I am very interested in this project and the Blockstack idea is unarguably a good one.The Blockstack team is also solid. My question is about the funding allocation. As with a lot of these software based ICOs, I don’t understand what costs so much? There are probably more costs than I am aware of, but 44 Million seems steep for a team of programmers. Where is the money going?
Muneeb talks about this a bit at 1:58 in this video: https://www.youtube.com/watch?v=gC31RtZBYrA&t=1m59s
It’s typical for companies funded by venture capitalists to raise money in stages. Alternatively, blockchain projects typically do their fundraising through a single token sale event at the start of the project.
Blockstack uses a novel concept whereby money from the token sale is only available to them when certain milestones are reached. For example, only 20% of the money raised is available to Blockstack immediately following the token sale. If the milestones are not reached, that remaining money is refunded to investors.
This structure is so that their single token sale event follows a path more similar to the venture capital model and the company gets more money as progress is made.
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Thank you for the reply. I did notice this funding in stages and it is reassuring. I still would like to know where the actual money is going. I really don’t have any idea what things cost on this scale. 20% of 44 Million is still a large number. Because I don’t know anyone running a business on this scale, I really don’t have an idea of the costs. Building costs for a year, salaries for a year, equipment, marketing, etc.
This Reddit thread comically voices my concern: https://www.reddit.com/r/CryptoCurrency/comments/6ipg9v/who_do_icos_need_so_much_money/
20% of 44M is ~8.8M. Without specific consideration to Blockstack, business costs include staff salaries and benefits (healthcare, 401k, etc.), office spaces and the usual infrastructure costs (machines, office furniture etc. etc), servers and other tech infrastructure (both physical and cloud), travel and conference expenses (both attendance and hosting), and other things that don’t occur to me at the moment (i.e. BTC burns for various reasons). That adds up pretty quickly and 8.8M will only get you so much ramp (time) before you’re out of cash.
To give you just a single data point, the average salary of a Sr. developer in NYC is $112,567 today according to Glassdoor. In the models I’ve been aware of, you typically multiply that by 2.5 to factor in some of the other costs (i.e. healthcare, 401k, insurances, office space etc.). So lets assume $250k / year and note that Blockstack has at least 4 developers–that right there could be $1M / year in burn rate alone. You can see how $8.8M sounds like a lot, but might not go as far as you would imagine.
Note that I’m not an insider and none of the details above are specific to Blockstack, they’re merely for illustrative purposes.
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