Thread by @a1rport_eth

(1/17) I am a mergers & acquisitions lawyer who conducts DD for my clients on their international investments. I have worked on projects valued well over USD 1b. Today I want to share my thoughts on how to diligence an NFT project, with @AzukiZen as a case study. A thread 👇

(2/17) Some disclaimer language: These thoughts are my own opinions and this is not financial/legal advice. I will also skip mentioning common DD items that people are mostly aware of (i.e. socials following, doxxed team, etc) and will be sharing things I see less mentioned.

(3/17) I will also be focusing on DD for projects which are launching new IPs, rather than a follow up collection in a series (e.g. Cool Cats versus Cool Pets). For simplicity, I will refer to these new IP NFT sales as genesis NFT offerings ("GNOs"), and the NFTs as genesis NFTs.

(4/17) Buying a genesis NFT is similar to giving angel or seed investment. In essence, the company (read: project) has not really started doing much at all yet to justify real value, and has only delivered a business plan (read: roadmap) of what they intend to do.

(5/17) This is not much since the pre-investment window is very short - but the devil is in the details. What we DO have access to pre-investment is a track record of the founders/devs in how they present their roadmap, and how they execute the actual GNO.

(6/17) Item 1: @AzukiZen's roadmap is not set in stone. They self-profess that roadmaps are restrictive and linear, demonstrating an understanding that web3 moves quickly, and indicating that a rigid roadmap may not be the correct tool to signpost future target milestones.

(7/17) This is confidence-building for investors. The team demonstrates a deep understanding of web3, while also performing consistently with their messaging of under-promising while overdelivering. Their "trust the process" mantra is built on the back of this consistency.

(8/17) Item 2: @AzukiZen's team handled the GNO with every little detail considered. Notably, they wrote their own contract standard for gas optimization, and deployed an innovative and sensible pricing model for mint (i.e. DA first, followed by WL at half DA sellout price).

(9/17) They also had mods/devs in the dc constantly spamming all relevant warnings at relevant times (at the risk of at times sounding like a broken record) - pre DA mint, it was the standard "trust no DM"; pre public mint (later axed), it was "do not mint if not experienced".

(10/17) The pricing was sensible since the DA determines market willingness to pay, while WL individuals still get benefit by minting at half the determined market price. Secondary value is preserved because minting didn't feel too asymmetric.

(11/17) As an aside, contrast this pricing model with another hyped recent project which minted at 0.088 for WL pre-sale, followed by a DA starting at 1.6+. Pricing was very asymmetric at around 20x, and secondary value fluctuated quite a bit post-mint and post-reveal.

(12/17) These actions signal that the @AzukiZen team is professional, meticulous, and organized. Individually, none of the actions are groundbreaking - but it's the fact that they were all considered that makes them collectively impressive. Reputation is built through action.

(13/17) If you're an early investor into a project , that short track record window is the only information you really have about the founders. If there is a project you really want to long-term hold, there should accordingly be a strong track record in that short window of time.

(14/17) This is not a perfect formula either - people make mistakes, and there is no guarantee the team won't mess up down the line simply because they executed well on their GNO. But as an early stage investor, you're effectively making a prediction with v limited information.

(15/17) All one can do is take the limited information available and extrapolate expected value. The point here is simply to look deeper than social media following, or hype surrounding a project, and look at how the actions of the founders dictate their approach to execution.

(16/17) Value is built long-term by continued performance and execution of the founders/devs. Their leadership and track record should therefore be among the most important factors in determining whether or not long-term value can be achieved.

(17/17) There are of course many other things to note, but these were particular points I noticed about the @AzukiZen team which made me bullish on the project, and which I thought were not mentioned enough in explaining why the project is en route to blue chip status. #ikz