4 ms·

How should I buy a domain name with equity?

10 points by billyj209 17y ago

I just reached an agreement with a domain owner to purchase a domain for my startup via equity (the company is an LLC). Does anyone have any documents or ideas that I can use to draw up a contract?

profquail 17y ago
Welcome to Hacker News, billyj209. You might want to prefix the title with "Ask HN:", otherwise those readers just glancing over the newest articles page won't know that you're actually asking for advice. I'd say your best bet is to contact a lawyer (if you can't afford one, perhaps you have a friend in law school, or your parents know a lawyer that owes them a quick favor). You want to make sure that you cover all the "edge cases", like: - What happens to the domain if the startup goes bust? - Will control of the domain be transferred away from the current owner? If so will it be transferred to you personally, or to the company?
byoung2 17y ago
Is the domain name worth that much in the age of search engines?
- yannis 17y ago
  I agree. Unless the domain name is s*x.com I wouldn't pay for it and certainly wouldn't give equity in exchange. Your product will brand the domain name not the other way round.
  - mannicken 17y ago
    six.com? stx.com? What's instead of the star, and why the fuck is it there?
    - yannis 17y ago
      sex.com! Now the big question: why am I in this brain, but not in your brain?
lsc 17y ago
I strongly suggest avoiding giving out equity except to people you trust. Sharing ownership is essentially marriage for the life and context of the company. (now, things are somewhat different if you have a heavy hitting, expensive legal team on hand. Or so I imagine.) As others have said, a domain name is probably not worth that much. I mean, once you have it, and you associate that with your brand in the eyes of the public, it's worth a lot. But it's your brand that matters, and right now, nobody associates the domain with your brand, so it's a simple matter to pick another domain. I mean, google.com? sure, the name is worth ridiculous sums now. But in '95? maybe $100. if that. I know this is just a stereotype, but if at all possible I would avoid doing business with a domain squatter. If I did need to do business with a domain squatter, I would assume that they would try to scam me, and act accordingly. I would never give a domain squatter the trust that comes with a percentage ownership in my company.
- barryrandall 17y ago
  If a domainer is willing to let a name go for equity, it's either not worth much to them, or they're essentially loan sharks. I don't have data, but I'm pretty sure the present value of most web startups is around $0, so this kind of deal really doesn't make sense from their perspective. Wait until you're profitable before trying to buy a killer domain name. You can't pay your hosting, rent, or employees with a domain name. If you're dead set on this domain name, renegotiate a cash price. Domain Capital provides domain name financing, and Escrow.com will reduce your risk of being ripped off. If the seller refuses Escrow, he's definitely trying to rip you off. The domain name secondary market is rotten with fraud.
evanmoran 17y ago
Make the product first, then buy the domain outright. If I recall correctly this is what Facebook did. They started out as thefacebook.com and then made the switch once they had money/success.
- rms 17y ago
  God knows how much that cost them though... Dropbox is in a similar situation and is going to have to pay millions (in equity?) for their domain. To the submitter -- I don't think it's an inherently bad idea because domains certainly have value. Mint.com anyone? However, the legal issues here are basically insurmountable on your budget, you don't want some random non-accredited investor holding shares in your startup.

10 points by billyj209 17y ago

I just reached an agreement with a domain owner to purchase a domain for my startup via equity (the company is an LLC). Does anyone have any documents or ideas that I can use to draw up a contract?

profquail 17y ago

Welcome to Hacker News, billyj209. You might want to prefix the title with "Ask HN:", otherwise those readers just glancing over the newest articles page won't know that you're actually asking for advice. I'd say your best bet is to contact a lawyer (if you can't afford one, perhaps you have a friend in law school, or your parents know a lawyer that owes them a quick favor). You want to make sure that you cover all the "edge cases", like: - What happens to the domain if the startup goes bust? - Will control of the domain be transferred away from the current owner? If so will it be transferred to you personally, or to the company?

byoung2 17y ago

Is the domain name worth that much in the age of search engines?

yannis 17y ago
I agree. Unless the domain name is s*x.com I wouldn't pay for it and certainly wouldn't give equity in exchange. Your product will brand the domain name not the other way round.
- mannicken 17y ago
  six.com? stx.com? What's instead of the star, and why the fuck is it there?
  - yannis 17y ago
    sex.com! Now the big question: why am I in this brain, but not in your brain?

lsc 17y ago

I strongly suggest avoiding giving out equity except to people you trust. Sharing ownership is essentially marriage for the life and context of the company. (now, things are somewhat different if you have a heavy hitting, expensive legal team on hand. Or so I imagine.) As others have said, a domain name is probably not worth that much. I mean, once you have it, and you associate that with your brand in the eyes of the public, it's worth a lot. But it's your brand that matters, and right now, nobody associates the domain with your brand, so it's a simple matter to pick another domain. I mean, google.com? sure, the name is worth ridiculous sums now. But in '95? maybe $100. if that. I know this is just a stereotype, but if at all possible I would avoid doing business with a domain squatter. If I did need to do business with a domain squatter, I would assume that they would try to scam me, and act accordingly. I would never give a domain squatter the trust that comes with a percentage ownership in my company.

barryrandall 17y ago
If a domainer is willing to let a name go for equity, it's either not worth much to them, or they're essentially loan sharks. I don't have data, but I'm pretty sure the present value of most web startups is around $0, so this kind of deal really doesn't make sense from their perspective. Wait until you're profitable before trying to buy a killer domain name. You can't pay your hosting, rent, or employees with a domain name. If you're dead set on this domain name, renegotiate a cash price. Domain Capital provides domain name financing, and Escrow.com will reduce your risk of being ripped off. If the seller refuses Escrow, he's definitely trying to rip you off. The domain name secondary market is rotten with fraud.

evanmoran 17y ago

Make the product first, then buy the domain outright. If I recall correctly this is what Facebook did. They started out as thefacebook.com and then made the switch once they had money/success.

rms 17y ago
God knows how much that cost them though... Dropbox is in a similar situation and is going to have to pay millions (in equity?) for their domain. To the submitter -- I don't think it's an inherently bad idea because domains certainly have value. Mint.com anyone? However, the legal issues here are basically insurmountable on your budget, you don't want some random non-accredited investor holding shares in your startup.