Structuring Domain Deals With Long Term Considerations
I’ve heard a lot of mixed views about structuring deals that don’t require 100% payment upfront. Instead, the owner typically receives a payment upon closing and either a profit share or structured payments over time, depending on the success of the company who buys the name. If you can afford to wait to be paid, I think these types of deals are fantastic.
When I was at AIG (accident insurance sold via direct mail, phone and web), many of our deals were structured to benefit the marketing partner more on the back-end in exchange for concessions on the front end. Our partners knew our group’s track record, the LTV of customers, and they knew a back-end deal could be more lucrative. This allowed our group to spend more on testing and helped our current P&L. Only if the campaigns were successful would we have to pay a greater share of the long term revenue.
For domain deals, I think this could work in the same way. The caveats, of course, are that the buyer has a track record of successful Internet companies and that you retain control of the domain name if the business fails. While the upfront profit may be less, the back-end potential should be set up to be far greater than if someone would pay all cash. Doing a deal like this really requires you to not need the cash upfront, but it could be beneficial if structured correctly.
Many of the largest domain companies and domain venture capital companies have been successfully structuring their deals with less cash upfront and greater back-end considerations. If someone with a proven track record and a solid deal were to approach me, I would strongly consider a mutually beneficial deal structured in this manner.
Reach out to Elliot: Twitter | Google + | Facebook | Email