How To Choose an Initial Coin Offering Like A Venture Capitalist.
Last week, John was telling you about how he made $10,000 investing in an initial coin offering. You became intrigued. You learn that blockchain start-ups raise funds by offering the first sale of their cryptocurrency to the public via an initial coin offering.
John advices you to be an early investor in an upcoming project. He says it’s a sure bet. The gains advertised are irresistible. You want to get in fast before its late. Hold on friend. Don’t invest yet. You need to know key attributes about the project before investing in its initial coin offering.
Here are five things to consider.
A Proven Business Model
The start-up must have a proven business model. This means they have paying customers for their product and a clearly defined, upward moving market segment. The start-up should dominate this segment by having superior technology or an excellent management team or a barrier to entry, for example a patent. Do your due diligence on the regulatory path of the business. Ensure that the product is protected via intellectual property and that the start-up truly owns the technology it uses.
A Good Financial Outlook
It is vital for you to inspect the start-up’s financial information.
This start-up should have potential for high revenue, high profit margins and a low cost of production.
A start-up that has existing loans should be a red flag for investing. This indicates that your return on investment will reduce and it will take longer for you to enjoy profit benefits.
Sound Business Relationships
The start-up should have developed the right relationships or connections to gain an audience and set itself up for success.
Be impressed if the business mentions exclusivity of supply to a given big retailer or a partnership with a crucial market player who can add viability to its product or service.
Risk Exposure
Its important to know the risks that the start-up is exposed to in its market. The management team must clearly articulate the risks and challenges the start-up is likely to face including its strengths and weaknesses in the business segment.
This team should show you a convincing plan of how they will tackle these challenges and the ways they will mitigate the risks.
A Sound Team of Advisors
Its vital to connect with a start-up seeking funding. Reach out to the management team and familiarize with them through their LinkedIn profiles.
In the journey towards getting a good return, investing in mentoring the founders is important. Experienced advisors who have worked for top firms and have been successful in the industry are brought on board. These advisors will steer the management towards making better decisions.
Instead of relying on John’s advice and profit-enticing ads, from today you will select a start-up based on fundamentals of investing. This separates you from the crowd to truly select a project like a seasoned venture capitalist.