Let’s take a deeper dive in some of the common problems, and misconceptions.

Professionals VS Crowd.

There is a notion that “professional” investors are better than “regular” retail investors at evaluating projects. I believe this notion ignores how the real world of ICOs works — that the “regular” investors work in crowds or hive mind. Is the crowd stronger than VCs when it comes to evaluating projects and due diligence?

While some professional VCs investors are truly experts in their field, and genuinely trying to help entrepreneurs, I find the vast majority of “professional VCs” have no clue about the projects or field they invest in. Many of them have zero startup experience and don’t even have a basic understanding of the technologies involved their fields. Many VCs don’t use the products of the companies they invest in. They look at hundreds of projects, across a variety of industries, spends most of their time negotiating with entrepreneurs, while staying at five-star hotels and fly business all day long. Today, there are probably more of these “professional VC funds” than there are startups.

Compare this with a couple of thousand retail investors in an ICO: they range from novice to advanced potential users of the product, are genuinely interested in the industry, have been following the team, and are not shy about sharing any negative findings on social media or question the founders in Telegram groups directly. Which group do you think will be more likely to be thorough in their findings?

As an ICO investor, this, of course, requires you to do your homework too. Don’t just follow the herd. Invest in projects you understand. Read the whitepaper. Follow the founders for a while before you invest in them. If you find anything good or bad, share it. You need to contribute to the crowd that you are part of.

Scams

Scams exist everywhere, in every industry. I still receive phone calls and SMS telling me I won a grand prize, but I need to make a bank transfer to someone first. Does that mean we should stop using phones, SMS, and banks? The same law enforcement dealing with scams in traditional industries still apply in new industries. We don’t need to re-invent the wheel here.

Failures

Most ICOs are new startup projects, and have a high rate of failure, just like in traditional startups. This is nothing new. Most ICO investors already know this. ICO investors are early adopters (and learners).

I do believe compared to “traditional VC invested projects,” a larger ratio of ICO projects will succeed. There are at least three reasons for this. One, the founders spend less time raising money and have more time to focus on product development. Two, with increased funding, some shortcomings of the project will be easier to overcome. For example, if the founding team is weak in marketing, it is now far easier to hire related specialists given the available funds. Three, ICOs help jumpstart the project with an initial user base. Now users are investors. They make returns at the same time as they use/pay for the product and make it popular.

Conclusion

Guess what most VCs do today? They invest in ICOs now! VC groups, unlike other large slow-to-react organizations, have their nose on the money. That pretty much says it all! Unfortunately, many other large organizations who are responsible for economic development and public wealth are not as nimble. The faster movers will reap exponential benefits. Don’t get left behind.