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Objective: Initial coin Offering (ICO) is an emergent type of crowdfunding based on blockchain technology. In an ICO, a startup sells its tokens to the public in exchange for a promise of a future product or service. The purchase of the tokens happens mostly with other mainstream cryptocurrencies. Since most ICO tokens are claimed to be utilities and not securities, many discussions have been raised regarding the advantages and risks ICOs bear. The purpose of this thesis is to explore and analyze this new phenomenon and to develop an analysis framework to help average investors assess ICOs.

Approach: This paper begins with a technical and business analysis of the ICO tokens, followed by a market and stakeholders (issuer, investor, regulator) analysis. Then, it presents the projection of the traditional fundraising assessment methods (VCs and crowdfunding) onto the ICO model. Thereafter, the document outlines the results of the review of several recent ICO assessment studies, industry practices, and my own analysis. Finally, and in the light of these elements, an ICO analysis framework is exposed and applied to 3 ICO cases. 

Result: Investors willing to invest in startups launching ICOs should analyze the startup projects from 4 different aspects: 
•Value proposition and project economics: their assessment is identical to the traditional funding models 
•Token design model: as ICO tokens are mostly considered as utilities and not securities, investors need to look at how the project profits will impact the tokens value 
•Cash and budget allocation: investors should assess the transparency of the startup budget and the treasury management of the high volatile crypto assets
•Regulation and law compliance: due to the ambiguity of the ICO regulations, investors need to make sure that the startup tokens are law compliant 

Conclusion: Compared to traditional fundraising models, ICOs are more difficult to assess because of the complexity of the token economics evaluation. Designing a meaningful token model (issuers) and assessing the token design (investors) require a deep understanding of many economic aspects that most of the time neither issuers nor average investors have. Furthermore, the hybrid roles tokens could play within a project make it difficult for regulators to classify them and evaluate their law compliance.

Initial coin Offering, ICOs, Blockchain, Early Stage Fundraising Methods, Distributed Ledger Technology. --- Sciences économiques & de gestion > Finance