How much should a startup spend on a domain name?

Startup Domain Name Budget

Over the last thirteen years I’ve bought the primary domain for our startup – BoldMetrics.com, helped startups like Medium.com get their domain, and watched a zillion companies buy the wrong domain and spend a fortune rebranding later. The challenge most startups have when it comes to domain names is understanding what a reasonable budget is, and how that might change based on where they are in their company lifecycle.

I’ll start by saying that there is no one right answer to this question. You can’t just throw out a number and say, yup – that’s what a startup should budget for a domain, there are a lot of factors to consider. That being said, you can set a baseline.

Any startup should be prepared to spend at least $2,500 on a domain name, period. I’ve heard some founders say, “I’m not going to pay more than the registration fee for a domain,” and most of the time, I watch them rebrand when they realize they should have put more than $10 into the first thing people see when they find out about their company.

One of the most popular marketplaces for startups to find domain names, BrandBucket sees their average sale price just below $3,000 when looking at sales below $10,000. At the same time, they see plenty of sales north of $10,000 which brings me to my next point – your budget is highly dependent on what you do and how broad of a reach you want to have.

In my mind, the first step here is looking at who your target audience is. If you’re a consumer-facing startup, your domain name is going to matter a lot more than if you’re a niche B2B startup targeting DevOps professionals. No matter what, you want to make sure potential customers can easily remember and spell your domain name.

New York VC Fred Wilson wrote an article nine years ago sharing how he had increased his suggestions for how much a startup should spend on a domain name over time, given that this was almost a decade ago, my guess is he’s upped it a few more times since then:

We used to advise companies to spend $10k or less on a domain, then we upped that recommendation to $25k. We recently upped it again to $50k.

(Source – AVC)

Recently, super Angel Jason Calacanis shared his thoughts about the importance of a great domain name and the power of a good .COM:

That shows you the power of a great domain name is that whoever gets the .com, they kind of get the best branding in the entire space. So it’s really worth trying to get that .com eventually.

You could start without it, you could start with inside .net or insidenewsletter .com, but if somebody were to create right now insideartificialintelligencethepodcast, I’m going to beat them with Inside AI when we do the Inside AI podcast. Eventually we’re just going to outrank them. So that’s one of the things that gets baked into owning the domain name.

(Source – Domain Name Wire)

Jason also mentioned that he decided to invest in Calm initially because they owned Calm.com. The power of a strong one-word .COM cannot be understated, but startups should know these sell in the six and seven figure range so the budget must be there to get one.

That being said, you’d have to ask yourself, would $500,000 spent on a domain name save you $5M in marketing over time? As for finding your dream domain, I usually recommend that startups look at curated marketplaces first where prices are in relation to each other and not set by individual sellers.

Since a domain name is an investment/asset, if you buy it from a marketplace you also know you can very likely sell it later on down the road, and probably for more money if you decide not to use it. This is why places like BrandBucket which I mentioned above are where I often send startups to first survey the market and see if they find something that they like.

Like I said when I started this article, there is no right answer but here’s a few highlights from what I’ve discussed:

  • a minimum budget of at least $2,500 should be in your head, if you’re thinking $10, $50, or $100, get real
  • getting a good domain can be a critical part of gaining consumer awareness and raising venture capital
  • with VCs like Fred seeing $50k as totally reasonable for a domain, and many VCs seeing six-figure purchases as an important step for a startup to make as they build their brand online you can feel comfortable chiseling out a real budget
  • rebranding later down the road is expensive, it’s better to pick the right name early on vs. spending a fortune later on

I know a lot of people besides myself have opinions on this and I’m sure they’ll share their two cents in the comment section below!

{ 8 comments… add one }

  • lifesavings.online May 21, 2020, 9:49 pm

    How much wood would a woodchuck chuck?

    Reply
    • Morgan May 21, 2020, 10:07 pm

      A lot more wood than you or I, we’re just humans!

      Reply
  • Macit Tuna May 22, 2020, 3:32 am

    It totally depends on your goals and what you want to do.

    You may want to start with .io or .ai and after getting enough fund you may upgrade your domain name to a.com.

    We, Dofo, as a domain name related startup, it wasn’t possible for us to start with a long or made-up domain name. We tried to find a good, memorable, and brandable .com. So, we spent $33,000 on dofo.com by taking the risk. When we purchased the domain name it was almost just an idea. While taking the risk, we thought that we would spend money on marketing. By spending money on a domain name we also wanted to lower the marketing expenses.

    Reply
  • Mark Thorpe May 22, 2020, 6:02 am

    Most startup’s buy a cheap domain at first, then buy a good .COM domain when funding starts coming in.

    Reply
  • John May 22, 2020, 6:30 am

    So God used you in part in the formation of medium.com, ay? You might not even know that He did if He did, but some in domaining doubtless understand.

    Some important truth telling goes on at medium.com. I will allow this discovery to shave off some % of my displeasure with you for the last year or two. 😉

    Reply
  • Green Jobs May 22, 2020, 7:49 am

    GIFs speak a thousand words Morgan. 🙂

    Reply
  • 168 May 22, 2020, 2:57 pm

    25 to 50k is great advice, the trending values for any domain worth branding on, occasional exceptipns of course.

    .com surly will always be iconic yet out of reach and reason for the most usable inventory that sits in porfolios unused.
    I see more value in industry specific extensions and domains in the added value of relevance to product/ services as digital marketing costs rise and a much shorter journey to brand awarness.
    New era, new mindshare.
    I describe it as the race to relevance.
    Radix and cc’s are showing the early signals of this shift.
    Your dedication to this industry is much appreciated !
    Bay area /.com original
    What a ride it’s been ! Wait, there’s more!
    Cheers

    Reply

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