10 Factors for ICO and IEO Project Assessment

If you have heard of Bitcoin, you might also have heard of terms called Initial Coin Offering (ICO) and Initial Exchange Offering (IEO). Put it simply, an ICO and IPO have similar nature, meaning raising funds via public, except that IPO uses fiat currency whereas ICO uses  cryptocurrency. Also, IPO is heavily regulated while ICO is not regulated. An IEO is similar to ICO except that a crypto Exchange will assist the project in fundraising by selling new minted tokens to their members.

With the popularity of cryptocurrencies like Ether (for Ethereum) and Bitcoin, many entrepreneurs are entering into the ICO space. 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 want to know how to assess projects listed as ICO or IEO. Motivated by the growing demand for educating new crypto investors, I have put together the following 10 key factors for assessing a successful ICO or IEO 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)
  • Know Your Customer and Anti-Money Laundering
  • 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 5-10X 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: 1- ICO fundraising, 2- Product Development & testing and 3- 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 is 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 are, 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 market 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 DoA

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 depends 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 in multiple languages. Also, creating regional Telegram groups as well as regional ambassador programs would be great means for sustaining and expanding global followers.

Summary

In this article, we covered 10 essential factors for assessing a new crypto project that is planning to raise funds via ICO or IEO. 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 session with the core project team would be a great place to discuss your specific questions.

Resources

https://realbig.medium.com/an-essential-guide-for-investing-in-cryptocurrencies-and-token-presale-participation-4ccdea4694cf