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advice Requesting Equity From A Domain A Start-up Wants

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Reddstagg

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Good evening,

I'd say that it might be an idea but say for example they take ownership of the domain name and the company goes belly up. Your equity share is then worthless as the company has ceased trading and the other party will own the domain name. However, another option which I think is a better alternative is a lease to own scheme whereby they can lease the domain name for say up to 60 months and they would make monthly payments but you would still own the domain until the final payment has been made and cleared. It is estimated that there is up to 30% more chance of securing a sale.

I have only recently switched my domain names to lease to own so I do not have any meaningful stats of my own but maybe others with more experience can chip in.

Rgrds,

Reddstagg
 

NickB

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Good evening,

I'd say that it might be an idea but say for example they take ownership of the domain name and the company goes belly up. Your equity share is then worthless as the company has ceased trading and the other party will own the domain name. However, another option which I think is a better alternative is a lease to own scheme whereby they can lease the domain name for say up to 60 months and they would make monthly payments but you would still own the domain until the final payment has been made and cleared. It is estimated that there is up to 30% more chance of securing a sale.

I have only recently switched my domain names to lease to own so I do not have any meaningful stats of my own but maybe others with more experience can chip in.

Rgrds,

Reddstagg
Lease to own is a fixed monthly payment

A monthly payment plan is a fixed term with (potential) interest added after a certain period (usually not a huge amount)

I think the main appeal to taking an equity stake is the big potential upside which could be worth much more than the initial asking price, depending on how the company does......the main points raised in the article for me where doing your due diligence before agreeing to this and making sure you have your backside covered - this could include a clause where if the company folds within a certain timeframe the domain ownership transfers back to you?......After that, who cares, you made your money.....

Also you have options on a split deal - 50% upfront, the rest payable through an equity stake etc etc etc - quite a fluid negotiation with plenty of wiggle room.......

All 3 of the above are very different income models.......I personally would not feel comfortable trying to negotiate an equity deal (even if I had that type of quality domain - your talking category killers here, which I don't)......
 
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VadimK

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Definitely lease, if they can't afford 100% upfront payment.
Cause I am wondering, in the case of equity partial ownership, how are you really gonna determine your annual income (assuming there will be any)? The company where no one knows where they are, what they do, how they work, what is their field, ground, financial situation, plans, ethics, etc? They can draw any reports they want.
Also, thinking of startups, people automatically think about Facebook or Twitter, but for one FB there are 10000 startups that go bust in 3 years, or stay low-profile/low income for decades... And even imagine for a second it's ''new Facebook'' - but you do remember Eduardo Saberin vs FB case? If not, the ''Social Network'' is a movie to watch.

Bottom line, my point is that the idea of partial ownership of a share in exchange for domain name will result in a wasted domain name, nothing else.
 
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