While I am sure there are more than seven ways to spot a “scam ICO”, I wanted to take a moment on how we at Qwids have addressed the seven ways highlighted in the article on blogging site Medium: “7 Ways to Spot a Scam ICO” by Fabian J. G. Westerheide, founder and CEO of Asgard VC.
The original article can be found here: https://medium.com/@bootstrappingme/7-ways-to-spot-a-scam-ico-bb5d2d5eb286
1. Does the company have a business plan? Read the whitepaper.
“A whitepaper is your only chance to get in-depth details about a company’s long-term plan and vision prior to investing in an ICO. Without a proper business plan, as outlined in the white paper, a company will likely fail and your tokens will be worthless.”
While I don’t agree the white paper is “your only chance to get in-depth details about a company’s long-term plan and vision”, reading the white paper does indeed have merit. But you could also contact the founders and arrange a video call to get further insight – assuming you have the time in your busy investor schedule. In both the Qwids colour paper and pitch deck we don’t explicitly refer to a business plan per se, but we have set out clearly the path forward for Qwids and how the ecosystem will develop around the Q tokenomics model.
“It’s filled with buzz words and looks too perfect.”
I am unsure what the author means by “looks too perfect.” but having read numerous white papers over the years they where often a higgledy-piggledy mishmashes of buzz words and technical jargon, largely unapproachable to the layman at that time. These days it seems they are more often filled with both technical jargon as well as marketing drivel; making it virtually impossible to understand what it is the founders are aiming to achieve.
At Qwids we wanted to try to knock down that drivel substantially and make our vision more approachable. This is a real challenge. There is a temptation to over-explain your vision using colourful language and awe-inspiring visionary language. While I think there can be a place for those types of words where necessary, we continue to aim to be understood by the many, and not only the few.
“You have no legal way of getting your money back, going to court or making someone responsible for fraud.”
Qwids is a registered LLC (Q3C COLLABORATION AB) in the country of Sweden. Why Sweden? Because we were born here. And after speaking with numerous ICO service providers on why they recommend conducting ICO’s from obscure offshore destinations, we came to the conclusion that the benefits appeared to be largely for corporate tax and privacy mitigation measures. These places where often presented as hip and happening destinations for mixing with the future crypto elite. Although as appealing as that might sound to wine and dine with the new fin-tech entrepreneurs, I am not convinced “crypto-jurisdictions” are part of the future long term.
2. Is everyone getting rich but you? Follow the money!
“Money from the ICO will go into building a team, improving the product and growing the company.”
As many white papers share the allocation information upfront it is easy to take it at face value. However, many white papers also highlight in the small print that they can change the allocation at any time. This is nothing new to those familiar with ICO’s and investing in general, as it is often a matter of necessity that a startup may need to redirect funds toward another previously unforeseen cost.
“Money will go to the existing investors, the founders, agencies, advisors and lawyers. Ask yourself, who will benefit from the ICO? If the founders get rich with the ICO, that’s a bad sign.”
As you will see if you read the Qwids colour paper, the allocations and tokenomics model does not strictly initially reward only the team and the platform, there is some room in the early stages for early adopters and investors to earn something. This is because we have a working service, and we wish to incentivise the further adoption and growth of the platform, and not to mention giving back to those who believe in what we are building. The majority of the allocation however is geared towards the platform development and community growth ambitions that the Qwids team and community collectively has.
3. Who’s on the team? Look for entrepreneurial leadership and a solid crypto-team.
“Research the backgrounds of all team members including profiles on AngelList, LinkedIn, and Crunchbase. Check out their social media profiles.”
While it is always important to look closely at who is bringing the service to market (or in the case of Qwids who has brought the service to market), I am not entirely convinced that looking at social profiles is entirely useful. I would opt for reaching out and talking with the founders directly. You can contact the Qwids team anytime at firstname.lastname@example.org
“Have they been active in their industry for a while? Do they regularly post articles showing industry expertise? Did they become a crypto “expert” overnight?”
Being able to see the length of time the founders have been active in the space is important. It’s often easy to come across those social profiles who claim to be seasoned professionals with many thousands of views and likes. Yet only a look at the dates in which they have been active you realise that there must be something fishy going on with the numbers. When it comes to identifying those persons “showing industry expertise”, be aware it is no longer a challenge to come across like a pro online when there are so many content providers willing to whip up some sweet copy for your cause, and all for just a few thousand satoshi.
“The founders have been in the market for the underlying product for years, and they’re knowledgeable about crypto or have staffed their team with crypto experts.
A diverse team with a valued range of desired inputs is essential and while I think staffing your team with crypto experts is often useful, there are no such experts that have such a wide understanding of the cryptosphere that they are able to apply their knowledge to any single useful outcome. There are numerous niches and overlaps with other business areas, and the goal is to find those with the right overlaps for your startup.
“They have a great reputation, strong advisors and a mission. They want to change the world with technology.”
Qwids at our heart is mission driven. It’s embedded in the very nature and terminology of the platform. Since we began 3 years ago we have always been keen on the potential for this technology to change the world. It’s why we provide for others to change their worlds too; through mission-driven actions.
4. Do you believe in the idea and its potential? There must be a great underlying product.
“Don’t ever invest in an ICO simply because the company claims their coin will increase in value. A company only has staying power if their product works. The main reason to buy a token should not be the exponential increase in valuation”
Placing the Q token on exchanges so it can “Moon” has never been the agenda for Qwids, but that is not to say that it will never happen. Nowhere in our documentation material do we claim such a “Mooning.” The Q token is (as all good crypto currencies) created and distributed to serve primarily as a fuel source for the platform users, to grow and develop themselves, much like Ether or Bitcoin power their users network activities. The Qwids primary services currently work off-chain, but as the platform gets funded and develops further the true application of the Q token will be realised through the growth of the ecosystem itself.
5. Is the ICO regulated? Regulated ICOs are safer.
“The company is located in a country where you have a legal standard for doing business. There’s a thorough Know-Your-Customer (KYC) and Anti-Money-Laundry (AML) process that checks your ID, proof of residency and other personal details.”
While conducting our early colour listing exercise within our own early adopters community of over fifteen thousand users, we have applied basic KYC/AML procedures to the google form in which we are using. Primarily to exclude those person within jurisdictions we do not wish to receive funds from. In the next stage, rolling out in August 2018, we will upgrade our investor portal to capture proper documentation and bring ourselves inline with the current industry standards. To date we have received zero Ether but have been able to colour list over 250 persons claiming to pledge over 380 Ether to the Qwids project when the crowd sale goes live in the forth quarter of 2018.
“The company is located on some sunny island where you may never see your money again. You’re not asked for identification and can invest right away.”
Qwids legal entity Q3C Collaboration AB, is based in the sunny tropical paradise that is Sweden (inside joke for those here in the summer of 2018). We have been regularly keeping up with the local authorities public commentary on the industry as it develops, and it currently looks like Qwids may well be the first ICO to launch out of Sweden.
6. Are you blindly following the crowd? Don’t be a sheep.
While it is now super clear many people became drunk on the idea of getting crypto-rich at the end of 2017, it has always been down to you as an individual to do your homework on each project you involve yourself with, just as it is for those founders to vet you accordingly. Investor/founder relationships work both way so it’s better to schedule a call or get in the same room if you can before even considering funding any project.
7. Have you done your due diligence? Learn to pick winners.
Agreed. Practice makes perfect. Start small if you are new to the space, and if you are seasoned then reach out and arrange a call. There are so many ways to connect these days. Don’t let a single lingering question that may have been missed in the project documentation stop you from funding a project you may otherwise like to see flourish.