This page looks at lending secured by domain names.
It covers -
supplements discussion in the broader Domain Names &
DNS profile regarding
domaining and monetisation
Lending is a matter of risks, returns and the availability
of capital (with innovation thus often occurring in periods
of economic growth or exuberance).
In principle, financiers will make loans that secured
by any asset that -
understand (or merely think that they understand)
recognised in national accounting guidelines or other
likely to retain value in an economic downturn (eg because
that asset is in demand by potential purchasers and/or
be readily disposed of by the financier if that lender
has to call in the loan.
and other financiers have thus traditionally made loans
secured by real estate, patents,
customs revenue, share
portfolios and tangibles such as fine
art or antique violins.
Given the availability of capital in the era of private
equity and hedge funds
it is unsurprising that some financiers have experiemented
with lending based on the value of domain names.
Iin 2001 the BBC reported
that the Industrial Bank of Korea had teamed up with dot-kr
main registrar Internet Plaza City, accepting domains
as collateral for loans. The venture planned to make loans
of up to 30% of the assessed value of the name, with a
limit of £16,000. It is unclear, however, whether the
scheme was not in fact a way of dealing with problem loans
to the Korean dot-com industry and there was unhappiness
with the severity of some valuations.
In principle loans based on intangibles such as domain
names are quite conceivable, in the same way that some
financiers will lend on the basis of what they perceive
is the market value of patents, trademarks or copyrights.
Perceptions that the portfolios of major domainers (eg
those holding several thousand 'prime' names or several
hundred less sparkling names) are likely to retain value
and to generate revenue that is greater than both holding
costs and alternative investments has led some investors
to inject funds into those businesses since the dot-com
crash. It is uncertain whether expectations about significant
profitability will be met in the long term.
Those domainers do not appear to be packaging derivatives
of their portfolios: if you want to invest you are required
to buy shares/bonds in the portfolio operator as distinct
from a stake in the specific portfolio or part of the
In 2007 Domain Capital claimed to be
first and only financial services company to offer financing
to businesses based on the inherent and recognized value
of premium domain names. Our vision is to innovate
exciting new financial products and services designed
to enable entrepreneurs to exploit new business models.
(domain name leasing)