Though ICOs and STOs are great fundraising methods that startups can use in raising funds for their projects, it is paramount to asses the risks involved.
Launching ICOs/STO requires quite an amount of investment and therefore requires due diligence to ensure that that money is used for the right cause.
Besides, the sole purpose of the ICO or STO is to raise funds for your project. So, one should assess whether the ICO/STO shall be able to meet its target.
What to consider when doing ICO/STO risk assessment
In assessing your ICO/STO, you should consider the following:
- Market assessment
It is good to keep in mind that the market shall play a very great role in the success of your ICO/STO and your project.
Before launching your ICO/STO, it is good to assess the market to find out if your project shall be accepted and even adopted by a significant number of people. If a lot of people like your project, they shall be ready to invest in it. However, if people don’t find the project to be worth it, they will not be interested in investing in it and your ICO/STO could end up being a total failure.
To ensure that your project fits in the market, you should ensure that it tackles a solution to something crucial in society. Your solution must also be viable and unique. Remember, you also have other competitors and you have to prove to the people that your project is better than the rest.
Besides, you must be able to identify your target group. You must clearly distinguish the people that you want your project to help. This ensures that your marketing strategies are trained towards this group. And the wider the target group, the higher the likelihood of finding more investors. To identify a target group, you should ask yourself what services your project intends to offer; and who is best suited for those services.
- Regulatory risk assessment
This is very critical in launching an ICO/STO.
You have to understand what is required of you depending on the regulations that are set within the region or country where you want to run your fundraising. Failure to adhere to those regulations could cost you a lot and could even result in your ICO/STO or project being put on hold by the regulatory authorities.
Since at times those laws and regulations are quite intricate, like when launching an STO, it is good to involve an ICO or STO advisory firm to help you maneuver those regulatory issues.
Legal liabilities can be very costly to your company or startup especially if you are involved in court cases. Also, once it goes public that your project is on trial at the courts, people/investors will tend to become extra cautious and it may hamper the rate at which people find it worthy to invest in the project even if you manage to handle the cases.
Why do an ICO/STO risk assessment?
- Preparing yourself for eventualities in future
Countries and regions are still struggling with regulation cryptocurrencies and blockchain technology. As a result, most of the countries are still formulating laws and regulations to govern anything related to blockchain technology.
Therefore, your antennas should be up all the time to ensure that your blockchain project adheres to all the laws; even those that were just released. The best way to do this is by looking for a competent advisory firm like Gravitas International that will be concerned with the regulatory issues.
A good advisory firm will help you maneuver the current legal matters and also prepare you for legal issues that may come up in the future.
- Ensuring that you ICO/STO does not violate any laws/regulation
There is nothing that can be bad like finding yourself on the wrong side of the law.
Risk assessment ensures that you are on the right side of the law.
- Estimating the success of your ICO/STO
Carrying out a risk assessment, enables you to find out your weak points and helps you to come up with ways of improving to ensure maximum success of your ICO/STO.
It also enables your team to identify risks and develop plans and contingencies to mitigate risks for your investors. This instills confidence in the investors.