Should We Invest In ICOs Without A Prototype?

We recently watched this video from Ian Balina, where he said why he was passing on the Aphelion ICO.

In short, he doesn’t invest in ICOs that don’t have a prototype or MVP.

His logic makes sense though. There are a couple of reasons why he passes on anything that is “just an idea”.

1.) 90% of the best performing ICOs of all time launched with an MVP. It makes sense to focus on these ones.

2.) There are around 10 ICOs every single day. We can’t invest in them all, so why bother with the ones that won’t perform as well as the others?

3.) The barrier to entry isn’t that high. Ian classes MVP as literally anything that shows the team has made progress beyond just coming up with an idea and writing a whitepaper.

Here’s a screenshot of the best performing ICO’s of all time:

90% of these launched with an MVP of sorts.

So the above points totally make sense, but we wanted to play devil’s advocate and see if there is an argument to be made for investing in ICOs without any kind of MVP.

….Aside from just being a bit of a gambler.

How Long Is Your Timeframe?

One thing that’s bothering about Ian’s explanation (and no disrespect intended) is that it’s pretty obvious that the best performing ICO’s launched with an MVP.

Aside from hype and fomo, what drives the price of a crypto the most? Progress of course. So it naturally makes sense that projects with more progress will create faster returns. A lot of the ICOs that launched without an MVP still have plenty of time to perform.

Ethereum might be the best performing ICO of all time, but it took over a year before it really skyrocketed.

So the point we’re making here is, yes it makes sense that a project with an MVP will soar higher and faster than a non-MVP project, but does a non-MVP project have a lower ceiling? Or does it just take longer to reach it?

Perhaps we should instead look at the worst performing ICOs of all time, or look at projects that have been abandoned. Did all of them have no MVP? If that’s the case, then Ian is onto something for sure.

Now of course, when you’re investing all day every day and you want to get the fastest return possible so you can roll profits into the net project, then yeah, you want to go for the ones that will be most likely to do that.

But given that the vast majority of ICOs are never going to go anywhere, is it right to disregard any project that hasn’t yet taken off?

Maybe a better metric would be the strength and experience of the team. OMG Launched with only a white paper, but with a stellar team and a connection to an existing company (Omise), nobody is particularly worried about their returns, which by the way are currently at X% and peaked at Y%.

What’s The Bigger Picture?

What is the team trying to do? How much of an MVP do they actually need before they start or before you can see the value in their efforts?

What’s their reasoning for not having an MVP yet? Are they going to lean startup route and building out small parts of their project as they go?

Do they need funding in order to get the MVP up and running?

It makes sense to consider all of the above before deciding whether or not to invest in any project.

At the same time, if a project already has an MVP, and by Ian’s own admission that could be a shell of an MVP with no substance, does it mean they’re not going to fail?

It just seems that to two things shouldn’t be mutually exclusive.

How Much Time Do You Have To Dedicate To Due Diligence?

If you’re investing in a ton of different projects, it’s going to be impossible for you to actually do thorough due diligence on all of them. With that in mind, you’re going to need some sort of filter to narrow down your search.

Lack of MVP is a pretty good filter to use, which is Ian’s explanation, and one that makes sense. However, your situation might be different. You might really like the idea of a certain project, or you might like its team, or its marketing, or you may have experience in the area they’re involved in.

If this is the case, then by all means make your own decision whether or not the MVP is a deal breaker for you.

As a side note, you can always wait a few months and invest later, once you’ve seen genuine progress.

Our biggest gain to date came from investing in Neo at $6.50, so you don’t necessarily need to invest at ICO in order to see the biggest gains. Want to wait and see if a project ever comes to much? You can.

Final Thoughts

It makes sense why you’d want to avoid an ICO without a prototype or MVP. However, we don’t believe you should completely write-off a project just because it’s lacking in this area. You should instead ask yourself (or them), why there’s no MVP yet, and what the timeline is to get one.

What’s the story they’re telling and where does the MVP fit into the context?

And if you DO decide to invest, does that leave even more room for upside later, because this one will fly under the radar?

These are all the things you should ask, and what we’ll ask when we look at upcoming ICOs as well.

Remember to subscribe to get our thoughts, strategies, and reviews as they come out, and leave your comments below about this particular debate.

Originally published at cryptosis.io on November 15, 2017.