The easy evaluation of web3 projects or how to identify lousy crypto eggs
Introduction
After a long crypto winter driven by pandemic, war and recession fears, we are now experiencing the long-awaited crypto spring. Crypto and Web3 companies that have been working hard in secret on their solutions over the past few months are now getting into a FOMO mood and want to finally put their projects to market. As a result of the increasing number of new projects, investors are quickly losing track of good and sustainable projects to put their money into. As part of the Bitcoin Talent Program 2023 of the Frankfurt School of Blockchain Center (FSBC), I’ve created a concept to fast analyze, evaluate and compare the external presentations of Web3 projects according to comprehensible criteria.
The Pitch Deck
A pitch deck is a visually appealing presentation used to convince investors or potential customers of a business idea or product. It is standard in the crypto world to present the venture and the most important information about a company in a clear and concise way in a pitch deck. A good pitch deck includes the following details:
- A clear and easy to understand summary of the business idea / project.
- A description of the market in which the company will operate and the business idea/project positioned.
- Analysis of competitors and description of unique selling points.
- Presentation of the business model, including sources of revenue and cost structure.
- Presentation of the founding team and their experience and qualifications.
- Overview of key milestones (road map) and financial projections.
- Summary of financial requirements and target investment amount.
However, as a non-major investor it is often difficult to get hold of such a document as companies are reluctant to make it publicly available. In my recent attempt to access 12 pitch decks from international crypto companies, only two companies got back to me. One company referred me to their website and another sent me on a wild goose chase.
It should also be noted that pitch decks are specifically designed for investors and the content is usually somewhat artificially glossed over. Therefore, my tip: If you hold a pitch deck in your hands, for analyzing the company presentation, use it only as a secondary means. The primary focus should be on the company’s website. If a pitch deck is available, it can be compared with the information on the website and included in the evaluation of the external presentation below. For the financial analysis, which is not part of this article, only the pitch deck should be used, as such information is usually not available on the website.
The Website
As previously stated, it is apparent that the people in control of the organization constantly prepare a pitch deck with great attention and passion. Before it is handed out to potential investors, it is frequently fixed, modified, and fine-tuned x times. The company’s website, on the other hand, is typically left in the hands of third parties, with people in charge frequently relying on the implementing agency or the internal project manager. As a result, the website is my first port of call for determining how transparent and service-oriented the company truly portrays itself, as well as how sustainable the initiative is. Furthermore, we check the website for potential scams, which indicates a lot about the firm and the technical expertise of the product/project — but more on that later.
Determining the company’s image
So that the evaluation of a company can be carried out as often as desired and always according to the same procedure, I have developed a scoring system which can be transferred to a spreadsheet programme of choice and supplemented by further criteria of one’s own.
The overall analysis consists of six main Web3 areas. Scoring points are assigned to firmly defined quality features for each main area. The sum of the scoring points is documented in the respective table at the Web3 main area (see example graphic below). The sum of all six Web3 main areas then results in the sustainability index of the company.
The following six main Web3 areas are checked with the following criteria:
1. Scam Index
First, we check whether the project is a serious one. To do this, we use the scam checker ScamDoc (https://www.scamdoc.com) and enter the company’s internet address to be checked. As a result, we get a report with a value between 0 and 100 percent. We note the first digit of the percentage value into our table (if 100% = 9 points).
2. Presentation
Here the scope and general quality of the information on the website is assessed.
- Is it a modern, responsive website that is professionally presented on all end devices and does the year in the footer correspond to the current year? (1 point)
- Is there extensive content that describes the product/project in a comprehensible way? (1 point)
- Does the website have pleasant and smooth animations that support the use and transport of information? (1 point)
- Is there a white paper describing the product/project in more detail? (1 point)
- Does a documentation section exist where technical details are described and addressed to developers? (1 point)
- Does the company offer a support area where people can get in touch with the company? (1 point)
- Are more than 1 language version offered? (1 point)
- Does the company offer webinars or the like to make the product/project more accessible to the target group in an easy way? (1 point)
- Is content marketing done (providing useful information after leaving the email address?)? (1 point)
3. Social Media
Indispensable for a successful Web3 project, the most important channels are analyzed.
- Does the company have its own Twitter channel? (1 point)
- Twitter followers: more than 500 (1 point), more than 1K (2 points), more than 10K (3 points), more than 50K (4 points)
- Does a Facebook and/or Instagram account exist with more than 100 followers? (1 point)
- Does a Discord and/or Telegram account exist with more than 100 followers? (1 point)
- Does the company have a YouTube channel with at least two high-quality videos? (1 point)
- Are there regular livestreams on the YouTube channel? (1 point)
4. Team and Financing
An experienced management team and transparency about financing are important indicators of success.
- Is the CEO mentioned by name and can he/she also be found on LinkedIn or similar? (2 points)
- Is at least one other management member or advisory board / supervisory board named, who can also be found on LinkedIn or similar? (1 point)
- Does the CEO have past experience in corporate governance? (1 point)
- Does the CEO already have blockchain know-how prior to the project (see LinkedIn or similar)? (1 point)
- Is the core team published on the website? (1 point)
- Are at least three partner companies named? (1 point)
- Are the investor(s) mentioned by name? (1 point)
- Does further detailed information exist on how and why to invest in the company (e.g. tokenomics)? (1 point)
5. Potential
Here everyone should decide for themselves how high the potential of the company/product/project is. According to the DYOR principle, competitive advantages, unique selling propositions, partnerships, interoperability, technical demand, management experience, among others, should be included in one’s own potential index from 1 to 9 points.
6. Compliance
Mention of general compliance regulations and regulatory processes.
- Does the website have a “Privacy Policy” section? (1 point)
- Are specific data protection regulations of the countries taken into account? (1 point)
- Are there separate statements on KYC/KYB (1 point), AML (1 point), CFT? (1 point). If all three available (1 bonus point).
- Is there evidence that the company complies with legal regulations? (Member FATF or similar) (1 point)
- Is the product/project certified by an external body (e.g. Certik or similar) (1 point) and is there a regular review? (1 bonus point)
Evaluation
A maximum of 54 points can be awarded per product/project and company across all six Web3 main areas.
- 0–18 points: The product/project does not meet today’s requirements at the current time.
- 19–36 points: There are some inconsistencies that should be looked at more closely before investing in the project.
- 37–54 points: The product/project and the company behind it make a good and solid impression.
Conclusion
The aim of this procedure is to quickly and efficiently determine whether a company wants to gain a sustainable foothold in the market or has already done so. If the management is not known, the scam check sounds the alarm or there are only a few followers on social media channels, the project is usually doomed to failure. But ultimately, of course, everyone decides for themselves.
Disclaimer
This article only describes the author’s approach to analyze / evaluate projects in the Web3 environment and does not constitute financial advice.
Remarks
If you liked this article, feel free to forward it to your colleagues or share it on social networks. If you are an expert in this field and would like to criticize or endorse the article, kindly send me a private message. I’m happy to respond.
About the author
Ralf Emanuel is a passionate entrepreneur. He founded two companies in the IT industry after managing large-scale IT projects since 1995. After developing and operating several critical enterprise applications in the tourism and finance sectors, he now specializes in IT consulting, focusing on digital transformation, cybersecurity, and blockchain while advising companies on their strategic direction.
