PE snaps up company that manages nearly 240 top level domain names.
Donuts operates top level domain names such as .guru, .software and .life. It is the largest new top level domain name operator in terms of the number of TLDs managed with about 240 TLDs. About 4 million second-level domains using Donuts’ top level domains are registered.
The company also owns retail domain name registrar Name.com.
Donuts has raised more than $150 million from investors since it was founded in 2010 by domain industry veterans Paul Stahura, Jonathon Nevett, Richard Tindal, and Daniel Schindler. Paul Stahura was CEO until the beginning of 2017, when he became executive chairman and Bruce Jaffe took over as CEO. Since then Tindal and Schindler have left the company.
The company was one of the savviest applicants for new top level domain names. It understood early on that contention sets would likely be settled in private auctions, helping it refill its coffers by losing auctions for the new domains. Its scale has enabled it to operate profitably despite only modest demand for new TLD registrations.
The acquisition of the majority of shares in the company does not include an additional cash infusion into the company. The deal will allow some of the early investors to exit an investment they made eight years ago.
It’s not surprising that a private equity company would be interested in a business like Donuts. Donuts is essentially a subscription business with a very predictable annual renewal rate and cash flow.
Abry Partners makes communications, media, information and business services investments. Former ICANN CEO Fadi Chehadé is a partner.
This story has been edited to add additional information about Abry Partners.
Big News! Although hard to see how Private Equity can boost earnings rapidly (as they like to do), until the next round of gTLDs.
Two ways…
1. Fire sale
Inflate the numbers by doing what xyz does, possibly by creating a “standard premium” tier for names they reserve by maintaining standard renewal while reducing costs on “junk” names.
2. Throwing out grandfathering and Jack up renewals relying on people having already committed to their domain
…
Option 2 has the greatest chance of backfiring
Option 1 could inflate numbers and score money for otherwise unregisterable names at current price points…
…with a risk of poisoning the well in the process
Neither a good option to pursue.
Of course, they may also review premium pricing on unregistered names, drop prices till they sell because it doesn’t matter if a domain could be worth a premium if no one has registered it.
They could acquire a bunch of other companies or cut costs to achieve the same results.
Some acquisitions are for financial return. Some acquisitions are done to control strategic chokepoints in a larger ecosystem or control grid. I believe this is about the latter. Domains and DNS are still central to the functioning of the Internet. Blockchain and the distributed internet may eventually supplant DNS. For now, the regulatory climate is making that transition a lot harder than it needs to be. Stay tuned — a lot more major chess pieces are in play.
Wasn’t Fadi Chadahde the ICANN genius who thought that gtlds was a good idea to begin with? Sounds like a lot of people are about to lose a lot of money, but shhhh, let’s let them figure that out by themselves. Morons.
No, he wasn’t. It predated him.