Now, exactly which criteria matter the most and the least depends on the project at hand. For instance, a project may be purely about the art in which case there’s no need for “utility”. And vice versa.

What you’ll read below is what I’ve learned from following and studying the leading investors and experts in the space. There’s obviously no such thing as a guaranteed success, but looking for projects that tick all these boxes should at least increase your odds.

The art

It may seem obvious that the art matters a lot when buying an image file, aka an NFT avatar. And it does matter most of the time. But it may not be exactly in the way you think.

First up, what constitutes “good art” is highly subjective. Some like detailed 3D work, others prefer the simple hand-drawn kind. Some like to see lots of bright colors, others like the subdued or monochrome style.

What’s more, some artwork stands out not by being objectively “high quality” but rather by being funny, cool, silly, weird, or memeable. We have seen art with these characteristics do well on multiple occasions. Sartoshi’s mfers collection is a great example of this.

Three highly successful NFT avatar projects with very different art styles (Cool Cats, CloneX, and mfers)

Following a popular trend or art style can be a positive. The thick-line hand-drawn style that goes all the way back to Cool Cats or the anime trend that’s currently raging on, for instance. But the art needs to be distinguishable from what’s already out there and deserve its own spot on the NFT scene.

Key takeaway: Look for unique and interesting art

When it comes to NFT avatars, art does matter. But it doesn’t have to be an artistic masterpiece in the traditional sense of the word. Rather, it needs to evoke a strong enough emotional response in a large enough group of people. Does it make you laugh and want to share it with others, for instance?

Utility, roadmap, and mission

Art and utility are in many instances seen as contradictory. You don’t buy a piece of art for its “utility”, nor would you ever ask an artist for a “roadmap”.

In the NFT world, there’s plenty of room for this type of art. Lots of digital artists are creating amazing works that are simply meant to be admired and collected as art. Some NFT avatar collections are even created as such.

For most NFT avatars, however, it’s typically a little different. While having some aesthetic qualities, the most important part of an avatar is the access and features it represents. Owning it may make you a co-owner of a business, give you access to a closed community, or work as your character in a game.

Some examples of what to look for (Coolman’s Universe, Rumble Kong League, and Squishiverse)

Lots of projects are just copying what everyone else is doing though. Some make grand promises that sound great in theory but aren’t realistic. You want to find that sweet spot of innovative and exciting, yet feasible.

Key takeaway: Find NFTs with tangible and innovative utility

When looking at an NFT as an access key, it becomes obvious why a project’s long-term mission is so important. Some projects are all about the art but most aim to build a business and provide utility to their NFT holders. This is really the main thing you need to understand before buying a new NFT.

Team and partners

Many successful investors subscribe to the old adage of betting on the jockey, not the horse. In other words, invest in great teams rather than ideas. This is particularly important when you’re buying into something as an investor.

If you take this seriously, you may want to rule out a large number of NFT projects that have completely anonymous teams. For the ones with identified founders, it’s worth looking into their backgrounds and how their experience sets them up for success in their new NFT endeavor.

Having a well-known and successful founder, advisor, or investor is usually a good sign as well. People like these serve as a seal of approval and can add a ton of value by leveraging their audience and network.

In addition to evaluating the team and partners on paper, you should also assess their work and communication in practice. Are they meeting their deadlines? Do they have an active Twitter presence and provide quick and thoughtful replies on Discord? Do they host live AMAs? And so on.

Much of this also boils down to the size of the team and whether the team members are working on it full time or not. You can’t demand much from a project that’s run by one person in their spare time.

Key takeaway: Find experienced, skilled, and dedicated teams

Anyone can make a cool landing page and an exciting roadmap. Very few can successfully launch and build over time. When you’re investing in a project, you’re really investing in the team’s ability to deliver on their plans and promises. Make sure you’re investing in the right people.

Community (aka demand)

You will hear most NFT market participants talk about community as one of the keys to success. Many project founders talk about it as their primary goal. In fact, the word is used so much that it’s become a bit of a cliche.

There’s a good reason why it’s used so much though. A big part of most NFT projects is their Discord chats, online events, and IRL meetups. Furthermore, when we’re talking about NFTs as investments and applying a more analytical market perspective, “community” simply means demand.

As with any other investment vehicle, its price is simply a function of supply and demand. Simply put, if there are more buyers than sellers, the price goes up. Thus, it’s important to assess how many people want to buy a certain NFT.

Some obvious metrics to look at are a project’s Twitter following and number of Discord members. Next, it’s important to look at the engagement on both of these platforms. Those 100,000 Discord members are probably bought or fake if a new announcement only gets 50 reactions.

The most popular NFT projects have Twitter followings in the hundreds of thousands

Other ways to assess the actual strength of a community, aka the demand for a project, is the number of interactions on Twitter posts, the activity in the Discord chat, how many people join whitelist raffles for the project, and the number of boosts in its Discord server.

None of these metrics are perfect though and everything can be bought or faked. High numbers, therefore, are not necessarily representative of actual buyers or real community members.

Just as with the founding team, having some high-profile supporters on the buy-side is usually a good thing for a new project. If some popular YouTubers or popular figures on Twitter talk about the project, they’re both giving it their seal of approval and helping to promote the project.

Key takeaway: Find large and engaged communities

The price of a financial asset is a function of its supply and demand. Look for projects with sufficiently large followings relative to their supply. A project with 10,000 NFTs and 5,000 Discord members most likely won’t sell out or be a good investment, at least not in the short term.

Commercial rights

Your rights to use your NFT for commercial purposes vary a lot from one project to the next. Some projects give you full commercial rights, known as No Rights Reserved or CC0. Others maintain complete ownership of the brand and rights to monetize it.

For most NFT collectors and investors, this honestly doesn’t matter too much. But it’s definitely worth being aware of and considering for yourself. There isn’t a “right approach” for all projects either. It really depends on what the founders are trying to create and what you’re looking for as an investor.

Key takeaway: Know your (commercial) rights

There’s no right or wrong when it comes to commercial rights in the NFT space. But you should at least consider if you have a strong preference in either direction and make sure you understand the commercial rights before buying into any new NFT project.

Tokenomics and launch mechanics

In addition to all the fundamentals covered above, it’s also worth considering a project’s tokenomics and launch mechanics. These aspects can both impact a project’s launch itself, as well as its longer-term success. Here are a few things to consider:

• Supply. We already touched on this in relation to the demand side. Is the supply appropriate for the demand, i.e., neither too small nor too big?
• Price. Are the NFTs priced too high for your own budget, the overall demand, and the current market conditions? If they’re perceived to be too expensive and don’t sell nearly as many as the team hoped, they will likely lack funding for upcoming plans and cause poor sentiment among buyers.
• Pre- vs public sale. It’s commonplace for a new NFT project to have a pre-sale, but it can be done in multiple different ways. For one, the mint price might be substantially lower in the pre-sale. This isn’t a problem in and of itself, but it creates the risk of pre-sale buyers listing their NFTs below the public mint price, basically killing the public sale in the process.

Key takeaway: Look for fair tokenomics and launch mechanics

What’s “fair” obviously depends on the project, but it’s important to dig in and understand all the launch details. Is the supply and mint price reasonable? Will you be at a serious disadvantage by not being in the pre-sale? How many NFTs are even left for the public sale, if any?

Blockchain

If you’re new to the NFT space, it’s also worth getting an understanding of the different NFT ecosystems that exist. Most of the trading volume takes place on Ethereum which is also where the most well-known and valuable collections live. Think Bored Ape Yacht Club, CryptoPunks, Doodles, Azuki, etc.

Many experienced NFT investors swear by Ethereum and have no faith or interest in NFTs on other blockchains. Some dabble in NFTs on Solana, Tezos, WAX, Binance, and others. But very few investors, relatively speaking, use these as their primary blockchains over Ethereum.

Magic Eden and objkt.com are two of the most popular NFT marketplaces on Solana and Tezos respectively

Key takeaway: Know your blockchains

NFTs on Ethereum are still your safest bet. The Solana and Tezos blockchains aren’t far behind but don’t yet have the same attention and staying power as Ethereum. You can still find cool and interesting NFTs in other ecosystems and they’ll likely be cheap — but also a lot riskier.

In summary

There’s no guaranteed formula for investing success in the NFT space. It’s highly risky and speculative, promising projects end up going nowhere, and what you think is amazing artwork may not resonate with anyone else.

That being said, there are certain criteria that most of the best NFT investors all seem to look for. And all these criteria seem pretty sensible:

1. Look for unique and interesting art
2. Find NFTs with tangible and innovative utility
3. Find experienced, skilled, and dedicated teams
4. Find large and engaged communities
5. Know your (commercial) rights
6. Look for fair tokenomics and launch mechanics
7. Know your blockchains

I hope this made you feel a little better prepared to go find some interesting NFT projects yourself. If it did, and if you want to learn how I find new drops early, I’d recommend checking out this guide I wrote👇

How To Find the Best Upcoming NFT Launches Early