Selling Domains – Mixing Cash and Equity

When I’m selling a domain, seeing it put to good use is one of my primary goals. Of course it’s not necessary to take this into consideration at all, but when you do it adds more texture to the deal and might change the way in which you structure the sale.

First, you want to have someone that genuinely wants the specific domain name you have. If you’re pushing hard to come up with reasons why they should own it, they probably don’t want it that badly. This is one reason why one-word domains are so powerful, they can be used by so many different businesses.

If an innovative startup wants the domain you have, striking a balance between cash and equity could allow the startup to get your name without having to shell out a lot of cash. This split can be written directly into the sales contract and issued as common shares of stock or through a convertible note.

I recently did this on a $12,000 deal for a one-word domain that I own and made a fair split between cash and equity to make it a good deal for me and affordable for the startup. At the same time I believe in the business and think it’s really going to take off and now have some skin in the game.

It can be all too easy to dismiss a buyer that can’t afford what you’re expecting for a name. Sometimes striking a balance between cash and equity can help you bridge the gap and potentially even make much more on the deal. Yes, you do take on some risk here but if you believe in the founder and the company this risk might be well worth it.

{ 4 comments… add one }

  • Logan Flatt December 13, 2012, 8:04 pm

    I would think a lease-to-own in addition to equity would be appropriate. If the business fails — most do — you’d still own the domain name because they were only leasing it and failed to make the final payments to own it. With the business in failure, your equity is worth $0.

    Reply
    • Morgan December 14, 2012, 9:25 am

      @Logan – I have done lease-to-own deals in the past that work that way. Sometimes in deals where cash and equity is mixed you can set on a fixed cash amount that will then allow them to take full ownership of the domain. It’s all about striking the right balance between cash and equity where you both feel comfortable.

      Reply
  • Wayne December 13, 2012, 9:59 pm

    Congratulations, Morgan!
    Very creative and definitely a win-win.

    @Logan – while I understand your point, Morgan hasn’t revealed the intricacies and nuances of this deal. This would lead me to believe that he may have retained ownership of the domain until such time that the agreed-upon equity portion was satisfied. Simply pointing the nameservers and maintaining control of the asset until the terms are met.
    If this isn’t the case, your point stands. I’d be interested in knowing… either way.

    Reply
  • Ale December 23, 2012, 11:04 am

    I think a post showing the crucial points of this deal would be worth more than a thousand of other posts (all really interesting, but this post, with this agreement shown clearly, would deserves the BDBE, the Best Domain Blogger Ever. Especially now that those who hold domains has been under unfair attacks from all sides for the last 5 years (or for the last 15 years……)
    Please post this contract, obscuring of course all names etc. I have yet “standard” well written lease agreements, but I am interested in maintaining a link with future sales for some domains with brilliant future…. (and I think even many other domainers would like to do this type of agreement…).
    Thank you!

    Reply

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