Start Up Exchange Costs

[JollyGood]

I am looking to invest in a crypto related business from anything such an exchange to a payment processor, I am open to any ideas for investment. I saw several posts on this forum for businesses looking for investment so I sent an interest offering to consider investing in them.

I will not be mentioning the name of the person that sent me the message nor mention the start-up by name however after I posted a message on his thread mentioning I would consider investing I received a message stating that he was looking for $40,000 as an initial milestone and then once that was reached it would be $200,000 for the next:
Hello, sorry for the delayed response. My email notifications stopped working for a few hours and I missed your message. We are looking for investors, our first milestone is setup at $40,000, but once that's hit it jumps to around 200k. If you're wanting to talk, I can give you my Skype or phone number and we can discuss over that? We are working on the drafted business plan to send to our potential investors and hoping to have that finished up shortly

This was my reply:
Hi, no problem about the delay, good to hear from you. Sorry but in my opinion $40,000 is a lot of money for the first milestone alone. People have launched their own exchanges for less than a tenth of that amount in the past and they are not worth $40,000 even after a significant time trading. I definitely would like to invest in a crypto exchange and maybe even merge own start up bitcoin payment processor for websites to integrate in to it at some stage but the figures stated do not make this a viable investment for me.

I wish you success in your project but I will not be able to invest.

After I sent a PM back, politely declining to invest I received this reply:
I wasn't asking you to invest that much at all, was just stating our first milestone. And with all due respect, I don't think you have any idea how much an exchange costs to startup. You do realize this is a financial corporation, correct? $4,000 (your one tenth proposal) is maybe enough to cover C-Corp and lawyer fees. Developers, marketers, legal advisers, care agents, do not work for free. Development is not free, and neither are servers. Getting booths at Bitcoin and digital conferences worldwide, is not free. Not sure if you were misunderstanding the business type, or though we may have been another alt coin or what, but this is a multi-million dollar company, and if you think $40,000 is too much then you are in the wrong field to be investing in. $40,000 for a startup is actually significantly low to bankers and investors, not quite sure you are ready to be playing in the game yet. Once again, not trying to be rude or anything, however I'm also not going to be soft about it. You're not ready for any financial investment until you get a better understanding of how actual, legal businesses operate within the United States.

Now, I am not going to comment on the condescending aspects of the reply vis-a-vis my the polite message I sent wishing him success. I would however take the opportunity to advise anyone who considering investing in any business here to think long and hard about it.

This one claims to be a multi-million dollar company yet is seeking $40,000 as a first milestone then even though it claims to be a multi-million dollar company will further seek $200,000 for the next milestone.

Apart from researching the viability of any business, my advice is to try to get to the know the temperament of those running the project because if they have a superiority complex or anger management issues then they probably will not be the sort of people you want to be dealing with regardless of whether things go positive or negative with the project.

In most cases I see no difference between the "hype" generated by the get rich quick altcoin launches from a few years ago or most ICOs today, with any business claiming they will be a certain success when they have not even traded.

In my opinion, in alot of (not all) cases it would be better to have a project manager as an investor/shareholder, then have the technical team as shareholders within the business too rather than ask for people to invest unless significant funds were required. Like I said, in my opinion and also not in all cases.

Keeping all that aside, what costs do you think are involved in starting up an exchange nowadays? As a start up, how much do you think exchanges such as Nova, Polo and Yobit invested to get off the ground? What sort of costs are involved for example, if say an exchange launches covering just a few altcoins then continues adding 5 or 6 altcoins a month to increase customer options and along with it also increases the hosting capacity for extra traffic and daemons. What about dedicated server hosting costs, benefits, pros/cons versus AWS EC2 and alike? Legal fees would be minimal. Thanks to forums like this and various social media it would be free to get the word out there literally.

In your opinion when Coinpayments was started as a payment processor by two brilliant coders from this forum a few years ago, how much do you think they invested money-wise to get going? They probably did not start with 60+ currencies at launch so must have added them step by step. Also the manner in which they hosted their daemons may have changed over time and evolved too. All that shows you can start a business and grow with a small investment rather than pump money in to a business that quite frankly, has not even started and has no proven track record. When I was thinking to start my own bitcoin payment provider for ecommerce websites, I used two servers. One server ran the php UI website for the sign-up process and client account. The other ran the bitcoin daemon which generated wallets for new customer transactions then updated the php server with the bitcoin confirmations, updated the order for the client UI and sent sent the cap number of bitcoin offshore in the event of a hack. Both were for test purposes only and hosted at AWS at minimal costs. I am now reviving that project and might launch it.

It would be hard anyone for provide ballpoint figures but just as an estimate using BTC and LTC as the base and then say 5 popular altcoins to start with:

- If someone had the technical know-how and could set it up how much would be the minimum investment required to launch a crypto exchange?

- If someone did not have the technical know-how to set it up, how much would be the minimum investment required to launch a crypto exchange?

Thanks

[Quartx]

Why would you randomly trust others on a free for all platform on the internet? Much less on one that promotes anonymity and on cryptos?

I imagine you sending your funds to the other party if he actually askes you to.

You want to start an exchange, are you going to deal with fiat? Read up on anti money laundering laws, where do you want to start your exchange in? Country? Location?

So many questions you should know beforehand, if you don't even do enough research or don't even know the answers to these little questions I wrote, chances are you can't afford to setup one or you do not have the business acumen to start one.

Do let us know the website if u intend to start one of your own, or if u revive that old project of yours, it's going to be fun for a few of us here.

Having the software and the hardware or the backend services means nothing if you do not have a legal team.

[LAETI]

if you are talking about Poloniex of course you will need money and strong team to get an exchange like poloniex...i saw alot exchange here, i m not sure they had 40.000 to start. A c-corp will not cost you alot, legal fees, other documents..but its depend where you are planing to incorporate , usa? panama? or in caribean?

[JollyGood]

Why would you randomly trust others on a free for all platform on the internet? Much less on one that promotes anonymity and on cryptos?

I imagine you sending your funds to the other party if he actually askes you to.

You want to start an exchange, are you going to deal with fiat? Read up on anti money laundering laws, where do you want to start your exchange in? Country? Location?

So many questions you should know beforehand, if you don't even do enough research or don't even know the answers to these little questions I wrote, chances are you can't afford to setup one or you do not have the business acumen to start one.

Do let us know the website if u intend to start one of your own, or if u revive that old project of yours, it's going to be fun for a few of us here.

Having the software and the hardware or the backend services means nothing if you do not have a legal team.

Maybe someone thinks it will cost $50,000 to set this up and run for 6 months on a 6x quad core load balanced server with 32GB ram and 60GB SSD with 2x failover MySQL DB servers running with 240GB SSD all behind hardware ASA 500x Cisco firewall. Maybe someone thinks it will cost $2,000 to set this up and run for 12 months on a 1x dual core server with 8GB ram, 500GB and running MySQL on localhost behind an IP based firewall. People will have their own opinions.

As mentioned in the opening post, it would be hard anyone for provide ballpoint figures but just as an estimate using BTC and LTC as the base and then say 5 popular altcoins to start with:

- If someone had the technical know-how and could set it up how much would be the minimum investment required to launch a crypto exchange?

- If someone did not have the technical know-how to set it up, how much would be the minimum investment required to launch a crypto exchange?

With regards to an starting my own exchange, I do not have the coding skills to launch one though I would like to be part of a project at some stage.

if you are talking about Poloniex of course you will need money and strong team to get an exchange like poloniex...i saw alot exchange here, i m not sure they had 40.000 to start. A c-corp will not cost you alot, legal fees, other documents..but its depend where you are planing to incorporate , usa? panama? or in caribean?

Hi LAETI, thank you for the reply. I am based in the UK. AMLs do not exist in every country. Many organisations are based in one country, have their servers/hosting in another country and register themselves as a limited company incorporated in a third offshore country/territory such as Jersey or Panama. When you say about Poloniex not having 40,000 to start, how much would you estimate their start up capital to be?

[theroryshow]

Gentlemen,

If you are interested in being part of any type of exchange please understand that the expense is going to go up in a couple years simply from the changes in regulations. I know that here in the U.S. the process of really looking into regulating crypto is just beginning. Once new regulations kick in the expense will skyrocket.  I would also look into how one can open up gateways on decentralized exchanges and how that might be a new business model.

[JollyGood]

Gentlemen,

If you are interested in being part of any type of exchange please understand that the expense is going to go up in a couple years simply from the changes in regulations. I know that here in the U.S. the process of really looking into regulating crypto is just beginning. Once new regulations kick in the expense will skyrocket.  I would also look into how one can open up gateways on decentralized exchanges and how that might be a new business model.

Thank you theroryshow. I am not sure but a few years ago it was some sort of introduction of pending regulations that forced the creators and owners of Coinpayments to sell up to a non-US based individual.

Regulations will no doubt also be coming in to the UK and EU but until then I think it is possible for the existing ones to operate and improve their services. In the event that you are correct about expenses skyrocketing after the introduction of future regulations then maybe it is better for any start-ups to open as soon as possible rather than later.

[frompublic]

lat year i asked two engineer to develop an exchange site for me.

Price was  $3500 ( Hardware and software)
               $2200 (Legal fees)
Total        $ 5700

ppl will have diferent opinion.

[JollyGood]

lat year i asked two engineer to develop an exchange site for me.

Price was  $3500 ( Hardware and software)
               $2200 (Legal fees)
Total        $ 5700

ppl will have diferent opinion.

Many thanks frompublic. The costs quoted to you last year are similar to the mark coders were quoting a few years ago minus the legal fees.

Did you ever think of making the developers part owners of the business because doing so would have two significant benefits:

1) the majority of developer fees would be exchanged for shares/equity thus initial costs would be lowered
2) as developers would be shareholders they keep highly involved in the business as it benefits their own interests

In the event coders are simply "hired" they would need to be hired and re-hired as and when developments/modifications or security patches/updates are required and access will be left open to paid hired developers.

In my opinion one of the biggest security issues is that hired coders (as wonderful and great as many are) have the capability of keeping a backdoor open to access the site and therefore the wallets. I think it would be better to part with shares/equity than cash-for-paid-coders as it keeps the cash within and encourages the developers to stay on top. If I manage to get an exchange going I would be looking to make it my number one priority because developers would be essential for the security and coding of the whole project whereas I can simply fund it and project manage.

[pixie85]

You asked for it OP, when you posted that you want to invest. If you went on into the street and started screaming "I've got money and I want to invest in a business!" who do you think would respond? Would you trust these people who come to you saying they need money and have a business idea?
As an investor you have to review these offers as you did. Lesson learned, keep trying.

[BitcoinMongolia]

Hi Angel Investor!

Have a look at this one.

https://bitcointalk.org/index.php?topic=1946998.0

[JollyGood]

Hi Angel Investor!

Have a look at this one.

https://bitcointalk.org/index.php?topic=1946998.0

Thank you for the link. I had seen your thread before but did not send a message as I have no desire to invest in it.

I wish you success in your business.

[freemanjackal]

every startup require a lot of money to start, at least that begin like hobby and after getting a good product attract some investors, it is different if starts like a project hiring all the staff..developers are expensive

[senyorito123]

You cannot actually know the real cost if you ask for the price for random people around here and might truly better if you seek some legal advises on those legal advisers who have experience on running a exchanger or might find those devs and build some partnership with them so that you can run smoothly your dream business with less hassle.

[shamzblueworld]

Coincidentally, I opened the project development section to ask the same question, but as there is already a thread;
and from the comments so far, I think the cost could be significantly reduced if one could make a team of owners/shareholders rather than one individual owner hiring people to create the exchange.
And what better platform to get your team together than bitcointalk forum.
I mean lets say the total cost is around $10,000, if there is a team of 10-20 people(including developers, designers, marketers), not only the cost will reduce, but it will be easier to manage and run.
But getting the right people in, is the main issue.

[JollyGood]

@ freemanjackal
Yes you are right. I was asking about costs related to a small start up and grow with time


@ senyorito123
I agree. I think the partnership alliance is a good idea but at this stage it is just about trying to fathom estimated costs


@ shamzblueworld
I agree. Getting the right people in is one of the biggest issues and also obstacles to starting a project. Like you I also prefer to consider giving shares to developers rather than hiring them. I hope there might be some posts here that show examples of server costs and also server configurations.

[DOMAINBROKER]

get a developer for long time , it always a good idea, i remember in september 2016, i had an exchanger site , a scammer from Pune india hacked the site and make me lost 11BTC , 1= $640. and the sad thing the dev is from pune india.
@JollyGood i agree with you, partnership aliance is a good idea.

[DayVid_GI_DEV]

Starting up an actual exchange seems rather risky. Imagine going through an ordeal like MtGox.
Have you considered starting or investing in an ALTCOIN? I'm not talking about one of those pump & dump sh*t coin Ponzi schemes, but one that will actually go somewhere. Just food for thought.
I'm part of a development team for a project that has been in the works for about a month. I'll share the link to the pre-announcement.

https://bitcointalk.org/index.php?topic=1879760.new#new

[shamzblueworld]

get a developer for long time , it always a good idea, i remember in september 2016, i had an exchanger site , a scammer from Pune india hacked the site and make me lost 11BTC , 1= $640. and the sad thing the dev is from pune india.
@JollyGood i agree with you, partnership aliance is a good idea.

If you know the guy is from a certain location, did you actually try to trace him and get back what you lost to him? Or at least filed a complaint against him? 11BTC is quite a big amount now in India.

[tinyteapot]

I can provide you with an exchange scripts, i have many of this script but they are old versioned because the developer have not updated another since 3 years back but that have to do with the engine and not the surface interface which any front end designer can complete without stress.

I can donate this script if we are to work together as a team.

We do not need any legal or bank fees if we are to trade and exchange crypto currencies only.

[JollyGood]

@ DayVid_GI_DEV
Many thanks for the reply. I would not like to launch an altcoin as I see no reason because the market is saturated. Even if there is a 'good cause' behind the project (there have so many in the past) the reality is it is all about making money and most of that money is made when exchanging the altcoin for bitcoin. Sure I would never like to go through an ordeal like MtGox but no harm in trying to ascertain the set-up costs of an exchange nowadays.

@ tinyteapot
Thank you. I will send a PM