There has been a lot of interest lately for investing in Initial Coin Offerings (ICO). The reason being that these events offer a great opportunity to invest in a completely new technology. Everybody can participate due to the low entry barrier. These crowdfunded projects sometimes boom into something great and the value of the initial coin raise exponentially. In this case you make easy money; when this does not happen the coin still retains some value. In the worst case, you lose the small amount of savings you invested. This latter case is particularly true if they start an ICO with the hidden intention to sell off at the first opportunity and run away with the money.
How much advertisement and what type of publicity the ICO is receiving is a first step in determining if the project is legitimate. The amount of advertisement alone doesn’t tell that much: some companies are really sure of their product and they invest, some are cautious and do things gradually. All things being the same, ICO with low volume of publicity have a better record.
Some companies like DomRaider initially advertised only to insiders. Well technically that was even before the ICO, it was a kind of pre-sale just to test the demand. If the advertisement seems to be too much, you probably want to double check the competence of the authors.
Since ICOs usually are just people at their first experience, they can’t anticipate what’ll happen during the craze of the event. This is often not even malicious but due to lack of competence. That’s why you should trust ICOs where the instructions to participate are meticulous. Tezos is a good example of this in my opinion. The ICO, while complex in that it had many ways of participating, had clear instructions and examples. Furthermore they had an open channel on Slack for questions.
Legitimate ICOs are often worried about selling too much coins, this is a common pattern. They take measures to sell them to as many actors as possible (don’t confuse this with how many addresses are created, too often for the same person). On the other hand when they do everything with the intent to sell as many coins as possible, there is a chance, they haven’t spent a lot of time planning.
This is often reflected in the ICO having a cap. A maximum number of coins sold during launch. Actually there are some good reasons to not have a cap. But if you don’t find them or they are not convincing to you, better to stay away.
Some founders are dreamers, but remember that they will play with your money. Setting reasonable expectations after the launch of an ICO is actually a sign of a legitimate start-up. If the objective of the coin is to become official currency by a country or promises things too good to be true, you should do your evaluations twice.
There are of course silly coins that are purposefully created to be just mocking of real money, some ICO explicitly say that they actually are going to run away with your money (PonziCoin). Just don’t pay too much attention if you are a serious investor, it goes without saying.
If you’ve done your homework correctly you should now the CVs of the founders, but most importantly, the endorsers of the project. The advisors are mainly this, they evaluate a project and they endorse it. They may or may not be paid but if you find reputable people, like university professors and researchers, you can be at least assured that the project is sound.