How should Startups value domains?

Choosing the perfect domain name is crucial to the success of a startup. 

Businesses with the best domains continually rise to the top, this is not a coincidence.  Domains are an integral part of branding and marketing.  The closer a domain aligns with your brand the exponential impact it has on marketing.

Domains are more relevant today than ever because of how the customer journey and relationship now typically starts online.  Customers and investors evaluate your company by your domain name usually even before they engage with your site.

The most successful companies create a destination for their brand, and their domain is where they are found.  If you rely on someone else’s platform to communicate to your customers, then you run a serious mistake (link to my past post)

Startups with premium domains show leadership, confidence, and expertise in marketing which makes it easier to raise capital with investors.

Startups unitize domain names and resources depending upon their goal.

An article in the Wall Street Journal by Steve Blank breaks startups into six key groups.

Depending upon the goal of your startup, the ideal domain strategy will differ.  The domain investment and quality should be matched with the ability of the company to leverage the asset.

The core principals to domain selection still stand (C.O.N.V.E.R.T. and P.R.O.F.I.T.S) for all six startup groups.

The Six Key Startup Groups:

  1. Lifestyle Startups:

Lifestyle startups work to live their passion.  For example, they own a surf shop so they can surf every day.

Domain strategies may be focused on their personal name and typically involve adding multiple words together or adding suffixes to the end of their company name such as LLC or Corp.

  1. Small business startup:

This group represents the overwhelming majority of small business owners.  Their core objective can be described as working to feed their family.

This category consists of grocery stores, hairdressers, consultants, travel agents, Internet commerce storefronts, carpenters, plumbers, electricians, etc. They are anyone who runs his or her own business.  Typically, their only available capital is their own savings.

Domain strategies may be focused on their personal name and typically involve adding multiple words together or adding suffixes to the end of their company name such as LLC or Corp.

Small business startups still benefit significantly from shorter domains in their marketing campaigns.  A premium domain helps them build a local leadership position.

  1. Scalable startups

Scalable startups are created with the objective of going big.

Venture capitalist and Silicon Valley entrepreneurs aspire to build scalable startups.  The goal of these businesses is to become publicly traded or acquired.

Scalable startups require significant funding and investments and typically hire the best and brightest minds who have success in developing repeatable and scalable businesses.

Domain strategies should be focused on the perfect brand domain or category defining domain because of how this can be leverage to move beyond the startup stage.  The earlier they can acquire the perfect domain the better because they will be moving quickly and changing domains becomes a later date becomes difficult.

  1. Buyable startups

Buyable Startups are similar to scalable startups, however, find different ways to fund their growth.  They are looking to be acquired and typically walk away with millions, not billions.

Domain strategies should be the same as the scalable startup because of how premium domains support leadership positioning, marketing, and confidence.

  1. Social startups

Social startups are looking to make a difference not necessarily take market share.

Domain strategies should be focused on descriptive domains that quickly communicate the mission and goal of the organization.  They may benefit from many of the new domain endings.  Also, they typically find value in the .org or .net endings.

  1. Large-Company Startups:

Large companies continually have to reinvent themselves to stay relevant.  This requires acquiring other startups or building out new platforms.

Domain strategies should be focused on domains that complement their branding strategy or category-defining domains.  Salesforce is an excellent example of a large company building and acquiring startups.  Their recent acquisition of Code.com might be another product extension in the works.

Google Ventures portfolio is an excellent example of premium domains in action.

Top venture firms receive thousands of applications for funding each year.

A premium domain name communicates to VC’s that you understand marketing and branding.  VC’s want to pick out winners and a short, descriptive or category defining domain quickly instills confidence for their investment.

Check out this list of companies that Google Ventures has invested in and notice the strength of their domain name.

  • Gusto.com
  • Slack.com
  • Dialpad.com
  • Duo.com
  • DocuSign.com
  • Airwave.com
  • Tamr.com
  • FullStory.com
  • CircleUp.com

 

What Startups risk by waiting to upgrade their domain

Some websites encourage startups just to pick a domain and go with it and that they can always change at a later date.

We work with many startups who have taken this advice and realize they now need a new domain to acquire funding and to increase revenues.

Picking the ideal domain early on is important because the longer you wait the penalties for switching could be severe.

For example, any branding and SEO equity could be jeopardized.  The process for updating offline and online references include links to your old site can be very costly.

Just picking a domain with one of the new extensions (ex: .xyz, .game, .web) could also be a risk.  If a viable business is built on the .com your marketing dollars could be driving them business and create confusion with your marketing.  The longer you wait to acquire your ideal name the higher the risk that another company could buy the domain and build it out.

You can significantly lower your risk of failure by building your startup on a premium domain name.

Ways Startups can acquire a premium domain

Making an outright purchase of a premium domain can be difficult in the early stages of a startup.

If cash is an issue, a startup should consider a lease option or owner financing as a way to gain a premium domain.  This allows the business to start using the domain immediately and focus investment funds on marketing efforts.  This may not work for every domain and needs to be presented properly.  We recommend using a company like escrow.com to keep everything transparent.

You can always go the traditional financing route by using a company like DomainCaptial.com

Why it is smart to work with a domain broker for acquisitions

Although there are a general market value and trends for domain valuations the domain name industry is still very subject.  Often owners are in no rush to sell their domain name.  If approached the wrong way or if negotiations go south they may decide not to sell or double the price.

Using a domain broker allows you to approach the owners with stealth and keep anonymous.  This difference can be worth hundreds of thousands of dollars in the purchase price.

Media Options is an expert in private, discreet & professional domain acquisitions.  We understand how to structure lease options and owner financing.

We’ll help you determine fair market value, get a hold of hard to find owners & get you the best deal possible in the fastest and most efficient way possible, all while securing your identity.

Summary:

A startup can increase their chances for success by building their brand with a premium domain.

Domain strategies will differ depending upon the objective and outcome for each startup group.

Venture capital firms understand and value how premium domains build great brands, supercharge marketing efforts and instill credibility and category leadership.

There are many risks of building your Startup on a weak domain.

Working with a domain broker like Media Options opens up more possibilities for acquiring a premium domain.

Here are a few premium domains that Media Options is brokering that will make great brands: Crystals.com, Spree.com, eDNA.com, Heart.com, Aces.com

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