By: Raymond Hackney
Forbes did an article a couple weeks ago entitled "Should A Start Up Spend VC Funding On A Domain Name ?"
Today they just released the second article in the series. Build Your Startup On A Vacant Domain Name
From the article:
The secret of building a business on a Tier-1 domain name is that a
great domain name (short, memorable, meaningful, .com, etc.) is worth
millions—if and only if a real business can monetize it. ff Venture Capital has numerous companies which have acquired or launched with blue-chip domain names, e.g., Alerts.com, Gobbler.com, Identified.com, Patents.com, Phone.com, and Plated.com. Those domains are valuable because of the companies built on them, not because of the domains alone.
You don’t need a lot (or any) cash to get a great domain name.
Buying a domain name is like buying real estate – capital-intensive and
risky. The last thing a startup needs is MORE risk. That’s why our
portfolio company Plated.com decided to
structure a lease option – they offered the prior owner a small monthly
lease fee for 1 year, with an option to buy at the end of the year. This
way, if the business was thriving and Plated had managed to attract
capital, they’d be able to purchase the domain outright. If not, the
current owner would earn a healthy rent for his (as of then unused)
domain and would still retain ownership. In the end, Plated was able to
use the domain to prove out its minimal viable product for a nominal
amount of cash, raise capital, and purchase the domain in full.
Ari Rabban, CEO of our portfolio company Phone.com,
said, “I saw many great business opportunities in the telecom space
fail because of marketing. When I had my idea for a virtual /
cloud-based phone system, I could not imagine the ability to work with
such a domain, so it was a no-brainer when I had the opportunity to
build on the Phone.com domain. It gives us instant credibility, high
visibility in the search engines, and significant traffic, even apart
from the value of the services we have built on top of it.”