past achievements but also serve as a lead to their whereabouts in case their end of the deal is dishonored.
Get the views of other investors
Finally, there are various forums such as Reddit where other investors with the same goal of investing in your identified ICO venture exist. Some of these forums, such as Telegram channels might be set up with the ICO team. In case of any questions, you can always air them on such forums. Additionally, you will always meet various threads from other investors airing out their expectations and critics of the project. If you are banned from such forums for being too inquisitive, take it as a red flag, you could have just saved yourself from a scam!