READ THIS FIRST!
Recently, Anton Ferraro and I discussed eSports ICOs and I wanted to summarize some of our key learnings to help all of you thinking about investing in an eSports ICO. Not a week goes by without the announcement of another eSports ICO. Because of that, it can be confusing for many people to separate the good investments from the bad ones. I hope to give you some tips that will help you navigate this chaotic world.
A WORD OF CAUTION
Let’s not beat around the bush, the clear majority of eSports ICOs are not worth your money. While I will refrain from calling any eSports ICO’s scams, caution is needed. Here are some tips to make a more informed decision:
Read the Whitepaper: any respectable ICO will have a whitepaper available to the public. You can view a company’s whitepaper as a non-binding business plan. They usually cover the idea behind the business, the company’s mission statement and most importantly, how the company plans to create revenue. It is critically important to read the whitepaper and understand how you will receive your ROI before deciding to invest. Red flags include: too many buzzwords (yes, I know the irony of this since eSports and the blockchain have become buzzwords themselves), an unoriginal business idea, trying to do too many things at once, no clear plans for revenue generation and no long-term plan.
Research the Team: A compelling idea alone can’t justify your investment. When thinking about investing in an eSports ICO, make sure to research the team that is running the company. They should have actual eSports, blockchain, and engineering expertise and be wary of those who inflate their experience. As a rule of thumb, it is always better to invest in a company with a great team and an average idea than the opposite. My personal pet peeve is the phrase “I am a lifelong gamer.” Being a gamer can never replace actual experience in eSports.
Furthermore, because we are talking about ICOs, there are usually no strategic investments. That only makes having a competent team more important.
Look at the History of the Company and Their ICO Purpose: Why is the company raising money and what has the company done prior to this? It’s prudent to have an answer to these two questions before you invest. Worthwhile companies opting for an eSports ICO generally have a solid record of accomplishments and a justifiable reason why they are raising money. A good example is Unikrn, the eSports gambling platform, raised money from veteran investors and VC companies like Mark Cuban and Rubicon Ventures years before their ICO. The company opted for an ICO later on, because it fit directly with their business plan and would enable them to grow without giving up too much equity. If a company doesn’t have a good track record and has no real purpose for going the ICO route, I would advise strongly against investing in them. There are plenty of other factors to take into consideration when investing in an eSports ICO and my opinion is by no means the end all be all. Most importantly, continue to do your own research. ICOs in eSports have the potential to democratize the ability to invest but with great power comes great responsibility!