Cost to Build STO Platform in 2024

Last updated on August 16th, 2024

As the popularity of blockchain technology continues to rise, more and more businesses are exploring its fundraising potential. One popular method is through Security Token Offerings (STOs), which allow companies to raise funds by offering digital securities backed by tangible assets. This innovative approach not only opens up new avenues for investment but also adds a layer of security and transparency that traditional fundraising methods often lack.

The process of developing an STO platform involves a variety of factors that can greatly impact its overall cost. These factors include regulatory compliance, technological infrastructure, smart contract development, cybersecurity measures, and user onboarding systems. Each of these components requires careful planning and execution to ensure the platform operates smoothly and meets legal requirements.

In this article, we will discuss these various components and provide insights into estimating the cost of developing an STO platform. We will also explore some real-world examples to illustrate how different businesses have successfully implemented STOs, shedding light on best practices and potential pitfalls to avoid. Whether you’re a startup looking to raise capital or an established company exploring new fundraising methods, understanding the intricacies of STO development can provide a competitive edge in the rapidly evolving blockchain landscape.

Introduction of STO Platform

But before diving into the cost of developing an STO platform, let’s take a closer look at what exactly an STO platform is and how it differs from other fundraising methods.

An STO platform is a digital marketplace that facilitates the buying and selling of security tokens. These tokens represent an ownership stake in a company or its assets, making them subject to securities laws and regulations. This sets STOs apart from Initial Coin Offerings (ICOs), which offer utility tokens that do not have any underlying value or ownership rights.

STOs are often viewed as a more regulated and secure alternative to ICOs, offering investors greater legal protection and potential for returns. This has led to the rise in popularity of STOs as a fundraising method, attracting both traditional investors and crypto enthusiasts alike.

Now that we have a better understanding of what an STO platform is, let’s explore some key components that are essential for its development.

How Does The STO Platform Work?

The first step in developing an STO platform is to determine the type of security tokens that will be offered. These can include equity, debt, or hybrid tokens that combine elements of both. Next, the company must adhere to all necessary regulatory requirements for offering and selling securities. This includes registering with the appropriate government agencies and obtaining any necessary licenses.

Once these legal steps are completed, the company can begin marketing its STO and accepting investments through the platform. Investors can purchase security tokens using cryptocurrency or fiat currency, depending on the options provided by the platform.

After the fundraising period is over, investors receive their security tokens which they can then hold, trade, or sell on secondary markets. The value of these tokens is determined by the underlying assets or company performance, making them potentially valuable investments for investors.

To ensure transparency and compliance with regulations, STO platforms often have features such as Know Your Customer (KYC) and Anti-Money Laundering (AML) procedures in place. These help to verify the identity of investors and prevent fraudulent activities.

Also Read: 5 Crucial Things You Should Know About Blockchain Technology

5 Popular STO Platforms

1. Securitize

Securitize is a comprehensive platform that offers end-to-end solutions for tokenization, issuance, and management of security tokens. By leveraging advanced blockchain technology, Securitize provides unparalleled transparency and efficiency in the creation, distribution, and lifecycle management of security tokens. This includes features such as automated compliance, real-time cap table management, and streamlined investor onboarding processes. These capabilities ensure that both issuers and investors benefit from a secure and seamless experience in the rapidly evolving digital securities market.

2. Polymath 

Polymath is a pioneer in the security token space, having launched its platform in 2017. It offers a one-stop solution for issuers to create and manage compliant security tokens on the blockchain. The platform also provides access to a network of experts such as legal counsel, KYC providers, and liquidity providers to help with the issuance process. Polymath’s unique ST-20 token standard allows for customizable security features based on regulatory requirements, making it an attractive option for companies looking to raise funds through STOs.

3. Harbor 

Harbor is a platform that focuses on regulatory compliance and investor protection for security tokens. It offers issuers the ability to create and manage compliant security tokens, with features such as automated KYC/AML checks and investor accreditation verification. Harbor also provides a secondary trading platform for liquidity and allows for seamless integration with traditional financial systems. With its focus on compliance and protection, Harbor is a popular choice among companies looking to conduct STOs.

4. Tokensoft 

Tokensoft is another platform that offers end-to-end services for security token issuance and management. Its platform includes features such as automated compliance, investor onboarding, and secondary trading capabilities. Tokensoft also provides tools for managing shareholder communications and distributions, making it a comprehensive solution for companies looking to tokenize their assets. Additionally, its partnership with leading law firms ensures compliance with regulatory requirements in various jurisdictions.

5. Securrency 

Securrency is a blockchain-based platform that provides services for both security token issuance and secondary trading. It offers customizable smart contracts to meet various regulatory requirements, as well as automated compliance checks for KYC/AML and investor accreditation. Securrency also has partnerships with major exchanges, making it easier for issuers to list their tokens for trading. With its focus on regulatory compliance and liquidity, Securrency is a popular choice among companies looking to raise capital through STOs.

How to Launch Security Token Offering? 

Launching a security token offering involves several steps, including choosing the right platform, conducting proper legal and regulatory due diligence, and marketing the STO to potential investors. Here are some general steps to follow when launching an STO:

1. Preparation 

The first step in launching an STO is to prepare the necessary legal and marketing documents. This includes drafting a whitepaper that outlines the details of the offering, such as the use of funds, project roadmap, and token economics. It’s also important to consult with legal counsel to ensure compliance with securities laws and regulations.

2. Pre-STO 

Before launching the actual Security Token Offering (STO), it’s common to conduct a pre-STO or private sale to accredited investors. This preliminary phase can help in raising initial funds and generating interest in the project, providing a crucial financial and promotional foundation. It also offers an opportunity to test the underlying technology and processes, ensuring that everything runs smoothly and securely before opening up the offering to a wider audience. By addressing any issues early on, the project team can make necessary adjustments and improve the overall success rate of the STO.

3. STO for Accredited Investors 

Once the pre-STO is completed, the main STO can be launched for accredited investors. During this phase, companies need to pay particular attention to legal and regulatory compliance, as securities laws vary across jurisdictions and can be quite complex. Companies must ensure that all documentation is accurate and transparent, providing clear information to potential investors. It’s also essential to carefully vet potential investors to ensure they meet qualifications set by regulatory bodies, which might include income thresholds, net worth criteria, or professional certifications. Effective communication and thorough due diligence are crucial during this stage to build trust and ensure a smooth process.

4. Post-STO 

After the STO has concluded, companies must continue to comply with securities laws and regulations. This includes providing regular updates and financial reports to investors, as well as fulfilling any promises made during the offering. Companies should also have a plan in place for managing post-offering investor relations, including handling shareholder inquiries and addressing any potential disputes that may arise. Additionally, it’s essential to continually monitor and adapt to changes in regulatory requirements, staying up-to-date on compliance obligations.

How Much Does It Cost to Develop an STO Platform?

Developing a Security Token Offering (STO) platform can involve a significant investment, with costs varying widely based on factors such as the complexity of the platform, the level of customization, and the geographic location of the development team. Generally, the cost to develop an STO platform ranges from $50,000 to $200,000. This estimate includes various stages of development:

• Initial Planning and Research: This phase can cost between $10,000 and $30,000. It involves understanding regulatory requirements, market analysis, and defining the project scope.

• Design and UX/UI Development: Expect to spend around $15,000 to $40,000 to create a user-friendly and visually appealing platform. This includes wireframing, prototyping, and user interface design.

• Core Platform Development: The actual development of the STO platform, which includes backend and frontend development, smart contract integration, and security features, can cost between $20,000 and $100,000.

• Testing and Quality Assurance: Rigorous testing is essential to ensure the platform operates smoothly and securely. This phase can cost between $5,000 and $20,000.

• Compliance and Legal Services: Ensuring that the platform meets all legal and regulatory standards can add $5,000 to $10,000 to the project budget, depending on the jurisdictions involved.

• Post-Launch Maintenance and Support: Ongoing maintenance and customer support can cost approximately $1,000 to $5,000 per month.

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5 Factors Affecting the Cost of Developing STO Platform

In addition to the development stages, several other factors can impact the cost of developing an STO platform. These include:

1. Platform Features and Complexity

The cost of developing an STO platform will vary depending on the features and complexity required. For example, a basic platform with standard features such as token issuance, investor management, and wallet integration will be less expensive than a platform with advanced features like KYC/AML compliance, secondary market trading, and multi-currency support.

2. Development Approach

Different development approaches can be used for creating an STO platform, such as building from scratch or using existing blockchain frameworks. Building a platform from scratch will generally be more costly and time-consuming compared to using pre-existing templates or frameworks.

3. Development Team Location and Expertise

The location and expertise of the development team can also have a significant impact on the cost. Development teams located in regions with higher labor costs or specialized in blockchain technology may charge more for their services.

4. Type of Token Standard

The type of token standard chosen for the Security Token Offering (STO) will also significantly affect development costs and overall project complexity. For example, creating an ERC-20 token on the Ethereum blockchain may be less expensive and straightforward, given its widespread adoption and extensive documentation. In contrast, developing a security token using a more complex standard like ERC-1404, which includes additional regulatory and compliance features, can be more costly and require more sophisticated development expertise. These choices will impact not only the initial costs but also the long-term maintenance and scalability of the project.

5. Maintenance and Support

Another factor to consider is the ongoing maintenance and support costs for the STO platform. Depending on the chosen development approach, there may be additional costs for updates, bug fixes, and security audits. It’s essential to budget for these ongoing expenses to ensure the long-term success of the project.

5 Ways to Reduce the Cost to Develop STO Platform

While developing an STO platform can be costly, there are several ways to reduce these expenses and make the process more efficient. Below are five strategies that companies can use to lower development costs:

1. Prioritize Core Features

One of the most effective ways to reduce STO platform development costs is to prioritize core features and functionalities. By focusing on essential functions first, such as token creation, issuance, and management, companies can save time and resources during the initial development phase. Additional features can be added later as needed.

2. Leverage Open-source Technology

Leveraging open-source technology can also significantly reduce costs as it eliminates the need to develop everything from scratch. There are various blockchain frameworks, smart contracts, and other tools available for free that can be used to build an STO platform quickly and cost-effectively.

3. Adapt Agile Development

Adopting an Agile development methodology can also help reduce costs by allowing for more flexibility and continuous delivery of features. This approach promotes collaboration, frequent testing, and early detection of issues, which can save time and resources in the long run.

4. Outsource Strategic Task

Outsourcing strategic tasks, such as legal compliance, security audits, and marketing, can also help reduce costs. These tasks require specialized expertise and can be time-consuming for in-house teams. Outsourcing these responsibilities to experienced professionals can save both time and money.

5. Consider a Cloud-based Solution

Implementing a cloud-based solution can also help lower development costs by eliminating the need for expensive hardware and infrastructure. By using cloud services, companies can pay for only what they use and scale up or down as needed, reducing overall costs. Additionally, cloud solutions offer enhanced flexibility and accessibility, allowing teams to collaborate from anywhere in the world. This means businesses can respond more quickly to market changes and customer demands, ultimately driving innovation and growth while keeping expenses in check.

Read More: Top 13 Real-World Applications of Blockchain Technology

Why Should Entrepreneurs Develop the STO Platform?

Developing an STO platform can bring numerous benefits to entrepreneurs. Here are some reasons why entrepreneurs should consider developing an STO platform:

1. Global Reach

An STO platform can facilitate the investment process for both domestic and international investors by offering a streamlined and efficient process. This opens up opportunities for entrepreneurs to reach a larger pool of potential investors, significantly increasing their chances of securing funding. By breaking down geographical barriers and providing a secure, transparent environment for transactions, these platforms can attract a diverse array of backers, fostering innovation and growth in various industries. Additionally, the use of blockchain technology ensures the integrity and security of each investment, further enhancing investor confidence.

2. Transparency 

One of the main advantages of an STO platform is its transparency. By leveraging blockchain technology, all transactions are recorded on a public ledger that can be accessed by all parties involved. This level of transparency not only increases investor trust but also helps prevent fraudulent activities and ensures compliance with regulations. Entrepreneurs can utilize this transparent system to showcase their business’s financials and provide investors with a clear understanding of their investment opportunities.

3. Increased Liquidity

The traditional methods of investing in private companies can be lengthy and complicated, often requiring investors to commit their funds for an extended period. STO platforms offer a more liquid option for investors, allowing them to buy and sell digital securities quickly and efficiently. This increased liquidity can attract a broader range of investors, including those who may not have been able to participate in traditional investment opportunities previously.

4. Cost-effectiveness

STO platforms also offer cost-effectiveness in comparison to traditional fundraising methods. Companies can save on expenses such as legal fees, underwriting fees, and listing fees associated with traditional IPOs. Additionally, the use of blockchain technology streamlines the issuance process, reducing administrative costs and creating a more efficient and cost-effective fundraising method for businesses.

5. Future Potential

The rise of STOs has sparked excitement and speculation on their potential for the future. With the use of blockchain technology, there is potential for even more innovative features to be incorporated into STO platforms, such as smart contracts and automated dividend payments. This could lead to a shift in how securities are issued and traded in the future.

Types of Security Token Offering Development Services

STO platforms offer various services related to the development and issuance of digital securities. Some common services include:

1. Asset Token Development

Asset token development involves the creation of digital tokens backed by real-world assets, such as stocks, commodities, or real estate. These tokens represent ownership of the underlying asset and are issued on blockchain platforms.

2. Equity Token Development

Equity tokens represent ownership in a company and can be used to raise funds through STOs. These tokens provide investors with rights to dividends, voting power, and other benefits similar to traditional stocks.

3. Debt Token Development

Debt tokens act as digital bonds, representing a loan given by an investor to a company or entity. These tokens have fixed interest rates and maturity dates, making them attractive to investors looking for stable returns.

4. STO White Paper Creation

STO white papers are a crucial component of any successful STO. These documents outline the project’s goals, team, token economics, and other important details for potential investors. STO platforms often offer services to help businesses create comprehensive and professional white papers.

5. STO Website Development

A well-designed and user-friendly website is essential for any STO, as it serves as the primary source of information for potential investors. STO platforms can assist in creating and maintaining a professional website that showcases the project’s key features and attracts potential investors.

Comparing Custom STO Development vs Ready-made Options

Tech Stack For STO Development

How can iTechnolabs help you to build the STO Platform?

iTechnolabs is a leading technology consulting and development firm that specializes in building custom STO platforms. With our expertise in blockchain technology, we can help you design, develop, and launch an STO platform that is tailored to your specific needs and requirements.

Our team of experienced blockchain developers has a deep understanding of the latest blockchain frameworks and tools, allowing us to create secure, scalable, and efficient solutions for our clients. We follow industry best practices and use agile methodologies to ensure the timely delivery of projects without compromising on quality.

• Customizable Solutions: We offer bespoke STO platform development tailored to your unique business requirements and compliance needs.
• Blockchain Expertise: Our team possesses extensive knowledge of leading blockchain platforms such as Ethereum, Hyperledger, and Polkadot, ensuring robust and future-proof solutions.
• Smart Contract Development: We provide expert smart contract development using tools like Truffle, Hardhat, and OpenZeppelin, ensuring secure and efficient token operations.
• Front-end and Back-end Development: Our proficiency in front-end frameworks like React, Angular, and Vue.js, coupled with strong back-end support using Node.js, Express.js, and Django, guarantees seamless user experiences.
• Database Integration: We integrate reliable and scalable databases like PostgreSQL, MongoDB, and MySQL to ensure data integrity and high performance.
• API Development: Utilizing APIs like Web3.js, Ethers.js, Alchemy, and Infura, we enable seamless interaction with blockchain networks.
• DevOps and Continuous Deployment: Our expertise in DevOps tools like Docker, Kubernetes, and Jenkins facilitates continuous integration and deployment, ensuring rapid and reliable updates.
• Security and Compliance: Utilizing security tools like MythX, Slither, and Securify, we conduct thorough audits and implement robust security measures to protect your platform.

Are you planning to build an STO platform?

Selecting iTechnolabs for your Security Token Offering (STO) platform development brings a plethora of advantages that can significantly enhance your project’s success. With a team of experienced professionals, cutting-edge technology, and a proven track record of delivering high-quality solutions, iTechnolabs ensures that your STO platform is secure, efficient, and scalable. Additionally, their comprehensive support and customized approach cater to the unique needs of your project, providing you with a competitive edge in the market.  Here are some key benefits:

• Expert Team: At iTechnolabs, our team comprises seasoned blockchain developers, financial experts, and legal advisors who work synergistically to deliver comprehensive and compliant STO solutions.
• Tailored Solutions: We understand that every business has unique needs. Our customizable STO development ensures that the platform aligns seamlessly with your specific business model and regulatory requirements.
• Cutting-edge Technology: Harnessing the power of leading blockchain platforms like Ethereum and Polkadot, we provide robust, scalable, and future-proof technology solutions.
• Enhanced Security: Security is paramount in the realm of digital assets. Our stringent security audits and usage of advanced tools like MythX and Securify guarantee fortified protection for your platform.
• Efficient Smart Contract Development: Leveraging top tools such as Truffle and OpenZeppelin, we deliver efficient and secure smart contracts for smooth and reliable token transactions.
• Seamless User Experience: Our expertise in modern front-end and back-end technologies, including React, Angular, Node.js, and Django, ensures that users enjoy an intuitive and engaging experience.
• Scalable Database Solutions: With reliable database integration like PostgreSQL and MongoDB, we ensure that your platform handles data with integrity and high performance, even as it scales.
• Continuous Deployment: Utilizing the latest DevOps tools ensures that updates and changes are deployed smoothly and promptly without compromising the platform’s stability.
• Comprehensive Support: From concept to launch and beyond, iTechnolabs offers ongoing support and maintenance to ensure the continuous success of your platform.

Important: What is Blockchain Technology and How Does It Work for Real World

Conclusion:  

The success of a Security Token Offering heavily relies on the underlying technology and development process. At iTechnolabs, we understand the critical role technology plays in launching a successful STO and therefore offer comprehensive services to cater to your specific needs. From cutting-edge technology to enhanced security measures, efficient smart contract development to seamless user experience, scalable database solutions to continuous deployment processes, and ongoing support and maintenance – our STO development services cover all aspects of creating a robust platform that aligns with your business model and regulatory requirements.

Frequently Asked Questions

How Much Does It Cost To Develop ERC20 Token?

The cost of developing an ERC20 token can vary depending on various factors such as the complexity of your project, the features and functionalities you require, the specific development team you choose, and other associated costs. At iTechnolabs, we offer competitive pricing for our STO development services that are tailored to meet your unique requirements. We also provide transparent costing structures and flexible payment options to ensure a satisfactory experience for our clients.

How Long Does It Take To Develop the STO Platform?

The development timeline for an STO platform can vary depending on the complexity of your project, the features and functionalities you require, and other factors. Typically, our team at iTechnolabs can develop an STO platform within 3-6 months, ensuring a swift yet thorough development process without compromising on quality.

How Much Does it Cost to Hire Blockchain Developers?

The cost of hiring blockchain developers can vary depending on their skill level, experience, and the scope of your project. However, at iTechnolabs, we have a highly skilled and experienced team of blockchain developers who are well-versed in developing STO platforms and other blockchain solutions. We offer competitive pricing for our development services and flexible hiring models to cater to your specific needs.

What Are the  Key Features of the STO Platform?

Some of the key features of an STO platform include:

• KYC/AML integration
• Token issuance and distribution management
• Investor dashboard for easy token purchase and management
• Smart contract creation and deployment
• Compliance with securities regulations
• Multi-currency support for investment options
• Investor reporting and analytics tools

What Are The Future Trends For STO Platforms?

STO platforms are still a relatively new concept, and the technology is constantly evolving. Some of the future trends for STO platforms include:

• Increased adoption by traditional financial institutions
• Integration with other emerging technologies such as AI and IoT
• Enhanced security measures to protect against cyber threats
• Investment opportunities in various industries beyond just real estate and startups
• Implementation of tokenized securities regulations by governments around the world.