Shark Tank, Ohhh AAHHAAAAHHH! Finding Nemo reference, anyone? Anyone?
“How do you pick a winning horse? Betting on the Jockey.”
Most people in business would say bet on the entrepreneur, or a solid product/proven team. When everything comes together you have the recipe for success.
The questions that the Sharks on Shark Tank ask, aren’t about plans for the future, or what is on a companies “roadmap.” The real meat and potatoes come with questions such as cash flows, long-term potential, P&L, profit margins and more.
If we look at NFT’s with the same lense as a startup while keeping in mind 97%+ startups fail, we want real utility over ponzinomics and a second gen collection. How can we go about doing this without getting overexposed by accident? Let’s see.
We saw this in 2017 during the ICO boom, Defi-summer of 2020 and the rise of Sh%$-coins all throughout 2021. Now we might be nearing the end of a market cycle and the true colors of projects will be put to the test. We want to make wealth in this market, and let’s be honest we aren’t all here for the tech… We do want to position ourselves well in what walks and talks like a bear market so that when the next bull comes, we will be ready.
Here is one of my favorite diagrams when thinking about the current state of the market:
If I had to guess where we are on this chart, it’d be right around anxiety or panic, very close to capitulation if not in the midst of it.
Setting ourselves up for those millions everybody preaches about comes right around the corner, so diversifying into solid projects is more prudent than ever. There's no set formula, but here are some things we look out for
Is there a checklist of things to look out for? Unfortunately not, but there are red flags ~ or ~ opaque boxes that most successful projects fall into, such as:
In an industry of open source code and straight up rug pulls, we have to look out for our best interest. Projects have to be straightforward with their approach, and the same way public companies give earnings calls, projects could be expected to be open about mint funds/salaries and where time and effort is going. The earlier a project can outline this, the easier it will be to make an investment decision and stick to it based on success or failure of said promises. Leading to 👇
Gone, (hopefully) are the days of no roadmaps. With no expectations, projects have no reason to build and the promise of good intentions has no accountability. This should be a smaller group now that the meta is coming to an end. Those that do have a roadmap, does it mention how this will get done? Tying in with transparency, a vague roadmap could also be just as dangerous as none at all. I say could, because we do have builders among us and projects take time and effort, and a community backing it, to be achieved. Analyze carefully, but don’t hold feet to fire on timeline issues if it’s a massive target. I.e. an onchain game doesn’t pop up in a month with great UX…
How much effort went into the art and execution. Minimal effort can be a bad sign. Many hyped projects are some variation of a Monkey/Bear or a pixelated/anime character. The first movers enjoyed being early, the rest could arguably be derivatives. Artwork similar to this style is not a bad thing, but the product the project is pushing can’t simply succeed if only a few minor tweaks are thrown onto canvas and sold as-is. Some art pushes the boundary, and as a human, you can see what detail went into the creation of this and make an informed decision therein.
The hottest topic in NFT’s time and time again for a reason. The same way a company values its customers, and the NFT community are some form of a holder. How the project engages, inspires and altogether treats the community is a telltale sign of intentions. Organic vs. forced is a new factor that recently hyped mints have brought from the Web2 world, and whether we like it or not, it most likely is here to stay. A recommendation for any experienced NFT trader is hop into a discord or social channel and learn who a project is, and what they’re about simply by the community.
Solution or Repetition: This is key in the markets, as we see metas fade in and out, a true solution to a problem, ie. Blocksmith labs whitelisting services, Atadia trust scoring data resources have real use cases. On the flipside, a project simply hopping on the current meta is most of the time a red flag. Whether on $SOL or $ETH, or other blockchains, the product in many times makes the project.
These are basic questions to ask yourself when looking at projects you’re throwing funds at. Like I have preached in previous articles, respect your funds or they will find a new home. There’s a lot more to investing than meets the eye, but approaching NFT’s with a value investment thesis, you can hedge yourself against the downside risks as much as possible.