Driven by a common misconception that ICOs are an inexpensive endeavor to be engaged in, a lot of founders find themselves dealing with immense bills that they have not anticipated while launching an ICO. Ivan Aleksandrov, the CEO of Memorandum Capital, an investment company focused on ICOs and investing in blockchain-based assets, dwells into real costs of ICOs and all the expenses of the preparation for private- and public-sale.
My clients very often address me with questions with regard to ICOs and how much they cost, being disillusioned about all the specifics and characteristics of the entire process. The ICO market is currently undergoing crisis, so I will describe the process of holding an ICO based on the market realms as of August, 2018.
The first part of the article will outline the main stages that are important to keep in mind while preparing for the ICO process.
Every ICO starts with the work on the white paper, the general documents, landing and presentational materials for prospective investors. It is necessary to be able to have enough of resources reserved, as, according to my estimates, well-written and prepared documents and the presentation, along with the budget-creation and the design of materials, will cost the founders from 30.000 to 40.000 USD.
Translation of all the documents is an important step to consider. You should be prepared to be charged from 0.20 to 0.40 dollar cents per word. The services of interpreters specialized in ICOs and blockchain, however, can cost much higher: if you are translating a 60-100 page document with graphs, the total cost can be estimated to 3.500 USD.
I will not advise you to save on translation services as low-quality material can play not in your favor. I also do not recommend translating the main documents into a lot of languages due to the fact that, and it is especially true in case of legal translations, the final content can end up being inconsistent language-wise.
The total estimate of all the additional services occurred while preparing the necessary documents can be amounted to 60.000 – 70.000 USD, including 30.000 dollars spent on the translation of the white paper in different languages, one-pager, other tech documents, web-site, etc.
Legal support is another important issue to consider. While having a wide range of options, I will most certainly not advise you to do it on your own. It is important to consult professionals, who will be able to provide you with qualified services and ensure full compliance with the law. The price range will depend on the jurisdiction, contractor and chosen structure, for example, I have clients who paid more than 500.000 USD to KPNG
, what, as you can tell, is rather a lot.
I would amount all the costs connected to the registration of the company, opening of a bank account and other legal support services from 100.000 to 150.000 US dollars. Sometimes, however, in cases of the registration of simple tokens and when all the necessary documents are already prepared, the general bill can be only 60.000 USD.
The registration of the company concludes the preparatory stage, upon the completion of which you can proceed to business development that starts from the private-sale and attraction of funds from major investors.
In general, in order for the private-sale to be held successfully, it is required to visit around 20 cities several times with personal meetings, private events for potential investors and PR-campaigns in local media. The total cost, including the transportation and living expenses, can be amounted to approximately 3.500 USD, depending on the locations.
Around 10.000 USD should be reserved for the PR- and advertisement campaign in the preferred location. Apart from that, another 10.000 dollars will be spent on the organization of the event for your target audience and investors, if you are planning to attend it with the other startups. You should be prepared to pay twice as much, if you are looking for the option of organizing the event on your own. The budget, however, can be decreased by reducing the number of locations.
Roadshows can be combined with the participation in major conferences, what will also help you to avoid additional transportation expenses. It will cost you around 20.000 – 25.000 USD, including participation fees and pitch-writing costs. I would also reserve another 100.000 USD for the purpose of expending your media presence and conducting PR-campaigns internationally.
The private-sale will eventually cost you 400.000 – 700.000 USD. After its completion, the public-sale can be launched. The cost of funds attraction, depending on the project, can be equal to 20 percent from investments. In the best-case scenario, you will be able to make 100 dollars from every 20 dollars invested, in the worst-case – the same amount from a 50-dollar investment. Additionally, you would have to invest around 1.000.000 USD in order to have your public-sale extensively advertised in cryptomedia and other social media channels.
You will be faced with additional expenses like entering the stock exchange after your ICO is completed. Depending on the kind and conditions, it will cost you from 250.000 to several million dollars. It is also important to keep in mind taxation rates that can vary from the jurisdiction and be equal to 15-20 percent of the amount raised.
Additionally, 5-10 percent of the funds you were left with will be directed to consulting services and brokers. So, an average ICO budget can approximately be amounted to several million dollars, including all the private- and public-sale expenditures and entering the stock exchange.
It is a common misconception that conducting ICOs can be an easy and inexpensive endeavor to engage in. Based on my experience, I can most certainly tell you that you should consider all the pros and cons and financial obligations that you will be faced with before making the decision to launch your ICO.