Initial coin offerings (ICOs) have become the go-to funding option for blockchain startups who are looking to raise funds to take their project from an idea to a functional product. The success of ICOs, however, varies greatly. Some raise substantial funds while other miss their funding targets by miles.
One important factor that plays into the success or failure of an ICO is how much capital the startup has available to conduct a successful token sale. So, how much does it cost to launch an ICO? The quick answer is anywhere from $100,000 to $500,000. Here is why.
What Are the Essentials Required Before an ICO Launch?
In order to give your ICO the best chance at success, there are a number of factors you have to consider, including:
- The technology behind the project
- The whitepaper
- An online presence
- Appropriate communication channels
- The token
- Appropriate audits
- Regulatory issues
The first, and arguably most important, factor is the technology behind the project. It is important to consider the viability as well as the real-world applications of your project. Once you are sure that it is plausible your project solves a real-world challenge then it is essential to write down the details of the project in a whitepaper.
A whitepaper is a document that is intended to give potential investors an in-depth introduction to your project. The document details the technological aspects in a thorough manner so as to extol the advantages of your project. Moreover, the paper should outline how you aim to implement the technology to bring about substantial levels of market adoption.
A whitepaper is going to be the first impression you make on your potential investors. Therefore, it is important to ensure that the document is clear, concise, and well thought out as this is likely to have a bearing on the amount you raise during the ICO.
Secondly, before a project goes into the ICO stage, it should have an online presence through a good website, social media, and other communication channels. Creating a good website for your project communicates a certain level of attention to detail and professionalism that people are looking for before they put their money into a project.
Moreover, the website is another way for people to familiarize themselves with aspects of the project that are not available on the whitepaper such as important announcements and dates as well as the projects’ team members. Social media pages are also essential as they provide another layer of credibility to the project. They are also a way to disseminate any real time advancements relevant to the project.
Communication channels are important because they help grow a vibrant community that supports your project. Community participation can be an indicator as to the success of an ICO; therefore, it is important to create channels on Telegram or Slack where members of the community can interact with the project’s team as well as with each other.
Before launching the ICO, you need to create the token you will use during the crowdsale. Whether you decide to use an ERC20 token or a cryptographic token that is native to your own blockchain, you will need to develop the token adequately. Depending on your technical knowledge, you may need to hire a developer to handle the technical aspects for you.
Moreover, it is imperative to conduct thorough audits on the platform in order to ensure there are no bugs or pieces of code that can be manipulated by hackers to undermine your project. Unresolved bugs can lead to a hack which results in the loss of investor funds and, most probably, also a complete loss of credibility. Furthermore, any bugs in your software can lead to a malfunction in your project, which can greatly harm your ICO.
Lastly, to avoid any regulatory hurdles, it is important to have the right legal backing that allows you to navigate the token sale in a manner that ensures you are staying within the confines of the law. This also helps the project develop certain rules of engagement with the investor to allow for clear communication and to minimize the risk of any future litigation against the project.
While the things outlined above are the most necessary for a project to have before it launches an ICO, some projects may choose to include other things that can lead to a substantial increase in their budget.
How Much Does It All Cost?
It is possible to create a whitepaper for yourself at no cost. However, if you are unsure of your writing abilities, you can hire someone to create the document for you. Reputable writers will charge upwards of $5,000 to $15,000.
While it may be cheaper and easier to create a website for your project using templates, it is best to have one developed from scratch that provides a strong level of security to prevent hacks. Good website developers will charge from $5,000 on the lower range up to $20,000 on the higher range.
Creating social media pages as well as communication channels can easily be done by the team at no cost. However, to get the word out about the ICO, it is extremely important to engage in ample advertising and marketing. You may need to hire content writers as well as pay for ads on social media sites like Facebook and Reddit.
Moreover, due to the fact that the ICO space is a little crowded now, it may be necessary to include search engine optimization for your website in your project. This can help you grow interest for your project organically.
Marketing takes the lion’s share of the budget during an ICO launch. Depending on how much you decide to spend on each aspect of marketing, the costs are likely to be anywhere between $50,000 to $200,000.
Additionally, developers will charge based on the time they have spent on your project. Experienced developers are likely to charge upwards of $100 an hour. The average amount of time they will spend on your project is five weeks. This translates to around $18,000, assuming they work eight hours a day for five days a week. Moreover, auditing costs range from $10,000 to $50,000. Lastly, legal fees will cost upwards of $20,000.
Including salaries for the team as well as other miscellaneous costs, an ICO launch will cost $100,000 on the low end and up to $500,000 on the high end.
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