I am looking at improving my skills when reviewing and researching new ICO projects. Sebastian shared the following article on Medium: A Simple Framework for ICO Due Diligence
His approach essentially helps us to score an ICO investment opportunity along 7 dimensions that he calls the 7 Ms (similar to Boris Golden’s 4Ms for early-stage startups).
The 7 Ms dimensions include the following:
- MODEL — i.e. the business model, does it make sense?
MECHANICS — i.e. the technology, will it work?
MANAGEMENT — i.e. the team, can they make it work?
MARKET — i.e. the addressable market, can it become big?
MOTIVATION — i.e. the token economics, does it make sense as a blockchain project?
MOMENTUM — i.e. the traction, are they on the right track?
MONEY — i.e. the financials, is it a good deal?
To begin with, please share your thoughts on the completeness of the above-mentioned dimensions when scoring an ICO opportunity investment.
Sebastian then uses a 5 point Likert scale 1–5 for each question and then uses the average as the overall score. To guide the selection of the right score in each dimension, he compiled a set of 30 simple yes/no questions. The idea is that by ordering questions from must-have criteria to more and more sophisticated requirements, you can determine a recommended score range from the answers.
Following is the list of the 30 questions across the 7 Ms. For sake of simplicity, Sebastian only highlights must-have criteria here with a (*), i.e. criteria that should check positive for a score >2. The Google spreadsheet is more detailed; it has a “configuration” tab that shows how each question is mapped to a recommended maximum score in case the criteria is not checked.
MODEL — The Business Model:
- CONCEPT*: Is the proof of concept coherent and understandable?
REAL NEED*: Does it address a real problem or need?
VALUE PROPOSITION: Is there a clear value proposition for all groups to participate?
VISION: Is there a vision beyond the immediate concept that matches broader trends?
MECHANICS — The Technology:
- FEASIBILITY*: Does the concept look like it can work?
MVP: Has it been tested?
DECENTRALIZED: Is it already truly decentralized or is there at least a roadmap in place to get there?
INNOVATION: Is the product innovative / does it contribute to the blockchain ecosystem?
MANAGEMENT — The Team:
- FOUNDERS*: Are the founders known & do they have relevant experience?
ADVISORS*: Do they have reputable advisors with relevant experience?
VESTING: Does the team have a sufficiently sized stake and vesting implemented for balanced incentives?
CONNECTED: Are the founders well-connected in the ecosystem?
SKILLS: Do founders & advisors cover all areas relevant to the project (business, tech, marketing, industry know-how)?
MARKET — The Addressable Market:
- MARKET POTENTIAL: Is there a large market and/or significant growth potential?
COMPETITION: Are they outstanding in their field compared to their competitors (if any)?
DEFENSIBILITY: Can the team defend their business against others (through IP, network effects, brand, ..)?
MOTIVATION — The Token Economics:
- NEEDS BLOCKCHAIN*: Does the project benefit from using blockchain technology (e.g. eliminating the need for a trusted 3rd party, leveraging impermutability, automation through smart contracts)?
TOKEN UTILITY*: Does the ecosystem get added and/or inherent value from having a token?
TOKEN INCENTIVES: Do the token economics create growth incentives and network effects?
TOKEN ECONOMY: Are there incentives to grow beyond the limits of a medium of exchange?
MOMENTUM — The Traction:
- HYPE & MEDIA*: Is there positive interest on (social) media?
ROADMAP: Do they have an ambitious yet realistic roadmap?
PARTNERSHIPS: Are there already high-profile partners working with them?
PROGRESS: Has an alpha or beta already launched with positive reactions from the users?
CUSTOMERS: Is there an existing customer base?
MONEY — The Financials:
- VALUATION*: Is the valuation reasonable?
RUNWAY*: Will the funding be sufficient but not too high for the scope of the project?
SUPPLY SOLD: Does the team distribute a reasonable amount of tokens (i.e. no central banking)?
DISCOUNTS: Are discounts reasonable in relation to the risk profile of this and previous funding rounds?
EXCHANGES: Are there already exchange listings in preparation?
To answer all the questions, you’ll still have to do all the research (e.g. whitepaper, webpage, news articles, ICO review sites — see below for a list). Sebastian found, however, that using a framework as a checklist can come in handy to make sure you look at all relevant aspects, and it helps to compare projects once you had a chance to rate at a few.
ICO Review Resources:
CoinCheckup
ICO Rating
ICO Stats
Foxico
ICO Holder
ICO Bench
Token Data
ICO Drops
ChainRock
Picolo Research
ICO Market Data
ConcourseQ
DeSearch
Coinvision
ICOPoolWorld
Coinschedule
Along with Sebastian, please let us know what you think about the 7 Ms model, and if you have any recommendations for further review resources, please let us know, too!