Since the launch of their rating agency in August 2016, the ICORating team has been constantly modifying and adapting its approach to the evaluation of projects staging ICOs in order to keep up with the dynamically developing industry. The assessment tools developed by ICORating are intended to help potential investors decide whether to buy tokens of startups staging an ICO/Token sale.
Risk-score is aimed at assessing the risk of potentially fraudulent activities. The higher the risk-score, the less information there is on the details of the ICO campaign, product development, the team and the documentation, which calls into question the possibility for success of the startup and the ICO/Token sale.
Projects are evaluated against characteristics such as:
- White paper
- Smart Contract (for ICOs)
Risk-score is intended to give an investor an initial impression of a project and address any possible fraudulent intentions of the project founders, highlight the level of the project’s readiness and the presence or absence of a product.
The metrics of this parameter are divided into five levels: very low, low, medium, high, and very high. The lower the parameter, the lower the risk of fraud in the project and the higher the quality of its development.
The secondary objective of this parameter is to demonstrate the startup’s chances for a successful ICO and further growth.
Hype-score shows investor level of interest in the project. The higher the score, the more people may consider the project for future investments.
The parameter accounts for the following:
- The number of users on the main social media pages of the project.
- The number of mentions in the press.
- Mentions in mainstream technology media and in prominent finance publications.
- The number of search engine results.
- Traffic on the main website.
Social media analyzed include the following platforms: Bitcointalk, Telegram, Twitter, Medium, and YouTube.
Among prominent financial publications, as well as mainstream editions devoted to technology, we cite such resources as Techcrunch, VentureBeat, Forbes, WSJ, Reuters, etc. Project mentions in publications outside of the crypto industry’s scope increase exposure, making the project more visible and broadening the audience of potential investors. Moreover, mentions in established IT and financial media reduce the risk of fraud.
The metrics of this parameter are divided into five levels: very low, low, medium, high, and very high. The higher the score, the higher the interest in the project from the community. Great attention of the audience on a startup can serve as a good indicator of investment interest in the project, equating to the level of potential demand for project tokens.
This report is an independent expert opinion from ICORating. Basic Review aims to give investors a common understanding of the project and its strengths and weaknesses. Basic review does not involve a project audit or assigning it a rating of investment attractiveness — it is an informational product.
ICORating experts carry out a basic review of a project in the following directions:
- The business model’s validity and viability.
- Elaboration of the financial plan.
- Competitive environment assessment.
- Assessment of market dynamics.
- Project team evaluation.
- A study of the internal economy of the project.
The review provides an overview of the scope of the project, the vector of its development, features of the product or service and the team's competence.
According to ICORating experts, any rating should answer specific questions from potential investors. Taking into account the specifics of the industry, and more precisely the quality of preparation in startups attracting investments, when writing an Investment Rating we aim to develop an approach relevant to the current level of development of the industry.
This approach should take into account the youth of the market, the innovative nature of projects, as well as the lack of analogues in traditional market segments. Investment Rating answers the following questions:
- Whether the stated information on the current state of the project, the team, the market and the degree of development of the technological component of the product is accurate.
- What are the team’s chances of implementing the product or service with the stated (officially confirmed) set of developments, team competencies, business model, current market development and competitive environment.
At the same time, we understand that the ecosystem of blockchain and of blockchain-based projects that are entering the market, significantly differs from all known market segments. Our assessment approach takes into account all the main aspects of traditional practice for evaluating startups, and identifying the unique features of the blockchain ecosystem, predicting its development and focusing on technological analysis allowing us to significantly update it.
Currently our experts clusterize the projects that are launching their products on the basis of distributed ledger technology as follows:
- Decentralized application platforms (Ethereum, EOS, NEO, etc.)
- Interoperability (Polkadot, Cosmos, ICON, etc.)
- Oracles (Oracles Network, etc.)
- Decentralized Exchange Protocols (0x, SWAP, etc.)
- User controlled Internet (Blockstack, Status, etc.)
- Smart Contracts (Etherparty, Blockcat, Agrello.)
- Dapps (the most common categories — Financial services, Business Services, Value Exchange.)
Assessment of the technological component and the potential role of the token in the system
Evaluating projects that create developer tools, such as platforms for the development of smart contracts and Dapp (NEO, Ethereum) or startups that provide interoperability (Polkadot, Cosmos), requires an individual approach because of the greater scaling and potential prevalence of the token (this factor can affect the price growth of the token).
Such projects (unlike Dapps) are analyzed differently: With a strong emphasis on the technological component and the ability of the team to solve the existing problems with the blockchain ecosystem. Now this area has a high potential due to the market readiness, the existing need for change and development and a lesser influence of external forces during the project implementation.
Dapps (decentralized applications) we evaluate separately because of restrictions which can be imposed on them by the platform on which they are developed (blockchain scalability). To evaluate them it is necessary to define a project’s environment qualitatively (whether the project will be able to function in it, whether it will receive user and partner support, whether its plans for entering the world market are realistic). We pay special attention to the analysis of the market and future stakeholders in the project.
Moreover, we divide the overall approach to project evaluation into two areas - qualitative and quantitative components.
- Technological operation environment — assessment of a project's impact on the blockchain infrastructure and its development, solution of current problems, possibility of integration with other products or use as a basis for building new products (reduction of technological risks).
- Market positions – assessment of the current market segment, its growth rate, competitive analysis (reduction of market risk).
- Legal preparation of the project — compliance with regulatory frameworks, support from the government, existence of a legal entity, necessary and sufficient documentation, KYC, AML procedures (reduction of legal risks).
- Project management — whether the team has the required competence to implement the project (reducing risk of non-execution).
- Probability of support (analysis of early investments in the project).
- The stage of technical development of the project — the existence of a prototype of the product, its technical characteristics, protocol or application operation mechanism, key components (reduction of production risks).
- Analysis of the token, its functionality and forecast of its value change in the long-term perspective (investment attractiveness of the asset) based on key principles of token economics.
- Forecasting demand and supply for the digital asset offered for sale by the company (determining the presence of factors creating a supply overhang or artificial deficit of the asset).
- Analysis of the distribution of raised funds (an estimation of project costs, verifying that the requested financing is in accordance with the project’s objectives and expenditure items by comparing it with open market cases) and tokens (determination of risk for investors in the ICO.
The metrics of this parameter is divided into 10 levels: Positive+, Positive, Stable+, Stable, Risky+, Risky, Risky-, Negative, Negative-, Default. The higher the rate assigned to the project, the better the overall quality of the project’s documentation, and the lower the number of risks for future investors.
In the process of assigning a rating ICORating expresses its independent opinion on the project raising funds by means of an ICO. The rating is an analytical product of ICORating and cannot be construed as an investment recommendation.
When writing a review and assigning a rating, ICORating experts check the validity of all figures and facts provided by the project team, using all relevant sources of information which are freely available. The lack of any necessary information in the public domain leads to a decrease in the rating score.
Our team consists of professionals in the financial industry. We strive to provide impartial reviews based on our long-term experience with ICO analytics. Analysts are open for communication with project representatives during an audit. Each ICORating review is itself subject to reviewing and additional verification. We assess more than 20 projects staging ICOs monthly; our assessment is not automated and is based on a deep understanding of the market.
The Post-ICO Rating is designed to formulate and express ICORating's opinion on the reliability of all actions taken by the project team for the realization of the product announced during the ICO. The analysis is aimed on assessment of the project’s performance after the ICO. In the course of the analysis, we adhere to the standards of the project information disclosure. If the company refuses to provide the requested information for some reason, it may do so, but this may negatively affect the final assessment.
When analyzing projects at the post-ICO stage, we pay attention to the following points:
- Product development:The state of the product at any stage (prototype, code, etc.) and the progress during the period under consideration relative to the roadmap. Important releases of product and updates from the team.
- Secondary market: Token performance on the secondary market, analysis of historical liquidity and volatility of the token, traders’ interest in the tokens, reaction of the token holders upon product releases, etc. Assessment of token performance vs competition (if any) and vs the market.
- Finance: Post-ICO analytics and the ways of storing and managing money by the project team. Analysis of actual expenses incurred by types vs planned, analysis of revenue flows (if any) of the project (analysis of financial performance is possible if the necessary financial information is provided by the team).
- Market dynamics: Analysis of market changes and the competitive environment of the project. Assessment of key milestones reached by the competitors and their potential effect on the token under consideration. Assessment of new entrants into the market (new ICOs in the same niche, etc).
- Legal: Analysis of stated obligations, activities of legal bodies related to the project, reactions to changes in legislation, and availability of licenses, if necessary.
- Other matters: We may draw attentions to other significant matters and issues which we believe are important for the stakeholders of the project
The interests of investors should be protected and relevant risks should be assessed both at the ICO stage and after the ICO when active product development is in place. Companies tend to make a lot of promises in order to attract the necessary amount of money in a limited timeframe and investors tend to believe such promises. Disclosure of information on progress in product development, money spending, important news, state of the team and business operations is necessary in the current market, at least as a tool for self-regulation, risk mitigation, governance and transparency.