Design and Tech.Co
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Design and Tech.Co

How my startup acquired — without it costing a fortune or my soul

The domain buying industry is notoriously shady and secretive but you don’t have to be to succeed

Last year my cofounders Ethan Sutin, Chris Messina and I were trying to decide on a name for our startup that automatically answers questions for you.

We wanted to use Molly but when we looked at it was clear the domain was owned and in use. So, like most founders, we tacked a verb onto the beginning and snagged as our backup.

This is where the story could’ve ended.

That’s where most people probably would’ve given up.

But here’s the first lesson when it comes to buying domains: just because a domain is being used doesn’t mean it’s not for sale.

I looked at the registration on Whois and saw the domain was owned by a woman named Molly Holzschlag, an internet pioneer and early advocate of the open web and web standards. She was using it to host her personal blog.

I briefly considered going the standard route — anonymize myself or connect through a domain broker — but that felt weird and cold.

In my heart I knew that if we were going to strike a deal that it would be different than how most valuable domains are exchanged — I wanted to try a different, more human-centered approach. I decided to be my authentic self. To reach out and tell her my story. Learn hers. And see if we could reach an agreement.

I began reading her tweets and old blog posts.

I empathized and connected to a lot of what she shared about her personal life and was awed by the breadth of her career.

I looked for mutual connections and noticed that she followed my cofounder Chris on Twitter. (A lucky break for sure!) It turned out they both ran in the same circles in the early Web 2.0 days and were friendly but not super close.

So, I reached out via Twitter and asked if she’d follow me so we could DM.

In our first exchange I explained what we were working on and asked if she had ever considered selling the domain. She had. But most of the people who’d come knocking over the years were in porn. The pornographers offered much more than we ever could but she had held onto the domain in the hope that someday it could be passed on to a project she genuinely believed in.

Now was my chance to show her that we were the company she’d been waiting for.

Holzschlag had owned for 23 years. She originally claimed it from the National Science Foundation in 1994 because back then that’s how you acquired website addresses.

At the beginning I was completely in the dark about her financial expectations and knew as a seed stage startup that we couldn’t spend a huge chunk of the money we’d just raised on a domain — that would be foolish. I wouldn’t be the highest bidder but I could offer a modest amount.

I was radically honest from the get-go. There was no game to play. It was just two humans getting to know each other and figuring out if we could come to an agreement that made both of us happy.

But there was a catch — as I got to know Molly I also learned about her deteriorating health.

The past few years have been brutally hard on her body and her heart. She lost her husband last year, a Vietnam veteran, to an Agent Orange related disease that included multiform glioma which took its sweet time paralyzing him. By the time he died he was a paraplegic and Molly had become his caregiver.

She had sat on the domain even though she needed the money because it never felt good selling it. It became part of her identity and legacy. If she was going to give it up it needed to be for a cause or company she believed in.

How we went from the product idea to the product name

Thankfully Molly Holzschlag is a technologist so when we explained the hard problem and the big vision we were solving for she immediately got it, and loved it.

We’re making it easy to ask friends and influencers questions in order to get to know them better — to build deeper, more meaningful connections.

We surface answers by looking at a combination of public and private data.

If someone asks you, “What’s your favorite music?” we could automatically show your top artists on Spotify or if the question is, “How do you feel about Trump?” we’d pull in your related political tweets, links and Instagram posts.

Our technology uses machine learning to sift through the content you’ve already produced — on Facebook, Twitter, Instagram, blogs, etc. — to find answers to new and frequently asked questions.

We also make it fun to proactively answer questions in order to build your personal knowledge base by offering in-app quizzes that assess your personality, preferences and beliefs.

Right now we’re focused primarily on influencers because they have a lot of data across multiple platforms for us to use to find automatic answers and they acutely feel the pain of trying to scale their interactions with fans.

In the future we imagine a world where everyone will have a digital version of themselves that can autonomously answer questions, chat, and even conduct simple business transactions.

We knew our brand would ultimately be accessible in conversational contexts so we wanted it to be a simple, memorable word. We knew it needed to feel normal talking to it (say, via a voice or messaging interface).

Our litmus test was that it should be as easy as saying “Hey Alexa, what’s the weather?”.

After throwing around various ideas we just kept coming back to Molly.

It just felt right.

The name Molly is friendly, easy to recall and it’s a little subversive (yes, I know it’s a common nickname for MDMA — the empathy inducing drug).

Chris tackled this fact head on in a recent interview on Hacker Noon:

Here’s the thing about MDMA — while many people only think of MDMA as a party drug, MDMA was recognized as a “breakthrough therapy” for posttraumatic stress disorder (PTSD) last year.

This year we’re going to see the first FDA-approved Phase III trials of MDMA to treat patients with severe PTSD, and presuming they’re successful, will help to lessen the stigma associated with the substance.

The effects of MDMA have been well documented and suggest a powerful ability to create deep connection and understanding between people — and that’s absolutely an inspiration for the kind of effects we hope our product might create.

Instead of shying away from the drug connotation, we’ve chosen to embrace it in a cheeky way.

Our Twitter handle and Facebook handle are both @TryMolly. Because we want you to. And you should. (Try us, we mean. Or maybe the substance too if you’re an adult. But really that’s up to you.) 😉

Leasing instead of buying the domain

As our frequent conversations unfolded over the late summer and early fall we discussed different creative options in acquiring the domain but the one that we all kept circling back to was the lease-to-buy model.

We had considered trying to sell some of our equity for the domain, like Uber famously did when they bought from Universal Music Group for 2% of the company. Universal Music Group must really hate themselves now because after Uber started seeing success they bought the shares back for $1 million. That 2% stake would now be worth billions. 🤑

But given the state of Molly’s health and the uncertainty with valuing an early-stage startup we decided an ongoing exchange of cash was easier and more meaningful.

We didn’t know anyone else who had done a lease-to-buy domain deal before so we made it up.

Here’s the deal we landed on:

  • we’d pay 10% upfront
  • plus a modest amount every month for up to 24 months, at which point we’d pay the remainder
  • we have the option to pay the remainder and own the domain outright at any point
  • if we can’t pay the remainder at the end of the lease then the domain returns to Molly Holzschlag
  • the domain remains registered to both parties during the lease

We chose the timeline of 24 months to give us enough time to get from our Seed round to our Series A round.

The monthly amount is paid to her medical fund because the bulk of her finances are managed through it at this point.

The money helps to keep her afloat since she’s not able to work a traditional job and it gives us the ability to use the domain while building a product people love.

It’s the best kind of deal because it’s one where we all win.

Open sourcing our domain lease agreement

Working with our counsel at Orrick we put this agreement together (disclaimer: it’s still no substitute for talking to your own lawyer should you decide to go this route as a leasor or lessee).

In the spirit of all the work that Molly Holzschlag has done throughout her career to foster transparency on the open web I figured I’d share the lease agreement.

Perhaps it’ll inspire you to consider an alternative approach when it comes time to negotiate the purchase of a domain for your next big idea:

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