What Every Startup Founder Should Know About A Purchase of Domain Names

Many founders of startups go through the frustrating and painful ordeal of being unable to obtain the internet domain name they want for their company. After selecting the name for the business, they often find that the .com suffix, which is the most popular, is already taken. Those who are lucky may buy it for several hundred or thousand dollars. However, if a company owns the domain, the price can easily go beyond what the startup can afford.

What Every Startup Founder Should Know About A Purchase of Domain Names

The problem starts when a startup chooses a name and then builds their business or brand without taking into account the potential intricacies of acquiring the desired domain. In some cases the domain may even be owned by a large corporation that is not using it, but it is only willing to sell it for several million dollars. Below is a list of what every startup founder should know about a purchase of domain names.

Acquire the domain first

Many startups come up with a brand name and proceed to use it in press releases, in print and in all manner of platforms. They then conduct a check to see if the requisite .com domain is available. If they find it is taken they embark on trying to acquire it. A number of them assume that they will easily acquire the domain for only a few thousand dollars. They are often shocked when the owner of the domain demands several hundred thousand dollars for it. This may force the startup to re-brand under a different name, which is an arduous and costly undertaking. To avoid this scenario, the founder of a startup needs to come up with various brand names and focus their energies on getting the domain before anything else.

Deciding on made-up versus generic domain name

The startup has the option of using a made up word or a generic name for the domain. This will be influenced by both the available budget and the branding preferred. In general, a good generic domain may require a five-figure budget although some lucky startups have acquired this for a cost of below ten thousand dollars. On the other hand, a made-up name is significantly cheaper, and can even be hand-registered (where the startup is the first user). Generally, many of the generic or best brand names will most likely have been taken. A one-word dot com domain will often go for a price that is in six-figures.

Domain ownership affects price

The available domain names required by a startup will be owned by either cyber squatters or domain investors. Cyber squatters are malicious people who buy domain names which incorporate an existing brand name so as to damage or extort the brand name owners. Domain investors are people who buy domains as an investment or for personal use. Companies may also buy a domain with the intention of using it one day. Individual domain investors are reasonable and often easy to negotiate with while companies are notoriously tough, often quoting five and six figure prices for the domain. A startup has legal relief if it identifies a case of cyber-squatting on its brand. A trademark attorney can be hired to assess the rights and remedies available.

A startup can find that the domain it desires is either used or taken. Examples of a used domain, is where a company may be using a domain for email addresses or other related uses. Such a domain is hard or even impossible to purchase. However, a startup founder may find that a domain may have been taken, where it has been registered but it is parked and not being used. Such a domain is therefore available for sale, and all that is needed is to negotiate the pricing. Before this process begins, the startup owner needs to have a fixed maximum price to guide him or her when tabling offers for the domains.

DomainTools.com is a valuable online tool

When doing research about the owner of a domain, online tools such as Domaintools.com are very useful. Through this tool, a startup founder can easily determine the history of the domain and how many other domains the owner has. Such information is very important when selecting the domain to buy.

Taking time before making any offers

After identifying the owner of a domain, a startup founder should not get excited and start emailing him or her immediately. This is because one may make an offer that is too low and end up offending and putting off the domain owner. It is advisable to first try and cultivate a relationship with the domain owner or engage an intermediary with the ability of arranging a deal. There are firms which specialize in anonymous acquisition of domain names.

During this stage, the startup owner needs to evaluate the budget available and also to internally assess the potential value of the domain name to the startup.

The Leasing option

If the startup owner finds the asking price to be too high, a lease-to-own deal can be explored. This affords the startup some time to grow its asset-base before purchasing. The advantage of this approach is that the prices of domains may lower further or the startup founder may realize that the domain is not needed in the long run.

An Escrow account is necessary

When the deal is struck, the startup founder must quickly establish and fund an escrow account. This is because a good number of domain owners may be untrustworthy people. This guarantees the security of the transaction and also ensures that the seller does not back out.

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