13 Oct If you want to do an ICO (or a TGE) these are the steps you need to take and the approximate costs involved:
1. Have a really good idea where there is a natural fit with the blockchain and token technology. Sounds simple, but there are already so many me-too products out there, or companies trying to shoe-horn themselves into an ICO. The cost? You get to think up the idea for free.
2. Legal fees. Are you going to issue a utility token or will your token be classed as a security? It’s never a good idea to play fast and loose with the SEC, the Commodity Futures Trading Commission or the US Financial Crimes Enforcement Network, so make sure you get good advice. Check out this article: https://www.stellar.org/blog/3-common-misconceptions-about-ICO-law/. Attorneys in this field will cost you anywhere from $250 – $1000 per hour, and you should budget around $100,000 – $150,000 depending on the complexity of your offering.
3. Tax and domicile considerations. If you think it’s easy to setup a robust offshore tax shelter, think again. Here are some questions you need to know the answer to: Does the jurisdiction have a clear definition of cryptocurrency? A high quality regulator? Proper corporate formations? Favourable tax policy? Clear AML and KYC guidelines? Data privacy laws? Access to or proximity to major markets? Consumer and investor protection? Established legal system? Here’s a great article on this: https://www.linkedin.com/pulse/how-choose-best-jurisdiction-initial-coin-offering-collin-thompson/. The cost? Budget $50 – $100,000 depending on who you use – the big four will charge up to $1200 per hour.
4. Jurisdiction, non-US domicile costs. Your tax advisers may recommend a non-US domicile for your token launch, in which case you should budget $15,000 – $20,000 per annum for the incorporation and annual costs for the incorporation and costs for the non-domiciled directors and compliance.
5. White Paper. The white paper is a critical component of the ICO. A successful white paper describes the project, the token sales and distribution method, the token redemption method, economic considerations and security issues, details of team members and their backgrounds, and an insight to the mechanism for creating long term value. The cost – budget $10,000– $15,000
6. Developing a community around your idea. There is a hugely active community of potential ICO investors on Reddit, Medium, Telegraph and Slack. If you want your ICO to be successful you have to be able to access the community that are already holding the major cryptocurrencies as they are the natural buyers of your token, assuming all things are equal. You will find that there are a number of players that are active on all these channels, so check out http://bit.ly/2ew5xMw for a list of these sites and resources. It’s difficult to forecast the cost involved in this as much of it will be your time researching where your target market hangs out.
7. Get some feedback on your idea from the community and experts in the field. As of July this year $1.27 billion dollars has been raised through ICOs. So there have been a number of ICOs where the companies concerned are doing it right. You need to know if your token sale is going to resonate with the community which is becoming more sophisticated in its choice of investible ICOs. You will need a decent PR company to help you build your public profile and ideally you will be picked up by the major commentators, such as https://www.smithandcrown.com
8. Design the crowd sale mechanism. This is technical and market-driven mechanism that you will need to put in place to be able to distribute your tokens to the crowd. It involves the rules of the crowdsale, the time lengths involved, the number of coins distributed, how the coins are distributed, how you are ensuring the security of the contract and coins and the multi-sig mechanisms that need to be involved. Check out https://zeppelin.solutions and budget $75,000 to $100,000
9. Security of the smart contract behind your token offering is critical. You may have heard about the attack on the DAO where $60m of Ether was lost to the hackers (see http://bit.ly/2ymLhYm). Token launches need a formal audit document in order to successfully complete their fundraising process. Check out https://solidified.io, https://newalchemy.io/contracts/ and https://zeppelin.solutions. You will need to budget $20,000 – $50,000 depending on the number of independent audits you carry out.
10. Pre and post-launch marketing. So how long is that piece of string? Depending on the level of take-up you have achieved with your community build in the early stages, you should budget $30,000 to $50,000 in additional PR, advertising and marketing costs to ensure your successful launch.
Like any crowdsale, it takes time to build up the momentum and the interest in your ICO sale. If you don’t build that community and support foundation from the outset it is unlikely that your ICO will be successful. It’s not a path to easy riches and if you get it wrong you’ll be facing the wrath of the regulators. As an overall budget, you won’t get much change out of $300,000 if you want a successful ICO, or Token Generation Event as they’re now increasingly being called.
Now, about that idea….