This is an interesting question.
1) Would you consider taking it? What is important to you as a domain owner if approached by a developer?
I think for most portfolio holders, there are a number of domains which are simply on standby. They are pretty much useless until deployed or sold, so I would be inclined to consider this offer, perhaps less so if it was my number one name that I had specific plans for. That doesn't mean I'd rule it out, but I would be less quick to get involved in the deal. This decision would be strongly influenced about how I felt about my potential partner and my gut feel on the situation. The decision would also be heavily based on what I considered my prospects, plans, and capabilities for independent development were. If I felt the benefits outweighed the risks, particularly if I was not in a position to do the development myself, I would strongly consider this option.
2) What is a fair % interest in the venture to offer/accept in exchange for supplying the domain name (e.g. 5%, 1-5%, 30%)
A fair interest would probably be based on a combination of the projected value of the site that I would be giving up in perspective to my assessment of the developer and their abilities to create a revenue producing site, and at what level of revenue I anticipated. The potentials, based on my assessment of the developer's strategy, ability to implement and promote the domain would have to be contrasted to a price I could get from an end user that could take the domain to its highest potential. My percentage would have to meet threshholds required by intersection of those events. I would also have to consider the costs of not developing, particularly if the domain were a premium. Ideally I would be able to strike a balance where the other party had an incentive to make it work, but where I could still generate profits appropriate to the domains raw value. The correlation is, the higher I estimated the projects potential, the lower the percentage I would require to make it an effective risk.
3) What are your list of requirements before you would be willing to agree to such terms?
Requirements.
Terms would have to be in place that were based on performance or production factors. It would be very important to create an incentive to move forward with the project rather than sitting on it indefinitely, which would be a default surrender of the domain. Developer is liable for all incurred expenses; or other protections against cost overruns if your funds are involved in this aspect. Basically a non-performance clause with a kill option for non-performance would be essential. A development and promotion plan would be highly important. Developer takes all content liability risks, as it would be difficult to monitor this from the domain owners perspective. I would have protections built in the event of resale or other potential litigation issues that I could reasonably anticipate, if it was a valuable domain I would get professional legal advice in this matter.
4) What other terms would you like to receive but that wouldn't be critical if your economic terms were met?
Site performance incentives would be nice, although I would be careful to arrange these so that they didn't impact incentive to take the site to its maximum level. Depending on the domain and how it represented my portfolio I would want the ability to veto a development path if I strongly felt it would be detrimental to the project.
5) Would you be comfortable taking a back seat to someone else developing the name (i.e. not having any input on its development)?
That would depend on the track record and my skill assessment of the developer. If I was going to enter into an arrangement of this nature, I would try and anticipate areas that would potentially undermine the site's development potential and make those terms, if any, part of the core agreement. Even if I waived final authority on decisions regarding the domain, I would still like to have the ability to provide input into the development process if at all possible, in terms of having any ideas I had at least up for consideration.
6) What are your concerns related to development in general OR have you had any past experiences developing names on your own, partnering with others, or supplying names in exchange for a % in the venture?
My own development experience is extremely limited, and I have not been involved in a co-development or partnership arrangement before. That said, I have a reasonable amount of conceptual vision and would enjoy participating in a major project if I felt that my concepts were considered seriously and it was an area I was interested in. At the same time, it would be fun to take a totally hands off approach and see what developed from the raw potential of a domain that I owned, had owned or had partial ownership in. I recognize there is a difference between having ideas and having the skills required to effectively implement them. At the end of the day, I would take great satisfaction in seeing something cool develop from an asset that I had registered at one point, regardless of my actual participation in the project.
Development concerns are mostly about avoiding potential legal issues that could result from a development strategy. I would not want to find myself in a situation where I was responsible for the actions of a third party over whom I had no ability to affect the decisions that they made. My primary concern in this arrangement would be that the other party could potentially obtain rights to the name, without actually completing the development plan, or doing it on a scale that made the investment an effective write-off.
While I recognize the development values of a domain vary considerably, developed domains tend to increase in value, and I would want assurances that I have a say in any resale and terms of that sale (at least before my financial goals were met for the domain), and that the developer was making a bona fide effort to develop the domain. Not having been in this situation before, it is likely that I overlooked a few things.
A lot of the overall decision would be based on what I perceived the risk/reward factors to be. If I felt the domain had moderate value undeveloped but exceptional development value, I would consider that the optimal situation for a deal of this nature. Aside from the basic CYA things I'd be inclined to give a lot of latitude in the negotiations and accept a greater amount of speculative risk in that circumstance. If the domain was the crown jewel of my collection, particularly if it was a relatively easy resale, I would approach with a significant amount of caution and forethought.
The ideal arrangement profits both parties, anticipates pitfalls, and provides incentives to get the most out of the asset for everyone involved. The greater the faith I had in the developer to do things right, the more latitude I would be willing to give them. Pretty much sums it up.
I also feel that Garptrader made several significant points which I agree with, pretty much in entirety.
