VC Valuations May Disappoint Domainers

Domain Name Journal is providing updates from this week's industry conferences in Las Vegas and Seattle. Venture capital interest in the domain industry was the hot topic at Traffic West, as keynote speaker Marc Ostrofsky of Internet REIT, LLP confirmed that said his new partnership is putting together a $250-$500 million war chest to acquire top quality domains.

But at what price? While VC funds have big wallets, they're looking for home runs on those investments. In the domain business, that means buying low and selling high. As such, the venture capital funds' valuations of domain portfolios may not align with market hopes. An excerpt from DNJournal's recap of the recap of the domain venture capital panel at Traffic West:

During the standing room only session they told attendees they were looking to acquire portfolios for 5-7 times annual revenues. With Marchex having already paid more than 8 times annual earnings for the Ultimate Search portfolio, (Conference organizers Rick) Schwartz doesn't believe there will be a lot of takers at those price levels. Schwartz told us, "the VC guys sited 'risk' as the key reason for not going higher than those multiples and it was met with skepticism from the domainers who perceive the 'risk' to have been taken by them years ago when they purchased their domains and not now."

It sounds as though the panel helped the buy and sell sides of the equation develop a better understanding of the perspectives each will bring to future negotiations. It may also have created a broader context for the Marchex-UltSearch deal and to what extent it represents a benchmark for future sales.

  Posted by RichM May 27, 2005 | Permalink | Newsletter

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VC Valuations May Disappoint Domainers - May 27, 2005





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