What it takes to create a successful ICO? How expensive it is? Your complete guide
TL;DR: It costs about $60.000 USD to create a successful ICO from scratch considering that you’re creating a truly useful product and investors are getting a nice amount of benefits. Want to know the details? Keep reading…
Today I was discussing with a business man on upwork about Smart Contract developent in order to help him run his ICO. Then, I got asked this unexpected question:
What is the cost to get set up and ready to market an [ICO] launch?
What he actually meant was:
“What do I need to do and how much will it cost me to run a successful Ethereum ICO?”
I know so because, as a Smart Contract developer myself, I see a lot of new startups raising up in the Ethereum ecosystem which inevitably makes me wonder what kind of effort they had to put out to get there.
That’s why in this article I’ll explain you as best as I can what it really takes to create a successful ICO from the beggining.
Note that I’m not an expert when it comes to running ICOs. I haven’t executed one yet, but I’ve seen how a lot of these startups develop. So take this guide with a grain of salt.
The Price of the ICO
In order to create a successful ICO you’ll need to spend money and time on the following things:
- The whitepaper: A good whitepaper must be done by the founders and reviewed by experts to perfect the idea. If your budget is limited, don’t spend money on the whitepaper and do it yourself.
Cost: $0 USD
- The website of the company: Any decent startup will have a professional looking website to show off their vision, their goals and their plans. The quality of it depends on how much you pay.
When you run an ICO you want to cause the best possible impression to the future investors so you’ll have to spend at least $5.000, up to $10.000 USD because in that range the price-quality ratio is the highest.
You’ll find a lot of good developer in sites like upwork.com. Take your time when selecting them. I’m a web developer myself and I know that the best websites are made from scratch, that’s why they will be more expensive than any pre-made wix or wordpress template.
Cost: $5,000 USD
- The token Smart Contract: If you want to raise money, you’ll need an ERC20 compliant token. This is a token that is easily tradable on exchanges because implements common functionality like a
transfer()function to move the token from an address to another.
Unless you’re one of the few Smart Contract developers that can deliver a secure ERC20 token, you’ll need to hire someone else. Now, Smart Contract developers aren’t easy to find because the best are running their own ICOs.
That’s why you have to be a bit optimistic with the people that propose to work with you, because they may not have the experience but the ability to create that token.
Good Ethereum developers are scarce. It’s new technology that has been around for about 2 years where 1 year ago was almost unknown and the documentation is scarce.
People have to learn from a lot of different places which complicates the learning process, thus resulting in a very small amount of Smart Contract developers. My point is that you shouldn’t be surprised to see rates of $200 USD per hour and above, it’s a small price for the possible millions of an ICO.
You can find developer in upwork.com, ethlance.com, jobs.ethercast.com, linkedin.com, twitter, youtube, facebook, indeed.com, remoteok.io and others.
A good Smart Contract developer with experience easily charge more than $100 USD per hour. From my experience, for the creation of a custom ERC20 token, I would need about 2 weeks to write the code, test all the possible changes and run security audits.
Working full time 8 hours at that rate, 5 days a week will cost $8.000 USD dollars to finish your custom token. Remember that you don’t want to rush the process so 1 week is too low to deliver quality code. Give the developer time to guarantee the security of the contract.
Cost: $8,000 USD
- The Crowdsale ICO Smart Contract: This is the program that will run the ICO to distribute tokens to investors in exchange for their ether. Because each startup is different and has different terms, this could get really complicated.
Therefore, to create a secure Crowdsale ICO Smart Contract with all the testing I would need about 2–3 weeks of development. At a rate of $100 USD it will be about $10,000 USD dollars for this contract.
It really depends on how much conditions you want to apply to the ICO. Things like changing the rate of tokens per Ether, limiting the access to a whitelist of pre-registed individuals and adding security checks takes a good amount of time to get it right.
Cost: $10,000 USD
- Smart Contract audits: These contracts will handle real money so security is a must. It’s impossible to guarantee the complete security of a contract but there’re things like Smart Contract audits that will help you find the most suble vulnerabilities.
The price of a professional audit from a reputable company could cost as much as $50,000 USD dollars but you can get by with an audit from an experienced individual for about $10,000 USD dollars.
Choose your best option depending on your budget. You can read more about the importance of secure audits here: https://www.ethnews.com/the-importance-of-audits-and-secure-coding-for-smart-contracts
Smart contract code security is a serious issue and shouldn’t be taken lightly. An investor’s money could be put at stake in a smart contract, and a simple bug could make a significant investment disappear for no reason other than a lack of audit.
Cost: $10,000 USD
- Marketing: Probably the most important step. Your ICO won’t get anywhere unless the curious investors notice it’s presence. That’s why you have to spend a lot of time and resources promoting your ICO in places like:
Reddit: in subreddits such as /r/ethereum and /r/ethtrader. You should buy a promoted post to get extra attention.
Social media: twitter, instagram, youtube, medium, google and facebook. You have to publish content habitually in all the possible platforms to inform your users about the progress of the application and everything about the ICO. Specially medium because it has a lot of viral potential.
Communication channels: such as slack or telegram. Slack is having lots of problems with scammers trying to fool people to take their hard-earned money. Telegram is good because it’s easy to use although it doesn’t have an easy way to send important announcements.
Use your time wisely. You don’t want to spend time creating facebook post or instagram images. Let a community manager do that for you. You could hire one for as little as $10 USD per hour.
If he works full time from monday to friday, that will be about $400 USD per week. Which is roughly $2000 per month. Enough to have a create abundant content and manage those communication channels. Maybe 2 community managers if you feel like creating tons of content.
Likewise, you’ll need to go where the investors use to spend their time on internet. Cryto dedicated subreddits, ethereum news websites, social media and forums.
You’ll reach them manually by creating content, providing useful information first.
Buy forum signatures and be active in bitcointalk.com, it’s the biggest for cryto related topics.
With paid advertising from google ads, facebook ads and forum ads you’ll gain faster traction with good results. About $5.000 USD dollars will give you a decent user base of capable investors.
Don’t forget email marketing. It’s the best way to maintain a close relationship online with lots of busy individuals. Be personal with them, tell them your story and your vision to get them as excited as you are when creating the startup.
Use it in combination with paid advertising. Facebook ads has a fantastic feature to generate leads directly on their platform. Use it and abuse it to grow your company to, at least, 2000 qualified leads.
Mailchimp is the tool of my choice because they it’s free up to 2000 emails and they recently added marketing automation to send autorresponders for free. Essential to create powerful campaigns before your ICO starts.
Remember that there isn’t a better platform or system. Get to all the possible places on the internet and, if your product is good, you’ll get paying shareholders.
Cost: $2000 USD per month for a community manager and content creator and $5000 USD for paid advertising
Depending on your startup, you’ll need to create a beta software to show people that you’re serious about the goals of your whitepaper. The price of it depends on your product. Invest what’s required to have a polished result.
- Legal Stuff: Your ICO needs a corporate entity for its legal structure. Therefore to better protect the ICO individuals from personal civil or criminal action, you need to incorporate and indemnify.
Investors into you ICO need a modicum of protection that your ICO is not a scam and by ensuring that your ICO has been review by a knowledgeable legal representative in the realm of securities regulations again will lend credibility to the ICO.
Cost: $20,000 USD for legal fees.
Finally, summing up everything it will cost you:
$0 for the whitepaper + $5,000 for your website + $8,000 for the token + $10,000 for the crowdsale contract + $10,000 for audits + $2,000 for a community manager and content creator + $5,000 for paid advertising + $20,000 for legal fees
The total is $60,000 USD dollars to create a prosperous ICO and at least 3 months to create a polished presentation of your product, whitepaper and so on.
That’s pretty much about it. You see that an ICO startup isn’t an easy process. It requires tons of work from development, to management and marketing in all the possible platforms. Hire excellent individuals to construct a business that’s worth investing into.
Remember to manage your money wisely before and after the ICO. This is a business that only gets paid once or twice, during your ICO and pre-ICO if you decide to do so.
Have backup systems to recover in case you run out of funds. Companies like district0x have reserved tokens for future ICOs in case the price of ether drops and they need financing.
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