According to Mangrove Capital venture capital group, an average return across initial coin offerings (ICOs) is as high as 1320 percent.
Guest Post By Denis Kulagin, CEO of Serenity Financial (https://serenity-financial.io)
ICO is a new way of project funding: It is similar to a crowdsale and uses cryptocurrencies. The capitalization of the ICO market has reached almost $8 billion by now and everyday over 300 ICOs take place around the world. For India, where 2,500 people invest in cryptocurrencies daily, this sector offers attractive prospects to make money.
Why people from different countries got so involved in the blockchain and cryptocurrency world? These three major misconceptions might explain such an interest.
Finding investment for a particular project is often difficult in many countries, especially when the business is not yet working. If you mention blockchain, distributed commands or other specific IT terms in the business plan, your chances of getting a loan will be almost second to none.
Securing funding from a venture investor will not be easy either. Proving your project is viable again and again on various events might take a lot of time and in the end you might not receive as much money as you needed. Raising money with the help of an Initial Public Offering (IPO) might also be complex and expensive.
At the first glance, everything about ICO might seem easy. You can attract many small investors by the information on your website or your White Paper. Bigger investors will, of course, require personal meetings, but they will not be your sole hope.
In reality, ICO might be difficult sometimes. Apart from your business, you will have to study blockchain technology, implement tokenization, come up with a marketing strategy as well as promote yourself and your project. Recruiting staff for your team might also be a nightmare.
Yes, one can start an ICO in a month and even enter the market with just an idea, without any physical prototype. The only question is whether this idea will be able to attract investment and whether you’ll be able to implement it sooner than anyone else.
Approaching this process seriously, it will be better to have more time before starting an ICO. Over this time one will be able to not only prepare the infrastructure for collecting funds, but also unique selling points for potential investors. Our preparation for ICO took four months – and this on the background of another, already operating business in finance.
One can attract millions of dollars on ICO. EOS secured $440.8 million of investment, but one might not get so lucky. Latest research shows that almost 60 percent of ICOs do not receive even 75 percent of the funding they aimed for. Another question is how to use the money after. Unfortunately, many teams do not think long-term and treat the money they received as a profit in itself.
The majority of such projects will not be profitable, even though it is clear that the overwhelming percent will not become successful. Moreover, not every each and one of them will launch anything at all. According to the forecast by the founder of Etherium Vitalik Buterin, 90 percent of the projects will fail.
At the same time the future of ICO projects in India yet has not been legally specified. The authorities are examining the idea of introducing their own cryptocurrency and call potential investors to be cautious of the risks of cryptomarket, but do not ban them. In Russia the situation in similar while in China ICO has already been banned.
If you decide to invest in ICO, check this list to make sure you minimize the risk of losing money and make sure the project you’re interest in is trust-worthy.
- Assess the idea of the project. Can it be useful for someone? Carry out a brief market research, talk to the experts in the field, compare the project with its competitors and similar ideas.
- Learn more about the team. Have a look at the people on the project’s website, find them on social media, make sure they are real people, not fictional individuals. Examine their experience, try to understand whether they worked in the area they pursue before and try to find their previous projects. Do they have enough expertise and can they implement the project successfully?
- Check the token. Find out why the team needs tokenization and what the token is for. Don’t forget about the legal aspect of the question and learn about the perks that you’ll receive. Do you really need it? Will you be able to resell it later? Will it be in demand?
- Find out what’s next. It is important for the team to not only have a plan for ICO itself, but also on the future implementation of the project.
- Consider your budget. Don’t spend the last money in your pocket and don’t invest too much. Make sure you’ll be ok to lose this money, in case the project doesn’t live up to your expectations.
Denis Kulagin is the CEO of Serenity Financial, the first blockchain-based marketplace for traders and brokers. He has more than 10 years of experience in developing and promoting brokerage firms in Russia and Southeast Asia.