link to previous article on Evaluating an ICO (stage 1 - online research) - https://steemit.com/steemit/@cryptobanyan/ico-investment-series-7-evaluating-an-ico-stage-1-online-research
Each topic that I touch upon can be very detailed and complex. Where possible I give links that help give deeper details. I refrain from any deep discussions because of 2 simple reasons - 1. I am not authority on these topics, but more importantly 2. I want to cover a broader perspective of ICO investments and any deep discussion will take us away from our goal.

Key Factors to focus on for ICO evaluation

Most of the focus in my discussions is for short term and not long term view.

With so many ICOs going on, you want to be able to scan an ICO quickly for participation worthiness. In this article I share with you the key factors that I normally look for in an ICO to help me decide if I want to skip it or do a deep dive for investment (definition of quickly varies, but this intermediary task takes me anywhere between 1 to 2 hours). The following are the key factors I look for.

The following are the key factors being discussed in this article:

• Problem being addressed by ICO
• Whitepaper and MVP
• Team and advisors
• Token economics
• Hype and Social Media Presence
• Roadmap

Is there a scam alert on the ICO.

Before doing any analysis, please read reviews and feedback on ICO on google. If you are seeing many scam alerts, then steer clear of the ICO. Of course this is not a guarantee that ICO is scam. Example, one ICO called Seele had many scam alerts, but the ICO still had thousands of subscribers and it had more people with cash waiting for the coins then they had supply. Overall I think that the ICO was sold out even though there were involved in a scam where some of their members ran away with investor money. You will have to use your judgement here, but to be safe, just steer clear of any ICO that has scam alerts on being shared on bitcointalk, reddit, twitter and telegram.

Problem being addressed by ICO

With so many ICOs going on, if you plan to evaluate all of them, you must have understanding of each of the industries the ICOs are catering to. This is really taxing unless you truly are having experience across a vast number of industries. The best is to narrow down and pick those ICOs whose area of business you understand and just skip the rest that you don't understand. Often you loose most money when you invest in businesses you don't understand (without some knowledge of the industry / business area you can't tell if the pricing is competitive, if its reasonable, if the problem is worth solving on blockchain, or if the problem is even one worthy of solving in the first place etc).

Though this is very subjective, I share below a few points that I consider myself.

• See if the ICO is solving a problem that is needed to be solved.

• Solving the problem on blockchain should get solution seekers to the ICOs platform / product.

I find that ICOs solving some of the below mentioned problems getting a lot of attention (the ordering may not be random, but at the same time, its difficult to accurately do it without some actual data, so for now consider the below list to be not in any order).

• Blockchains - ICOs solving the issues of blockchain (by introducing new blockchain of their own, side chains, multi chains). If the ICO is about blockchain, I immediately get into deep dive mode as I am sure I want to invest, unless I smell a scam.
• Solutions providing first entry advantage. Of course not all of these are equal and the industry matters.
• Protocols - These are ICOs that are introducing protocols for DApps on the blockchain. Just like we have HTTPS, TCP/IP etc for the internet. These ICOs are my next favourite. Without the right protocols a new ecosystem will have difficulty evolving.
• Any ICOs trying to solve cloud computing issues or help users monetise using their existing hardware (laptops, desktops, mobiles).
• Solutions for collaborative consumption are a rage these days - Housing rentals, car rentals, any other kind of part sharing businesses.
• Anything to do with AI, Machine Learning, VR / AR etc.
• Any business offering a decentralized alternative (with arguments of superior product of course) to problems already solved in a centralised way by Google, Facebook, Amazon, Microsoft
• Decentralized exchanges
• Financial solutions / lending apps.

Competition

• Search google for competition. The problem may already have been solved and solved better.

• Is there first movers advantage. If not, is the project solving the problem better than its predecessors. Projects will first movers advantage have high chance of success in marketplace (blockchain is very young and it will take some time for later entrants to come with a solution that will be way better than existing ones, not impossible or unlikely, but may take some time).

• If the market is glutted already, then I would look at the blockchain the project is being launched on. Some new blockchains may have give newer opportunities and it may help to speculate once in a while. Of course you need to first ensure that previous projects are not hedging themselves by being ready for multiple blockchain and side chain solutions. If they are then it won’t matter on which blockchain the later entrant is launching its project and it will face many hardships to succeeding in the marketplace and displacing competition.

White paper and Minimum Viable Product (MVP)

Whitepaper

Most good ICOs publish a white paper which details the project, success factors, risks, token mechanics, roadmap etc. Having a white paper does not guarantee a good project and team, but not having a white paper surely seems fishy.

• Check the language of the ICO. If it is not professional work then at least check the technical content. If even the technical aspects are not well laid out then it is a red flag. ICO should at least have tech aspects well laid out. The language could be an issue if the ICO members are from non English speaking countries. Of course it would be good to know the quality of work they did in their native language (but that would be tough unless you know that language already). Most good ICOs hire top talent for writing white papers, so language mistakes should not be there and technical mistakes should never be there. This is not some internal company report. This is for investors who will pour their hard earned money. So if team does not believe in doing a stellar job, then you should be vary of how they will progress.

Is there an MVP

There is a chicken and egg situation with respect to MVPs for ICOs. The ICO is mostly being done to raise money for taking the idea from conception to reality. The investor expects to see the product before investing. So many ICOs build a minimal viable product (MVP) using some seed money (raised from founders, friends and family or through private investors). The MVP will showcase some key features of the final product that are enough to take the product live. For the product to really compete in the market place it needs more features which will be built using the funds from ICO.

Having an MVP does not mean the next Amazon in the making and not having an MVP does not mean a bad project. I stress on MVP, because any decent idea must at least be able to raise seed capital for MVP. If no one including the founders themselves and their friends and family are ready to put money behind their idea, then I would have second thoughts on putting my money behind it. I would not normally fund an MVP unless I am in the role of private investor and understand the business area and problem being addressed extremely well (most ICO participants are not at this level).

Of course such a strategy means that you would loose chance to invest at a low price on something that can be tomorrows Google, but the downsides are many and to avoid them its best to look for ICOs with an MVP.

Team & Advisors

• A stellar team can almost guarantee a successful project. Of course you can never tell a Google in the making when founders are just getting started with MVP. Unless you are an expert, don't go around hoping your ICO project will become Google. Instead look for a team that resembles a successful team.

• Look up the key roles on linkedin and Internet. If the names don't seem to foster a sense of trust, then believe in your gut feel. It is always better to leave a good ICO if you are not sure, then end up in a scam ICO. There are many scam ICOs and their linkedin accounts are duds.

Things to search that will give away a scam team

• Linked profiles - these will mostly be new or with little connections. Reputation may be important for people with more than 500 connections and they may not risk it.

• Review the companies listed in their career profiles - Possibility of many unheard of companies for scam accounts. Top guys mostly are having top jobs in top companies (or some affiliations which appear academically rich even if they drop out of top schools).

• Review the connections - For scam ICOs almost all connections are same for all team members and mostly the connections are limited to ICO team.

• Do a Google search on their names - For scam ICOs the search results will mostly yield very little results or results that don't add up well.

• Do a Google search of their office addresses and that of any similar profiles you came across on LinkedIn and Google. Scam ICO members will try to create fake accounts that resemble someone genuine, just in case you search them, so Google results come up for them. It is also very easy to use the same photograph. Many medium business CEOs may not have time to keep checking who is impersonating them on various social media platforms as those impersonating will hardly do anything other than use the impersonation for ICO purpose (so they don’t alert the person they are impersonating). But if you look carefully through search results you will catch some important clue they missed.

• Review their Facebook accounts and Twitter accounts. The sure signs of scam team will be brand new accounts setup just for the sake of ICO.

  • I once reviewed an ICO where I felt the CEO was using a fake name (of another CEO with some changes to characters), but all other details were same. I had to dig deeper to confirm that the team was a fake team. It was very difficult as they were impersonating someone who had a genuine and good background. I had to dig deeper into their Facebook accounts, linkedIn, Twitter and also read decades old emails from the genuine person. I could guess that the genuine person may either be long deceased or retired.

• One Caveat - In some countries Google search will not yield much if English is your primary language and also in some countries people may not be having LinkedIn account or even Google search or Facebook accounts.

What makes a team stellar

• Good academical qualifications. Folks from top tier universities have better chances of success, not just because of their own track record, but also because of their rich network. It will be easier for them to loop in top talent as most of them would be their batchmates, alumnus or from their network from inter college projects.

• Work experience from top tiered companies. If top companies have already interviewed them personally and given them senior roles in their companies then they have already vetted them for you. You anyway may not have more resources than top companies to do background checks etc to arrive at a better judgement on the team members capabilities.

• Past projects the team has done. Past success also encourages chances of repeat show.

• Team dynamics. Are all team members known to each other from before. Known teams (assuming they gelled well before) tend to reduce friction and communication complexities and this may help get work done faster and better.

• There are some caveats here as well

  • Many ICOs are being done by teams from Japan, China, Russia, France, Germany and many other counties.
  • Not all teams are from well known US and UK colleges. But in their own country, they may be from top colleges.
  • The names of top universities and colleges in Russia, China, etc. may not be very well known globally (especially China).
  • The names of top companies in many countries may not be well known as well.
    • Example - I was not aware that Tencent was a large company until its market cap had crossed 100 billion USD. I also did not realise how huge Jack Ma's Alibaba was as a company, until a few years back. I was also not aware of Softbank until I heard about their billions of investments in startups globally. Of course I am not the best example of a person who keeps updated of global business knowledge or even global news, but the point I am making is, don’t discount the work experience of the team if you have not heard about their colleges, universities or companies. Do some research and Google will give you the info almost all the times.

Advisors

• ICOs having top class advisors is a very good sign. Advisors get on board for many reasons like maybe because they cited a great project in the ICO, or they were offered good compensation and also entry into Private sale. Whatever the reasons, as long as you are sure there is no pump and dump possibility, the advisors will only join if they see long term prospects. 9 out of 10 good advisors will only stand behind projects with a good future, great technology and / or a project that helps mankind in the long run.
  • Pump and Dump schemes are where founders, team, advisors, or early investors pump the token and sell their share at higher price and then exit and everyone else starts dumping in frenzy until the token becomes worthless or way below ICO price. Investors in public sale end up losing their money as such tokens never recover in short time frame (or maybe never ever).
• To know if the advisors are top class, you will have to research their past works.

Tokenomics (Token economics or metrics)

How profitable an ICO investment may be for you depends heavily on the amount of tokens and how they are distributed among the various participants of the project. Obviously this a short term view, but on many occasions this applies to long term view as well.

Think of the bitcoin. There can only be 21 million of them. An important factor for the perceived value of anything is its scarcity. If gold suddenly becomes abundant due to improved mining and production techniques then its price may just fall and we may not be able to use it as a standard anymore.

The following are the metrics to look for when reviewing tokenomics

How many tokens / coins are being proposed.

• This will give the diluted market cap (assuming all coins may be in supply at some point of time). So if ICO is having 1 billion tokens / coins and each is priced at 4 cents then diluted market cap would be 40 million dollars.

• A complete understanding of total tokens also helps compare projects. An ICO with 1 billion tokens at 4 cents each is similar from tokenomics perspective to one which has 80 million tokens at 50 cents each.

• Market normally prefers ICOs with smaller number of tokens. This gives a [false?] sense of value for short term investors and price appreciation in short term. If you want to sell immediately after ICO, prefer one which has lesser number of total tokens. However in the long run, the quality of project and the purpose it is solving will appreciate the token price.

• Also in the medium to long run total market cap (relative to similar projects) is more important for token to appreciate. If market cap is say 25 million, but similar projects are at 250 million, there are chances for 5x if not 10x. Of course you need to look at all Key factors to arrive at the possibility of token price appreciating any number of times.

What is the token distribution

• How many tokens are being sold in ICO. Typically if this figure is between 50 to 70% then it is considered good. If 100% tokens are sold then team is not keeping any for themselves (which may seem fishy) and if too less is on sale (less than 30%) then most of the tokens are being kept with team which they can dump them anytime. So if ICO is selling way too less number of tokens in sale, then study deeper on what they plan to do with remaining tokens. Less initial supply will create scarcity and a higher price, but once price is ripe, and team starts dumping their tokens, then its anybody’s guess what will happen to the tokens future price.

• How many tokens are being retained by founders and development team. This number is important and the larger this number, the worst it may get for those buying into the ICO. Around 30% should be ideal.

• How are advisors getting paid. Advisors being paid with tokens is a good thing. The advisors trust the token will appreciate.

• What is the lock-in period for the founders, team and advisors tokens. Tokens locked can't be sold on exchanges until lock-in period is over. Having a minimum 6 month lock-in period for all such teams is a good thing for ICO investor. Think very hard if you are investing in an ICO where the project team has no lock-in period for their tokens. Normally 30-40% tokens are reserved for founders and all other teams and if they start dumping on the exchange then the price may take a very very long time before it even reaches back to ICO sale price (they may be allocated their tokens at 0 cents or a very low strike price, so they can sell very low [at ICO investors cost] and still walk away with a profit, whereas ICO investor may only sell if price goes above ICO sale price or else take a loss).

• Is there a Bounty and how many tokens are being allocated to Bounty Hunters. Anything more than 2% is great for Bounty Hunters, but very detrimental to short term ICO investors. The Bounty Hunters can sell tokens at any price as they get it as a reward (payment). So someone who wants 100 USD urgently can dump 500 USD worth for just 100 USD. A lot of Bounty Hunters sell their rewards quickly after ICO, causing token prices to plummet (this is just a guess). Therefore the smaller the tokens for Bounty campaign (1 to 2% max), the better for ICO investors. I will be writing a separate article purely on Bounty campaigns and how to earn some free tokens by being a Bounty Hunter.

• Did the ICO keep aside some tokens to help encourage the usage of its system via some rewards mechanisms. Having tokens to reward developers and early adopters of the project platform is considered good.

Final Price of tokens

• Was there a private sale. What was the bonus (unless you are participating in private sale).

• Does the public sale have bonuses. Many ICOs provide tiered bonuses. Those coming in last to buy are the worst hit in short term.

• The more the bonuses, the better it is to be first to buy. Those who buy later will be unable to flip the tokens on exchanges in the short term. If I get a token at 4 cents after applying bonuses etc. and someone buys later at 8 cents, then on the exchanges, I can sell upto 7 cents easily. The price may just crash and never go above 8 cents in the short term.

• Typically a bonus of max 10 to 20% is acceptable and that too only if given for less than 10% of the token supply (most of these tokens are sold with bonus in Private sale or Presale).

• As a rule of thumb, unless you are getting in at private sale, avoid ICOs which offer large bonuses to early investors.

• Are maximum tokens sold off in Private sale to a select few (whales). This is not good situation as the whales can then play with the tokens price movements as they deem profitable to themselves.

• Good ICOs are the ones where the public sale has maximum tokens and there is a cap on how many maximum tokens each individual buyer can purchase.

• Many ICOs where most of the tokens are sold off in Private sale are doing very poorly on the exchanges.

• Is there a Hardcap and soft cap. Not having these is not considered good for ICO investors.

  • The soft cap is the bare minimum that will help team get started and complete their project (of course with some less features)
  • Hard cap is the maximum amount team needs to do a stellar job in hiring top talent, development, marketing, partnerships, negotiating with exchanges etc.
  • Any ICO without hard cap is trying to be greedy and squeeze, as much as possible, the investor money. These ICOs fare poorly on exchanges.
  • Also if soft cap is not mentioned, then you never know at what point ICO can be called successful or if it failed and what happens to investor money.

• ICO must clearly communicate what it plans to do with investor money if soft cap is not reached and what investors can expect as each milestone from soft cap to hard cap is reached.

• What happens to unsold tokens. If these tokens are burnt (taken out of supply) then it is very clear that existing tokens have more room for appreciation on exchanges as diluted market cap gets lowered and also supply is lowered (further creating possibility of unmet demand on exchanges, though this not necessary). * Normally token burn is expected to raise the price of token post ICO. So investors prefer ICOs where unsold tokens are burnt.

Hype and Social Media Presence

Hype is what the marketing team of the ICO creates. This attracts investors to the ICO. The more the merrier for the ICO, so hype should be strong enough to attract sufficient investors both to ICO (though social media and other channels) as well as exchanges (by creating some kind of unmet demand through beautiful token metrics discussed above).

• Most ICOs will be on the following social media:

  • Facebook - review the number of likes and followers.
  • Twitter - review the number of likes and followers. 8000+ followers is common for popular ICOs.
  • Telegram - Look at the number of members of their telegram channel. This is how I classify the telegram numbers
    • 0 to 5000 - Project has little hype (maybe they have more followers in Reddit, twitter and Facebook). ICO may not get fully sold or will take a very long time for it to be sold. Price on exchanges won't be very good (unless this project is an exception).
    • 5000 to 10000 - Project has good hype and higher chances of token demand on exchanges. ICO will take some time to sell out, but eventually it will.
    • 10000 to 20000 - Project has done good marketing. There are enough folks on board for a successful ICO. Most projects in this range have good success on exchanges.
    • 20000 - 100000+. - ICO will surely sell off. In fact project may sell off in Private sale and there will be no public sale. All participants may be given some 2 to 10 USD worth tokens free for staying loyal and following them on social media channels. One weird thing is that most of such ICOs are faring poorly on exchanges, especially if they are completely sold off in Private sale. For ICOs having such following in telegram or any other social media channel, I would be skeptical and try and figure how they managed this. What programs they have run to ensure high number of followers. People who are lured with free tokens to add up numbers, almost already leave as soon as they cash in their free tokens. They do not necessarily add to the community and project ecosystem as a whole. The community built is fake and only for successful Private sale or ICO.
    • Side Note - Beware of many scamsters on Telegram channels of the ICO asking you to transfer money to their addresses in return of high bonuses or discounts. There is no way to recover your money, so only trust ICO communication from their website or their pinned messages on Telegram.
  • Reddit - Most tech discussions may happen here. See what experienced folks in blockchain space are saying about the ICO
  • Bitcointalk - This is where Bounty's are announced. So soak up all bounty inputs from here. If you can help spread the word around, you will be rewarded tokens (and you may just not have to bother buying the tokens in ICO, unless you are die hard fan of the ICO).
  • Medium - This is where most ICOs will publish important articles. You may be required to clap, like and share the articles to show proof of love/care for the ICO which many times is prerequisite for whitelisting if their telegram channel subscriber numbers are upwards of 20000.
  • Steemit - Seen this only for a few ICOs and mostly for similar reasons as medium.
  • Instagram - Very few have used this effectively. Anyways unless ICO is trying to rope in under 25 group, most will not have this channel.
  • Slack - I never joined anyones slack channel, so I can't give much experienced info here.

• The basic thing is to also look at the ICO website and review its content, presentation etc. These days all ICOs are coming with good websites, so there is little to gain from here other than that they are putting their best foot forward to attract investors. A deep review can reveal interesting facts that may encourage or deter you from investment. So don’t skip this step.

Is there a roadmap with milestones

Roadmap is a breakdown of what intermediate success points the team plans to achieve which will lead to ultimate success of project launch and thereafter sustain in the marketplace.

• All good ICOs have a roadmap.

• By the time of ICO, quite a few milestones are already achieved.

• If an ICO is starting with token sale and not really achieved any milestones yet then I would be vary putting my money into it.

• Roadmap ensures that team has thought through the steps to reach their goals and arrived at intermediate success points (milestones) that will help them get there and also that marketplace will appreciate once they reach each milestone. Roadmap also helps someone to know if team is making any mistakes in their planning and advice can be shared for corrective action. Roadmap shows milestones before ICO, after ICO till project launch and actions project team will take to make it a success in the marketplace post launch. Having this big picture will encourage investors.

• Having a roadmap does not guarantee success as anyone smart enough can draft one easily (even if there is no intention of following through on the work needed to reach post ICO milestones), but not having a roadmap at all is surely a red alert for me. I can't trust a team that can't break down their plan into achievable milestones and show investors what and how they plan to make the project a success step by step.

Disclaimer - I am only sharing my limited knowledge and for the sake of knowledge alone. This is in no way an investment advice or legal or taxation counsel. I am not qualified to provide any of these. This is also not a recommendation or encouragement to invest in cryptocurrencies or ICOs