Should I invest in ICO?
In last couple of days, I have got few calls from my friends asking about ICO and should they invest in ICO?
For those, who are new to this term and area, ICO (Initial Coin Offering), is used by start-ups, as a way of raising the capital from similar to VC funding. The term is cleverly coined as ICO, to sound like an IPO, which I believe is bit misleading. IPO is done for a company who has a business history, whereas the ICO companies have no business in place yet, well most of them, it’s just a promise of business.
All of us know that how difficult is getting a VC funding, ICO is a way to by-pass the VC and source funds from the general public on a “Promise” of excellent business platform based on the blockchain.
Here are few things to consider, if you are considering to invest in an ICO:
- Put a VC hat. Think as if you were a VC and this company approaches you, would you give them your money.
- Most ICOs are just a simple white paper, which with a bit of research and good blockchain knowledge, any smart developer can write.
- Some ICOs claim to have an alpha version of the product, but anyone with a bit of technical knowledge can see that it’s nothing more than an HTML prototype, which can be created in few days of effort.
- They do not have any proven business model, as the platform is not built yet, so you are not sure if it is going to succeed. Please remember, the majority of start-ups fail.
- Most importantly, unlike IPO and VC, you DO NOT own any part of the company, which means that you will not get any share of the profit of the company. You will only hold the token, and their value will depend upon how the market sees the value of the token.
Disclaimer- I am an investor in Cryptocurrencies.
