In 2017–2018, some of the most conservative and prudent players in the entire economic system entered the blockchain industry: venture capital investors. They bring in their fiat money, despite the high risks associated with volatility, and the lack of legal regulation.
Why have venture capital investors come over to crypto-currency projects? Simply because the crypto-industry itself is getting smarter. With each passing month, the crypto-currency market becomes more predictable. Investors learn from their mistakes, and improve their methodologies for analyzing ICO projects; screening out unreliable players becomes easier. The market is becoming more stable.
A positive factor influencing the attractiveness of blockchain projects has been trust from the government side. Forward-thinking governments, which recognize the inevitability and convenience of blockchain, are attempting to keep pace with the speed of the industry’s development and to regulate the area from the legal side.
In addition, blockchain can also be employed within the government system itself. Authorities are open to innovation, and generally look positively upon their activities having full open access. The first steps towards transitioning the activities of various government departments have already been taken.
For example, Estonia provides an e-citizenship program based on blockchain technology; Georgia is developing a land cadastral registration system using blockchain as its basis; Sweden plans to allow real estate transactions to be conducted with blockchain; and the UK plans to use blockchain to manage the distribution of grants.
I believe that, for the development of the industry, ICO projects must evolve in order to maximally protect the interests of both large funds and small private investors. It is necessary to reduce the number of fraudulent start-ups and give investors the opportunity to control the development of projects, the spending of funds, and to receive a share of the profits from projects.
The main driver behind these changes will be the introduction of a new framework for assessing the investment attractiveness of start-ups, which will help any investor accurately assess a start-up’s reliability. As a result, it is important to redirect the flow of funds from unreliable projects over to start-ups that are really passionate about their ideas, and who are able to lead their businesses to success. This will improve the industry as a whole.
I study existing methods for assessing ICO startups and I want to share insights from investors themselves, as they evaluate projects today and what makes them decide to invest their money into each particular start-up.
Why are they launching the ICO? Does it need its own cryptocurrency or blockchain — most don’t.
Do they already have a working product or at least a demonstrable MVP, and provable customers or partnerships– i.e. is there any incentive to spend money raised on the product and make it better? Again, most don’t.
Does the product have a real-world use — check with experts in that niche industry if it serves a real purpose and adds value, or is just optimistic marketing spiel and a good idea that realistically won’t be possible within the next 5–10 years? What would having its own crypto for their platform achieve, over using Bitcoin or fiat? Would people really buy that crypto to use it when there are similar services where they could just pay with credit card etc? Are the team and advisors real people, with actual experience? Be very sceptical over everything.