Crypto & NFT projects are essentially startups. Learning to evaluate a startup like a VC gives you an unfair advantage in crypto. Today let’s cover the lessons to learn from how VCs evaluate startups & projects.

Investors (thinking like a VC) look for a couple of key things:

1. Problem & Need

2. Product & value proposition (Utility)

3. Team

4. Market

5. Differentiation & Competition

6. Go to Market

7. Traction

Let’s go through each of them:

#1 Problem & Need

Projects need to solve a need or a problem. Investors want to know if the problem NEEDS to be solved or if it would be nice to solve.

More pressing the problem, the more successful the startup.

There was no censor resistant, transparent store of value that suited the needs of the digital age. BTC created a decentralized, borderless store of value & solved that problem.  ETH struggles to scale & has high gas costs. Alt chains like AVAX & Terra solved that problem.

Crypto Lessons: More pressing the problem, the more money you can make.

Pressing problems are more likely to be solved ASAP & will make the most money. Identify problems — bad interfaces, high costs, poor experiences, long wait times — in your crypto journey.

The more painful it is to deal with, the more closely you should look at that space. Invest in protocols & projects that solve painful problems.

#2 Product & Value Proposition (Utility)

Investors want to understand the solution the startup is building to solve the problem.

* What is the tech they’re using? Is it feasible

* Is it actually solving the problem?

* What is the value created for the users

* ROI

Crypto Lessons: Read the white papers (they’re not as scary as they seem). As you read many, you’ll be able to gauge the feasibility & understand the tech. Or, read their breakdowns.

Projects that provide real utility will be the only ones making it. This is especially true for NFT projects.

* Mere pfp NFT projects are going to fail.

* Creating a token & staking it is not utility.

Winners:

* Solve a problem — “ making it easier for beginners to enter crypto” through GameFi is real value.

* Actually create & deliver long term, bet on projects that provide real value. That’s where the money is at

#3 Team

Teams make or break the team.

More than anything, investors bet on the team. A bad team with a good product will fail. A good team with a bad product can pivot & succeed.

Investors look for:

* Past experience & track record

* Ability to produce results

* Clarity & good communication

* How compatible & complementary the team is

Crypto Lessons: The team is just as important in crypto. If anything, more important. Doxxed (public profile accessible, e.g., twitter, linkedin) teams are the easier to analyze. Look for the same things that the investors do

Undoxxed teams are harder.

* Look at what they have achieved up until then.

* Are they communicative?

*  How do they answer tough questions ?

When you analyze a project, spend extra time looking at the team. Here’s my in depth guide on evaluating teams in crypto.

#4 Market

Big markets = big money.

At the end of the day, more people = more money. Often, Investors think of the best case scenario: What if this startup does everything right & succeeds. In that case, bigger market = more $$. Also, a small but growing market is good

Crypto Lessons: Gauge the size & impact You can use the market size to determine how long to hold. If a project checks the other boxes, bigger the market, longer you hodl. Look for small but growing spaces & what’s being built in these spaces?

#5 Competition

Investors need to understand the competition & how this startup is different

* Who are the competitors? How is this different

* Who failed in this space and why?

* What is this startup doing different

* What is the startup’s unique edge

Crypto is full of copied projects. The copies almost always fail. Don’t get caught holding a falling knife. Every NFT project is now making a metaverse. That is nothing special. Building another metaverse does not mean success. Look for projects that offer unique value.

When you’re analyzing a project, look at other projects doing similar things.

Is this project doing the exact same thing? Or does it provide some additional benefits ( lower costs, higher speeds, better experience)?

If it’s the exact same thing, why take a risk & invest in a newer protocol?

Look at failures in the space. Why did they fail? What is this project doing better?

#6 Go To Market Strategy

Investors want to understand how startup is going to be launched & how they will acquire users. Essentially, how they will market & grow themselves.

Crypto: Essentially this is community & marketing. Super important in crypto.

Understand how good their community is:

* Is there real engagement & genuine interest? Or are they just shilling the project & screaming rocketships?

* Is there thoughtful discussion & questioning?

* Does the team take in community feedback?

* How does the community react to obstacles?

You can make money off of blind hype & cults. But these are short term plays. Use tools like LunarCrush to gauge the social sentiment for each coin. Look at what the top influencers for each coin are saying. Is it valuable? Or are they just shilling their bags?

Is their marketing working? Look at Twitter & Discord. Look at the engagement on each post. Is it growing? Are they partnering up with the right people? How good are their community building efforts?

#7 Traction (Results)

Investors want to see proof in the form of results.

* How many users are using this? What are they saying?

* How many partnerships has the team formed?

* What results do they have to back their claims?

Crypto: Currently, a lot of crypto is in earn money then build mentality. This is not sustainable. Pixelmon made $70M before they had anything. This promotes scams & shitty projects.

Instead, invest in results.

Look at:

* The team’s track record.

* Number of Users

* Total Value Locked (TVL)

* Milestones hit

* Partnerships & Investors they’ve brought on This is especially important for undoxxed founders.

Summary

With that, you now know how to evaluate a startup & crypto project. Crypto is full of amazing projects & startups that are primed to explode. The next time you’re analyzing a project, make sure to look into these 7 things & you’ll 10x your investing.