How much of a startup’s funding should be spend on a domain name?

Here’s a burning question that startups around the world have – how much of their funding should be spent on a domain name?

First things first, there is no right answer here, and I think the answer varies quite a bit depending on a few key pieces of information about the startup. Here’s a few questions I think you need to ask yourself:

Is your startup focused on B2B or B2C? While both should have good domain names, B2C startups can live or die by their domain name and often have bigger marketing budgets since they’re trying to reach consumers.

The next question to ask is what market you sell to? If you sell to a customer that is very tech-savvy then putting more money into your domain name makes sense. If you customer is typically someone who uses a flip phone and prefers fax to email, well then you might not need to shell out as much money.

The third question I think you need to ask yourself is – are you planning on advertising in a way that a customer will hear your name in a video or audio ad? If so, you’ll want them to remember your domain and be able to easily get to it, if you use some obscure TLD or pick a brand name that’s hard to spell or remember, you’re in trouble.

With all that said, I’ll throw out some general numbers to get the conversation going. For B2C startups where a domain name is critically important I’d say spending as much as 25% – 30% of a funding round on a domain will pay dividends over time. A B2C startup can probably get away with spending 10% or so.

Given that most Seed rounds now feel like they’re in the $2M range that means that $500k shouldn’t be out of the question for B2C startups that are going to need to pick a domain that will really help establish you brand. If you don’t feel like shelling out the money all at once, you’ll find many domain name owners are happy to over lease-to-own deals which can take out a bit of the sting.

Like I said above, there’s now right or wrong answer here but that’s my two cents. Just last week a good friend raised a Seed round and spent $350,000 on a domain name, they talked with their investors about it quite a bit and all agreed it was a good move.

Of course you can always spend $5,000 or so on a domain that you don’t love but gets the job done…just know you could end up upgrading later down the road and changing your name is an expensive and complex process, always better to get it right the first time if you can.

Okay you’ve heard from me, now I want to hear from you, comment and let your voice be heard!

Morgan Linton

Morgan Linton