I believe that a good domain name is an important success factor in building and launching consumer web services. It’s not in my top 10 but it could be. It’s certainly something we think about a lot when making investments and working with companies post investment.
A number of our portfolio companies have acquired their domain names in connection with or shortly after our investment. Del.icio.us purchased Delicious.com with some of the proceeds of our investment. Foursquare purchased Foursquare.com with some of the proceeds of our investment (they launched with playfoursquare.com). We’ve advised and assisted a number of our portfolio companies in this effort.
A good domain name is short and memorable. It doesn’t need to mean anything. Etsy is a good example of this. The word etsy doesn’t have any meaning in the english language. But it is short, memorable, and fits well for a handmade marketplace. As a marketing person once told me “find a name that means nothing and inject your meaning and brand into it.” All you need to do is a google search on Etsy to see that is what they’ve done with that word.
I remember walking home one afternoon from the office on the phone with Mark Pincus. He had launched texas hold’em on Facebook operating under the name Presidio Media. We were talking about what he should call the company. He knew it needed to be a consumer brand. He said “Domains are so hard and expensive. I’d like to use a name I already own.” And he precded to list a bunch of names he owned. He stopped at zynga.com which was his dog’s name. I said “you own the .com of your dog’s name?” He said “of course I do.” I told him I liked the idea of naming the company after his dog and it had the added benefit of being a short and catchy name. He agreed it was a good idea. A few weeks later, after thinking about it some more, running it by a bunch more people, that was the name Mark chose. It is a fantastic name and brand.
That conversation with Mark was in the summer/fall of 2007. Since then domains only gotten harder and more expensive. We’ve noticed the average price of a good domain has risen fairly dramatically in the past year. We used to advise companies to spend $10k or less on a domain, then we upped that recommendation to $25k. We recently upped it again to $50k. I suspect domain prices and pre-money valuations of newly launched startups are highly corrrelated.
Here are some suggestions on finding and buying a domain name:
- Don’t obsess about getting a name that is descriptive. It’s great to be Kickstarter if you are buidling a funding platform for creative ideas but it is not required. Do focus on a word that is short, catchy, and memorable.
- If you own a domain that can work, give it serious consideration. You’ll save yourself a ton of pain and agony.
- Be prepared to pay up for a good domain. It is very unlikely that you’ll find a great domain name these days for less than $10k. And it could cost a lot more.
- Think about rent to own. My friend Jamie Siminoff is a proponent of this approach and he clued me into it a few years ago. If you find a great domain that you can’t afford but you absolutely love, you can often rent it for a few years with an option to buy it at any time. Let’s say you are launching a website to buy boats online and the person who owns boats.com wants $100k for it. There’s no way you can afford it right now. But the owner is willing to charge you $5k per year for it and will let you buy it anytime over the next three years for $100k. You do it because you figure that in three years, you’ll be selling 10s of millions of dollars of boats and your business will be worth 10s of millions and $100k will be easy to raise for not a lot of dilution. And if you don’t sell any boats online then you don’t need the domain and it didn’t cost you much.
- Think about offering equity instead of cash. Many owners of sought after domains have this idea that their domains are going to be worth millions some day. And who knows, they might be right. So it is hard to pry the domain out of their hands. The one thing you have that might be worth millions some day is the equity in your company. If you have a hot company (like foursquare was when it purchased foursquare.com), you might be able to trade some equity for the domain.
- Find an intermediary. We’ve used a few different intermediaries and played that role ourselves. Eric Friedman, who worked at USV and now works at Foursquare, was a very useful intermediary in a number of transactions. There are also a few lawyers we know who specialize in this kind of transaction and are very experienced and skilled at procuring domains. A neutral third party who can hide the identity of the buyer is often very helpful in domain transactions.
This whole exercise in finding and buying a domain is a huge pain in the rear. I’ve seen startups spend endless hours on it. It is an important issue, particularly for consumer web startups, and it is worth getting it right. But there is also a limit to how much time and money you want to spend on this effort. Remember that a name is what you inject into it over time. So don’t let getting the perfect name be the enemy of getting a really good one.
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