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ICO Market 2018: Numbers And Expenses Evaluation

09 October 2018 15:49, UTC   |   5545
ICO Market 2018: Numbers And Expenses Evaluation

ICO and cryptocurrency market was a huge hype this year. But despite of the fact that the growth rates in recent months aren’t the same as they have been at the beginning of the year, ICOs still collect huge budgets, taking a prominent place in the global economy. In August, for example, the result was almost $1 bln raised. With TOP projects collecting $100 mln dollars and more, the consumer asks where all these incredible budgets go and whether IСO is an easy way for rapid enrichment.

Today, we will look at all aspects of ICO implementation in 2017 and 2018 and talk about which ROI can be expected by the average creator of the blockchain project these days.

ICO building blocks

In 2017 according to ICOBazaar leading experts:

  • Pre-ICO part (including whitepaper, smart contract etc.) costs around $70,000.

  • Marketing part: a month of programmatic advertising, banner placement, search engine advertising - costs $120,000 - 150,000 including agency fees (10% of the amount on average)

  • PR: about $30,000 a month plus direct costs of about $50,000.

  • Community support: about $5,000 (inhouse) - 10,000 (agency) per month

Total in 2017: $250,000 - $300,000 for a project with a one month ICO

In 2018 according to Quantalysus experts:

  • Pre-ICO part: $80,000+ for basic services

  • Technology, including KYC/AML services, ICO landing page, smart contract and token: $10,000 (for a freelance developer) - up to $250,000 (for a development company).

  • Legal support, including legal consultation, entity setup, agreements, whitepaper and lending page legal review: $20,000 - $100,000

  • ICO consulting, including white paper consulting and co-development, token design and economy model, roadmap: $12,000 - $100,000

  • PR, including cryptonews media, media outlets, press release distribution: $20,000 - $50,000

  • Advertising, including ads on crypto sites and Telegram channels: from $17,000 a month

  • ICO trackers listing with featured status: $10,000 - $30,000

  • Bounty on Bitcointalk: $4,000 - 12,000/monthly +2-5% of Bounty Tokens

  • Community support in Telegram: $6,000/month

Total: $200,000 - $1,250,000 for an ICO on average (preparation costs + one month sale).

How to reduce costs

  • Having good developers in your team, you can create all the technical part yourself without outsourcing. But experienced developers rate is $100 an hour, and if they are not co-founders ready to work for shares or for the sake of future success, you will have to pay them up to $18,000 (for 8h/ 5 days/ week).

  • It’s also possible to create a whitepaper by yourself without involving any specialists.

  • You can have a cheap website created from basic templates, but this may harm the perception of the project since the site is the project’s face on the early stage.

  • You can also use your team members to communicate with your community without hiring community managers, but you’ll need lots of time for that, answering all the same questions day by day. But usually it’s a task for a 24/7 group of managers, so you’d better consider hiring at least one of them.

How much agencies want

  • According to Cryptocurrencyhub info, top ICO-agencies (ICO BOX, for example) charge up to 40 BTC for setting up full ICO, which is $267,000 (at September 27th rate).

  • Priority token offers “Full support” package for $200,000 and marketing and investment packages for $95,000 and $75,000 respectively.

  • Amazix asks $7,900 for the cost assessments upfront.

  • Others do not disclose prices.

How much ICO Trackers want

  • ICO Bench charges 40 BTC for “Premium Hit” package that will last 30 days.

  • ICO Bazaar has various options from $200 to 3 BTC

  • ListICO offers Gold listing package for 0,08 BTC.

Exchange listing costs

One of the important elements of an ICO is listing your token on crypto exchanges. An agreement with an exchange is often an additional factor in attracting investors. However, we must take into account that the cost of this event is extremely high, although the leading exchanges prefer not to disclose prices.

According to ICOBazaar data, average top-10 crypto exchange require 30-50 BTC for listing. That gives us minimum rate of $300,000.

According to Autonomous Next data, the market price to list a crypto token on an exchange from a TOP-10 list is $1,000,000 for a reasonably regarded token, to $3,000,000 for an opportunity to get quick liquidity.

How much ICO raise

The funds that an ICO can possibly raise do not have an upper bound. We’ve already published a series of articles about most successful ICOs in history (Part 1, Part 2 and Part 3). The highest amount in history was raised by El Petro ($5 bl), EOS ($4,2 bl), Telegram ($1,7 bl).

But we need to take into account that El Petro is a Venezuelan project, whose goal was to create a national cryptocurrency to circumvent US sanctions and all investments were raised during private sale and investors are not disclosed. Telegram also never went public using ICO rumors for generating hype. While EOS, a strong project, was conducting a one-year-long token sale, maybe one of the longest ICOs in history. In 2017 the most successful result was Hdac with $258 mln.

Normally hyped projects can expect to raise around $200 mln best case scenario, but more likely the result would be around $100 mln. For example top projects that closed ICO in August were tZERO with $134 mln, KitToken with $117 mln, Hedera Hashgraph with $100 mln.

But according to ICOBazaar recent data projects more often plan a hard cap to be less than $20 mln. And it looks like the average is on the slide. The average hardcap during summer 2018 didn’t exceed $4.4 mln (we exclude anomalous caps above the billion USD from average calculations).

All the costs vs Hard Cap

As we have seen, an approximate price range for the ICO-launch package will cost you $200,000 - $1,250,000 for a project with a one month ICO.

Let’s not forget the salaries of the team members. Average startup has a team of 5 to 20 people. If we assume that they’re working for annual salary of $70,000 to $130,000 and also receive tokens, it gives us additional $25,000 to $150,000 costs/month.

There are also post-ICO costs when you have to continue marketing process and support community, providing up-to-date information about your progress: $50,000 - $100,000.

Let’s add here ICO Trackers prices (3-5 BTC/ $20,000 - $30,000) and crypto exchange listing ($300,000 - $3 mln)

An average ICO with a hard cap of $5 mln, half a year of product development and 1 month ICO will have to spend minimum $200,000+$25,000*6+$50,000+$20,000+$300,000 = $720,000 and up to $5,280,000.

And here it is necessary to take into account that in our example we seriously underestimate the costs for the team and advisors, and also do not take into account the company's expenses (office rent, conferences and meetups and other operating expenses). Also in addition, the minimum salary of $5,000 is a utopian amount, which will be satisfying for either interns or real fans of the project who really count on success in the future.

Conclusion

What does it all mean? If you compare the cost of an ICO in 2017 and 2018 ($250,000 vs $1 mln), you will get a 400% difference. In fact, it turns out that the cost of an ICO today is so high and unaffordable that teams are desperate to find funds and investors that will support their project at a private stage. And they can’t get the same ROI other projects used to in 2017.

ICO costs can be 10% to 50% of the funds raised. Given that the market now has the highest competition, the price of a wrong decision is extremely high. Some startups even admit that they are forced to refuse to raise funds through an ICO precisely because of the huge number of pitfalls in this area. It turns out that ICO is not "easy money" at all, and success of ICO depends on the quality of product and team proficiency.

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