How to get funding for a domain purchase

[Fork]

Hopefully this is the right forum for this topic - I wasn't sure where to put it.

There's a domain name I'm interested in purchasing from it's current owner in the low to mid $xxx,xxx range. I plan on developing this domain into a business. It's currently the best possible domain for niche the business is in (think realestate.com for the real estate niche) and won't take long to reach #1 in Google for its main keyword.

With some rough calculations, I'm very confident the business will be profitable in a year, but more likely within 6 months. There are many ways of generating revenue with this domain in this niche, but the primary one is a product that I'll be developing with my business partner - a product that's pretty much done, just needs the pieces packaged together.

I've considered doing this project on a cheaper domain, possibly even a hand-registered one. But I'm afraid the value of the domain will be going up soon and will cost us more in the end - I also don't think our business plan will be nearly as successful with a sub-par domain in the niche.

Any ideas for getting funding for this domain investment?

 

[owntype]

digipawn.com? That's one I heard, owned by Rick Latona.

 

[Fork]

I've given that a shot, he won't touch my biggest earner. My overall domain portfolio probably wouldn't cover the amount I need anyway.

 

[shockie]

any chance you could get a loan or loc from the bank? it's probably pretty hard to get one these days so you might have to put up some collateral... at this level you should probably put a lot of thought into this idea of yours etc, although at this amount you've probably already thought a lot about it, lol.

 

[Fork]

Again, the problem is having a collateral to back up the loan. I was thinking about getting a bunch of smaller loans here and there, but I was hoping to get some new ideas from others.

 

[JohnPK]

Domain Capital? They finance domain purchases - although afaik they only loan up to 60% of the domain's value based on their/Moniker's appraisal.

But the best way to get more detailed information probably is to contact them directly -> www.domaincapital.com


Good luck with your project.

cheers
John

 

[Giode]

DomainEquity.com is probably the best out there for this kind of loan. I've used them and had a great experience. It's run by Rob Monster who has done some very impressive things in this industry, and is very easy to work with.

 

[interestedenough]

Here is a proposition you can make:

You develop it on a lease with the option to buy it at any moment or after a set number of years.

If the domain costs $100,000, and you could lease it between 5% and 10%, you would be paying between 5,000 and $10,000 per year. You lease it with the option to buy it for $100,000 at any moment. If you can not make the $5,000-$10,000 payment per year (or monthly equivalent), the owner takes the domain back.

The worse that can happen:
You didn't risk all the money to buy it, the owner got some profit from it, and you developed traffic for the domain for a while. You only lost your yearly lease amount and the owner got some profit and a domain with more traffic.

The best that can happen:
You made all your payments on time, and raised enough money to actually pay the principal on the domain and bought it after a year or two.

Moniker.com could hold the domain in escrow while the contract gets filled. They can do complex contracts like this one, and have a base lease (with option to buy) contract that you can probably modify to fit custom clauses.

 

[nrmillions]

Since you plan on pumping money into development then why not start with a cheaper brandable name first that you have the actual money for and then when profits come in then buy that generic domain in cash and point it at your site to get targeted traffic. It would be like for the real estate niche you have Zillow and Trulia, for the social networking niche you have Facebook and Myspace, not SocialNetwork.com. Do you think if Facebook was called SocialNetwork.com that they would have had as many people sign up? For video niche you have YouTube.com, not Videos.com. For search engine niche you have Google.com and not SearchEngine.com. Amazon.com is for books, dvds, etc and not a site about the Amazon in south america. Sometimes if your name is too generic it doesnt allow you to grow outside of the name. You are saying you think you will be profitable within a year but so does every person who develops websites or they wouldnt spend the money to do it but only a fraction make a decent amount of profit even if their domain is really good. If its a big development plan you will need a lot of money for hosting and other things. What if you got a $500k loan and then didnt make a penny of profit and couldnt cover the monthly payments anymore on the domain? If you are venture backed with millions and want the generic domain to call the company that is one thing but its extremely risky to borrow 6 figures for it.

 

[nameboi]

Leasing does sound like the best option. I did not know about Moniker leasing escrow. That makes leasing a lot easier for both parties.

 

[jmot]

Is there any resource for advertising domains for lease?....other than posting in forums like this?

T

 

[iridium]

Leasing is great and the best option if available, but sellers are often reluctant to go that route especially if their domain is "for sale".

 

[networkmsia]

pitch your idea to a venture capital

 

[DnEbook]

reminds me of a song i wrote ... beg and steal, beg and steal and borrow

there are some leasing services ...do the google search or approach yourself

 

[dbtbandit67]

it sounds like a bad idea, i wouldnt go through with a domain purchase that large, which is made more complicated by the fact that it wont all be your own money. i dont think that it should just be flatly assumed that any investment will pay for itself guaranteed in 6 months-12 months.

neither should you just assume that one domain will definitely go up in value. a domainer i know has a portfolio of hundreds of domains and admits that not every domain is going to sell. the profit lies in picking up a lot of good domains; some hit, some miss.

if we should learn anything out of today's perrils its not to put all your eggs in one basket.

 

[tech4]

I agree with DBTbandit67.

This sounds like another credit card application but worse. You are asking to borrow a very huge amount of money that you cannot pay back. Usually banks wants collateral like your cars or proof showing employment records and these are for loans in small amounts only. Venture capitalist deals with higher type of loans in hundreds of thousands and they usually want at least a 50% stake if they believe you have a business in place. If its only an idea, its not a case to present it to anyone.

Borrowing more than you can afford would most likely to get you burn.

I recommend start with what you can afford, don't take unnecessary loans that you cannot pay back. Don't start at 50,000 or 100,000 if you haven't started at $1,000 or $5,000 and haven't had the experience. In businesses, survival is the first thing, meaning you have to cover yourself and that's equivalent to experience and insurance. Most venture capitalist will not take you seriously if you haven't present experience and insurance to them.

 

[NathanJacob]

I agree with DBTbandit67.

This sounds like another credit card application but worse. You are asking to borrow a very huge amount of money that you cannot pay back. Usually banks wants collateral like your cars or proof showing employment records and these are for loans in small amounts only. Venture capitalist deals with higher type of loans in hundreds of thousands and they usually want at least a 50% stake if they believe you have a business in place. If its only an idea, its not a case to present it to anyone.

Borrowing more than you can afford would most likely to get you burn.

I recommend start with what you can afford, don't take unnecessary loans that you cannot pay back. Don't start at 50,000 or 100,000 if you haven't started at $1,000 or $5,000 and haven't had the experience. In businesses, survival is the first thing, meaning you have to cover yourself and that's equivalent to experience and insurance. Most venture capitalist will not take you seriously if you haven't present experience and insurance to them.

I totally agree with tech4 ~ start low and once you are established, popular and have collected enough money then you can always buy the Domain Name of your choice and redirect the existing traffic!!!!

 

[domaino]

I agree with DBTbandit67.

This sounds like another credit card application but worse. You are asking to borrow a very huge amount of money that you cannot pay back. Usually banks wants collateral like your cars or proof showing employment records and these are for loans in small amounts only. Venture capitalist deals with higher type of loans in hundreds of thousands and they usually want at least a 50% stake if they believe you have a business in place. If its only an idea, its not a case to present it to anyone.

Borrowing more than you can afford would most likely to get you burn.

Yeah, but by adopting that mentallity you're setting yourself up to fail. When he decided to establish an online gambling community and try and profit from links to affiliate gambling networks, Frank Schilling sold everything he owned (for the sum of $200,000) and set-up shop in the Caymans. Turns out the gambling route went awry and he then concentrated all his efforts on domaining. He spent the next two years (20 hours every day) - granted, favourable maket conditions come into play here - snapping up domains right left and centre on his way to building one of the most revered domain portfolios in the industry.

Of course you might get your fingers burned, but you can also build yourself back up and LEARN from your failures. If you plan thoroughly then you can mitigate against risk, as far as is humanly possible. Then you set yourself up for the best possible chance to succeed. Rick Schwartz was declared bankrupt before amassing again, one of the best and most revered potfolios in the industry. I would argue the only way to truly succeed is to take a risk here and there, the early pioneers in this industry worked on intuition alone - for great periods of time, Mrs Frank Schilling had serious reservations about her husband's mental state!

"There is no failure except in no longer trying."

Elbert Hubbard

 

[tech4]

What I am saying is, don't stick your $50,000 or hard earn money into something you don't know. Borrowing $50,000 or $25,000 to invest in a business that you haven't invested in that much tells alot. You don't have experience at that size, therefore its like putting your money on stocks.

If you invest, do it at a small level and build up from there as NathanJacob pointed out. Don't be like Frank Schilling and waste your $200,000 into gambling as mentioned by domaino. Not many people can afford failures at that size.

Frank Schilling is a good example of failure but not of success as mentioned. However he was lucky to hit domain names before everyone else did, else he would have lost his shirt. But then again, who has $200,000 to gamble? he probably had more than that to spend. Yes its true, after many failures and experience one would get something out, but how many $200,000 or $50,000 investment can a typical person afford to lose. Not to mention its borrowed money. In Frank's case it was his asset or he had other means. In this case, borrowing and asking for loans is asking for trouble. It takes a lot to succeed and very little to failure, don't make rash decisions especially on borrowing.

Its like saying Bill Gate never went to college to became billionaires, which is only half the story. Did you Know that Bill's parents were lawyers and was one of the rich family dynasty at the times. Bill had connections to IBM and other influential people, that's how he was able to negotiate with IBM to sell his windows products. Would any college drop out be able to talk to IBM on a deal? Absolutely not.

 

[notlikeyou]

I agree with some of those on the "don't do it side". If your business model/product is stout, you can make it work with a domain name that is not going to immediately put your business in a position to start with a larger debt than need be. There a literally hundreds of websites that didn't have to start with a known domain to be successful,(think any brandable/made up domain currently). Depending on the niche I can see where you would be tied to grabbing the primo domain, but what if that niche fails or a change in technology causes the landscape to be drastically altered. You're stuck with a very expensive "betamax"

best of luck either way you decide to go.