ICO investing requires due diligence

Fortunes are being made with cryptocurrency ICO's and as is usual whenever money is being made it has attracted those that are less than honest. The fact that the markets are completely unregulated and that there is no way of recovering your cryptocurrency after it has been sent makes it really important that you learn how to do basic due diligence yourself. I will give you some ideas about how to sniff out potential problems by asking a series of questions you should try to answer before investing.

Who are the people behind the ICO

This is the most important thing to answer. At the end of the day whether a company succeeds or fails is mostly down to the people behind it. All new businesses face challenges and it is critical that those running the company are able to meet those challenges. Don't rely solely on the information on the website, just like people often overstate their ability on resumes they also tend to exaggerate their skills when they are trying to get you to invest. Check third party sources like LinkedIn and pay particular attention to the the skills and endorsement section as these can only be confirmed by others.

Do They Have The Skills

Ask yourself if you think the person has the skill set to fulfill their role. If you are looking at the person who is the CFO they should have some accounting skills. If it is the CTO they should have an IT background and hopefully exposure to the blockchain. Ask yourself if it was your company are these the people you would be hiring to fill these positions.

The second thing you should be checking is if they collectively have the skills to pull off what they have stated they intend to do in the white paper. You could have the greatest idea in the world but if you don't have the skills to translate that into code your idea is going nowhere. A simple way to get some idea of their technical skills is to check their Github repository.

Does the Business Model make sense

Before you invest you should have a good understanding of what purpose the token will play in the business model and what will motivate people in the future to buy the cryptocurrency. You should understand who the potential customers are and what price they are likely to pay and what the overall size of the market could potentially be. A lot of the ICO's out their are unfundable business ideas with crypto elements stuck on just to attract investment. Beware of projects like that as they have a very low probability for success.

I recently did the due diligence on a company that failed all three of these tests in spectacular fashion. They had a fantastic website and a fantastic high technology story but when you started to scratch below the surface things started to fall apart. They even had endorsements from companies that hold themselves out as skilled advisers on ICO's like FoxICO, TrackICO, ListICO and FoundICO. But when we tried to confirm the backgrounds of what on the surface was a technology dream team we could not find anything to confirm that these people even exist. When we went to look at their code we found the Github repository was empty and the business model just did not make any sense.

I hope you found this informative and that by learning the importance of due diligence or at least following someone who does that it saves you from losing money needlessly.

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