Last week, we looked at 10 ongoing “pre” ICO’s -discounted sales of tokens intended to attract earlier investors than actual ICOs. We tracked them for a week, to see if there were changes. There were, with half delayed and some data discrepancies. We also looked at their value proposition, both as a business and as a token.
All are early stage, and risky.
Good news: one looks quite good -which in our books means we need to do more due diligence on it.
Bad news: all nine others fall short, many by a lot. And we should be clear that particularly on the governance side, we were generous. We did not closely examine ownership of the entity, tokens can’t truly be verified (but we acted as though they are accurately represented, etc.).
We also note that if we had applied this level of analytic rigor to Bitcoin or Ethereum (or Dogecoin) in their early days or ICO, we would have judged them as extremely risky as well.
We give this upfront disclaimer: we are not being compensated by any of the tokens rated below or their affiliates, and we have no positions in any of them.
We analyzed 10 recent ICO’s across four dimensions, rating from 0 – 5.
A 0 means a complete failure. 5 means worth looking at further. We did not interview teams, nor verify development schedules, for example.
1. Business Model
2. Token Use (does the business model benefit from a token? How much?)
3. Governance (Is the entity clearly incorporated? Which jurisdiction? Is this information clear? Is their any KYC?
4. Delay. We first looked Feb 25. Of the 10 that were to complete by March 5, five did, and a couple of those with an asterisk.
This is clearly a first screen for venture investing. Of the 10 we picked by simply choosing the next 10 up on ICOALERT we found one, maybe two that we would consider looking at in greater depth. And of course, a token has no call on the company or its assets. Tokens are not equity, they are not debt, and they have no similar rights.
If you would like more information on specific ratings or our methodology, please email us at [email protected]