How much of a startup’s funding should be spend on a domain name?

Funding spent on domain name

Here’s a burning question that startups around the world have – how much of their funding should be spent on a domain name?

First things first, there is no right answer here, and I think the answer varies quite a bit depending on a few key pieces of information about the startup. Here’s a few questions I think you need to ask yourself:

Is your startup focused on B2B or B2C? While both should have good domain names, B2C startups can live or die by their domain name and often have bigger marketing budgets since they’re trying to reach consumers.

The next question to ask is what market you sell to? If you sell to a customer that is very tech-savvy then putting more money into your domain name makes sense. If you customer is typically someone who uses a flip phone and prefers fax to email, well then you might not need to shell out as much money.

The third question I think you need to ask yourself is – are you planning on advertising in a way that a customer will hear your name in a video or audio ad? If so, you’ll want them to remember your domain and be able to easily get to it, if you use some obscure TLD or pick a brand name that’s hard to spell or remember, you’re in trouble.

With all that said, I’ll throw out some general numbers to get the conversation going. For B2C startups where a domain name is critically important I’d say spending as much as 25% – 30% of a funding round on a domain will pay dividends over time. A B2C startup can probably get away with spending 10% or so.

Given that most Seed rounds now feel like they’re in the $2M range that means that $500k shouldn’t be out of the question for B2C startups that are going to need to pick a domain that will really help establish you brand. If you don’t feel like shelling out the money all at once, you’ll find many domain name owners are happy to over lease-to-own deals which can take out a bit of the sting.

Like I said above, there’s now right or wrong answer here but that’s my two cents. Just last week a good friend raised a Seed round and spent $350,000 on a domain name, they talked with their investors about it quite a bit and all agreed it was a good move.

Of course you can always spend $5,000 or so on a domain that you don’t love but gets the job done…just know you could end up upgrading later down the road and changing your name is an expensive and complex process, always better to get it right the first time if you can.

Okay you’ve heard from me, now I want to hear from you, comment and let your voice be heard!

{ 5 comments… add one }

  • Snoopy October 10, 2019, 10:29 pm

    Only a crazy startup would spend over 10%. They will probably end up bankrupt wasting money like that. Less that 1% is the norm, usually far less than 1%.

    Reply
  • Shaun Pilfold October 10, 2019, 11:13 pm

    I’ve always said, “buy the best name that you can afford”. A great domain will not guarantee the success of an online business; my past projects are a testament to that! It certainly can be part of the success, but not as much as most domainers say/think. The key in my opinion, is the “afford” part of my opening quote. Get the business started, prove the concept, make real money, then decide if “the best name” is needed for your future growth.

    Reply
  • Andrew Rosener October 11, 2019, 5:14 am

    In my experience most high growth startups who have real ambitions and are raising smart money will, in their A-Round spend .05% – 2% of their raise on the best domain name for their business, IF they have the opportunity to get it. A better way to put it is that they are ABLE & WILLING to spend between .05% – 2% (consumer facing) if needed.

    Reply
  • Raymond October 12, 2019, 9:44 pm

    Regarding .05%-2%, Louis Vuitton may be able to buy Fashion.com based on 2% of its market value of $53.5 billion (2018 )

    ie Domain worth / market value x 100 = 2%

    Domain (Fashion.com) = $53,500,000,000 / 100 x 2
    Fashion.com = $1.07 billion

    if 1% of market value = $535 million

    more info at
    https://www.linkedin.com/feed/update/urn:li:activity:6586911752603176960/?commentUrn=urn%3Ali%3Acomment%3A%28activity%3A6586408813358866432%2C6586911663390322688%29&fbclid=IwAR3YzuLIlQFwxzJ-BiMCtmyd6p-ppiUmQk_CqVL8dC38c3cUZr6Oi3nlQAA

    or https://nameii1.wixsite.com/otcbid/post/otcbid-fashion-com

    Reply
    • Snoopy October 13, 2019, 8:26 pm

      Why would they have any interest in buying Fashion.com?

      Reply

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