Investing in crypto businesses is essentially like investing in any other business on NASDAQ or NYSE (except for a few differences which we’ll address later). A lot of people see the word “crypto” and get jumpy. Crypto businesses are real businesses that operate in the real world. “Crypto” does not automatically equal “fraud.” But you still have to be wise and well informed when investing in the crypto landscape.
You probably clicked on this article looking for some special tips and tricks that you can use as a golden standard when asking yourself which companies to invest in and trying to foresee outstanding success. This article isn’t meant to provide silver bullets for crypto investing as much as it is meant to review sound investing principles so you can wisely allocate your investments.
Below are four key things to remember when deciding how you should invest your money:
Are They Already Set Up For Success?
First, understand the need that the business is planning on solving. After reading about the company and its business plan, wittle the information down to two sentences: what the current problem is and how they intend to solve the problem. A good amount of businesses within the crypto world solve complex issues and take a fair amount of background knowledge to understand how they are relevant, but the successful ones pass this simple test. If after reading information about the company you still can’t succinctly write the industry need and the company’s resolution, it means one of two things. First, you need to gather more background knowledge before fully grasping the concept of the business. Second, the business plan is poor and is covering up the weak points by convilluting the issue.
Next, look at the major details of their business. Does the company’s revenue stream make sense and is it sustainable? Do they have distribution nailed down? Have they established partnerships with key companies and individuals? Perhaps you may not have all the information to answer all of the above questions but the more you know the more confident you will be in your investment.
What Is Their Potential?
While the first section focused on looking at the company as a whole, this section is geared to get you go focus on the existing industry and potential market size. Once you understand the problem that exists in the market and how the company plans on solving the problem, ask yourself, “How large is this problem?” and “How much are people willing to pay to solve this problem?”
Perhaps you may not know how big the need truly is that the startup business is trying to solve. Regardless of how well you understand the industry, study all you can about the current landscape. This will be an important step for two reasons: to understand which companies the startup business will be competing with and to decipher if the startup business is a copycat company. You don’t want to invest into a company that will be facing an industry juggernaut and at the same time you should be weary of copycat businesses. Unless they offer a significant advantage over their competitors, it’s not a good investment.
The Team Makes All the Difference
If the startup business of interest passes the first two major hurdles above, it’s time to look internally at the team. What kind of experience do they bring to the company? Is the team well rounded and do they have a diverse set of skills to overcome challenges? If you’re not impressed with the team you probably shouldn’t invest in them.
They Live and Die By Their Technology
While this may not be a big deal it can prove to be a deal breaker when considering investing. Since all crypto companies utilize the crypto technology you’ll want to make sure that the team is tech savvy and strong developers are on the team. This is true of most startup businesses today but is vitally important to crypto companies since everything they do is meant for an international audience.
With a couple of exceptions, investing in an ICO or a recently launched crypto business is a lot like angel investing. The same business principles that apply for angel investors also apply in the crypto world. There really aren’t any silver bullets when knowing which startups to invest into. With that being said, hopefully this article helps you conduct your research when looking for promising crypto startups.