Aug 21 2020 34 mins 12
In this episode of the Website Investing podcast, Richard speaks with Michael Bereslavsky from Domain Magnate (Richard was on the most recent episode of his podcast) about the performance of their first fund and news on the second one. In this part 1, free subscribers get the first ~30 minutes of the conversation; paying subscribers also get part 2 in their RSS feed. As is typical, part 2 elicits more insights as we get deeper into the conversation. EPISODE SPONSORS ? Niche Website Builders - a hands-off approach to outsourcing your content. Packages include keyword research & high-converting review templates. Get 10% off your first order. ? Smash Digital - an SEO growth agency with actual skin in the game, ranking their own portfolio of profitable businesses, and offering the exact same services to clients. Check. Them. Out. Part 1 Show Notes About Domain Magnate How They Started Domain Magnate has been buying and growing sites for 15 years now, and only started accepting investors one and a half years ago. They were previously self-funded, but they decided to let investors in because they couldn’t purchase bigger sites in the market with their own capital. Starting with a Family Fund They started out with only one investor, and after good results, this investor invited his family members to invest, leading to the creation of Domain Magnate’s first fund: a family fund. This fund is currently set up as an LLC and has 4 members---all from the same family. The fund has grown exponentially and had 9 websites in its portfolio at one point, having been purchased at a cost of $457,000. Since then, they have sold 4 of these sites, and the remaining 5 sites have an estimated value of $275,000. Profits and asset value currently stand at over a million dollars. Setting up as an LLC is also the easiest way to set up a fund, and also how smaller funds under one or two million are set up as well. Other Funds in the Works Domain Magnate is currently setting up two other funds, with the first planned to be a family fund like the one they have now. The second one is going to be a bigger and “proper” fund that will take in various investors, with a capital target of around $3.7 million and their deals to reach around 10 to 12 in number. In order to actually get in the second fund, an investor would have to be accredited according to Domain Magnate’s standards and must invest a minimum of $120,000. There is an investment target because of the high costs of setting up a fund, including legal and organizational costs and compliance requirements, all of which could reach up to $150,000. Moreover, there is a minimum required investment because it would be very difficult communicating with so many different investors, and to make sure that the investors are serious and understand the industry. This bigger second fund will have a term of 5 years, and will not take in any more investors after its initial raise. In fact, contrary to other funds in the industry, once this fund acquires businesses, they will look to sell them after once they’ve reached their peak, and thereafter distribute the profits to its investors right away after the sale. They will also distribute dividends regularly on a quarterly basis after around half a year. This setup will go on until the end of its 5-year term, and after this, Domain Magnate could possibly set up another similar fund. Moreover, they will pay out at around 15-20%, return capital, and return 50% of any upside. These are definitely attractive to investors. Having a Dedicated Team Onboard To be able to manage the fund and offer these attractive terms of investment, Domain Magnate has a team of 20 people, with half of them involved in finding and reviewing deals in order to get the best deal. Domain Magnate does work with some agencies for small aspects like buying links, but a large part of the management and operations are done in-house, which helps them lower costs and maintain high-qua [...]
