How do end users pay for 7/8 figure domains?

Across the various blogs dedicated to domain names, you’ll often see reports of highly valuable domain names being sold to startups, established companies, or newly formed ventures. Just how do companies afford such domain names? In 2022, we’ve seen Connect.com sell for $10 million, plus the closing of multiple seven-figure deals such as IT.com at $3.8 million and Call.com for $1.6 million.

Sometimes, it’s obvious. HubSpot received $1.3 billion in revenue in 2021, so its source of funds to buy Connect.com is easy to discern. But what if you aren’t a multi-billion dollar brand? How do you buy an expensive domain?

 

Venture Funding

Often, companies allocate venture capital funding towards the cost of purchasing a domain. It’s no coincidence that the announcement of a completed funding round corresponds with the acquisition of a domain name.

An example that comes to mind is Lick, a British home decor brand that raised $23 million in funding in June 2021. By August 2021, the company had acquired its exact-match domain, Lick.com. Companies often acquire domains before announcing the completion of a funding round, too.

 

Equity

If a company can’t offer the full asking price, providing equity might make up the numbers. Equity, or shares in a company, are sometimes used either instead of cash, or alongside it. A prime example of equity in return for a domain name is Uber’s acquisition of Uber.com from Universal Music. At the time of the acquisition, the value of Universal’s equity in Uber was $107,148.

Universal sold its shares for $863,000. However, if it held on until 2019, those same shares would have been worth $532 million after Uber went public. While most domain owners won’t realize gains like this, equity can be a consideration that may suit some situations.

 

Payment Plan

Spreading the cost of a domain name purchase over a longer period of time can be beneficial to both domain owners and startups, especially if it’s a seven- or eight- figure deal. From the startup’s perspective, it can access its preferred domain name earlier than it could otherwise have done, while the domain name owner receives a steady income from the domain.

Payment plan deals can include a sizable up front payment along with monthly payments. Licensed escrow companies such as Escrow.com do offer payment plan options.

 

Financing

Private domain acquisition financing can be an often overlooked way to pay. This is especially the case if you’d like to pay for the domain over a period of time, but the owner wants the full sales price up front. In this scenario, a company such as Domain Capital may be able to fund the purchase, with repayments sent to Domain Capital over time.