This is the sixth article in the series on selling domains and follows directly on from the previous one.
So you now have an interested buyer and the price is looking pretty good as well. I get people asking me all the time whether they should take equity in a deal or construct the agreement in some fancy fashion. In this article I’m going to unpack what I think is the best structures and why.
“Hey Michael, I love the domain you own and I think that I can build a business on it. I’ll give you some equity for the domain. Do we have a deal?” Have you ever hear this before?
Let’s think about what the potential “buyer” is saying here. Typically speaking the reason why they are offering you equity is because they don’t have the cash. This is not always the case but more often than not it is. A company that is short on cash from day one is a company that is on the road to failure. This means your equity is worth nothing.
What they are banking on is that the domain name will be in the name of the new company as an asset of the company in exchange for equity.
So what the buyer is actually now saying is, “Hey Michael, I don’t have any money to pay for your domain name so I’ll get the majority of its value when the company closes.” There’s not a chance I’m going to do a deal like this.