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New TLDs: Preparing Your Funding Strategy and Approaching Investors

Sedari

Dirk Krischenowski's presentation gave us an excellent overview of this business as a stand-alone investment opportunity. How to built out the models to include all things investors would chose when taking an outside look at where to put their money in our industry. My little fingers ran furiously to try and capture as much of the presentation as possible — so this may be one of the choppier postings of the event. Potentially also among the most important. If we do not see adequate funding for the initiatives led by interested organizations and groups — this new Top-Level Domain (TLD) initiative will not reach it's full potential.

A few market cap valuations worth noting when setting the scene for potential investors:

  • Verisign values at close to 5 billion
  • Neustar just over a billion
  • Sedo at 90 million

The domain name industry has it's own capitalization systems and a few of it's own investment funds, a few of which:

  • TopLevel Domain Holdings - Fund
  • DDH - Fund

This industry has a small set of powerful players; specifically registries and registrars. It's very different from most other technology spaces: Past performance is not an indicator of future results. The New TLDs are expected to do better than the past. They will have usage, which is what the new TLDs lacked in the first rounds (which included .BIZ and .IFO). Names like .FACEBOOK, .GOOGLE, .EBAY will be visible and that will influence new TLD acceptance.

Considering the Secondary Market vs. new TLDs is something the investors will spend time on:

  • Second level Domains vs. Top level Domains
  • Should I invest in Insurance.Com or should I have .Insurance

Agreeing with many other fellow speakers, Dirk mentioned the biggest challenge is how to get to the registrars shelf space. However, this of course, applies primarily to the .GENERICS and in some cases .COMMUNITIES — less so for .BRANDS.

Additional challenges mentioned were the need to fight cyber squatting and domain grabbing in your new space, as well the ever-challenging task of acquiring experienced and talented manpower.

Factors to consider when Building Your Valuation and Investment Proposition:

For community TLDs:

  • Have an advisory board
  • Community leaders on your management board
  • Get community support from associations
  • Gov want to have opportunity to Observe, Object and Sink the business - whenever they want.

The minimum a business can expect to invest in a new TLD is $500,000.

Valuations in the past for new TLDs:

  • .NAME sold for $11,000,000
  • .MOBI sold for $8,000,000
  • Dot Eco sold 10% of their business for $200,000

Ways to Get Funding:

  • Try crowdsourcing - get all 3 million smiths in the us to give a small amount for .SMITH
  • Reach out to Government

Exit strategies:

  • Sell to registry operators
  • Sell to an industry player - .SHOP, .MOBI
  • Sell one registry to another registry

Cost of entry is fairly low - cost of failure is very high.

From the audience, I couldn't help but ask him a question:

Dirk, you quoted expected registrations for top generics such as .WEB at 5 million names in the first year. Where did you get those numbers? And, to you the expert panelists, do you believe those predictions?

I asked this because I was on the launch and marketing team for .BIZ — and it was uphill selling those names all the way. We would have been over the moon with 1 million names in the first year — it didn't happen for over 2.

Dirk's Answer: We asked the applicants what their estimations were, as well as supporting potential buyers of the names, such as .SHOP.

Dirk asked Jose Ignacio Rasco what were their key decision factors in choosing a TLD investment:

  • Is the team is credible — do they have experience in the registry business
  • Do they have (and fully understand) a clear and concise marketing and distribution plan

There is big money to earn in this opportunity… and to lose.

Written by Jennie-Marie Larsen, Chief Marketing Officer at Sedari

By Sedari, Registry Management Services. Sedari is a consulting and technology company focusing on TLD operations for applicants who want to run their own registry. Sedari guides new TLD applicants through the entire continuum of ICANN's application process and, most importantly, provides a robust fully outsourced Registry Services Management Platform to help string owners run their top-level domains over the long term.

Related topics: Domain Names, Registry Services, Top-Level Domains

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