Here is an interesting article written by Rebecca Burn-Callander from Real Business wrote. It emphasizes the caution that one should exercise when buying premium domains.
When Pat Reeves and Rohan Blacker decided on the domain name sofa.com for their online sofa retailer, the acquisition trail took them to the US – and into a whole heap of trouble.
“We knew we had to have that domain name,” says Blacker, who co-founded the firm in 2006. “There are so few four letter words that are a product that can be sold online. It was an opportunity we couldn’t miss.”
The pair tracked down the owner, a chap named Steve Galstad of Dinesen’s Leather in Milwaukee, USA. Blacker and Reeves duly contacted Galstad and asked him if he was using the domain, to which he answered “No” so they then attempted to purchase it.
At first, Galstad asked for the exorbitant sum of $1m. The pair had the domain name valued by an independent consultancy, who worked out that the name was worth more in the region of $35,000. Reeves and Blacker offered Galstad $50,000.
“But he [Galstad] was very reticent to accept,” says Reeves. “He refused to speak by phone, would take up to four weeks to reply to emails. Finally, we agreed on the sum of $200,000. He asked to meet in New York to complete the deal. But he wanted me to bring the money in cash!”
When Reeves turned up without a locked briefcase, Galstad became very jumpy. The lawyers convinced him to sign all the legal papers and he eventually agreed to have the money wired across. Two weeks later, the domain name technically belonged to the entrepreneurs, but when they tried to transfer it from the States to the UK, they found a block.
“It turned out that he didn’t actually own the domain name,” says Reeves. “He was just the manager of the company.
“The account number he’d given us for the money transfer was his personal account. And he’d absconded to South America with a stripper from Vegas!”
Luckily, the contract was airtight, and even though Galstad was not technically the owner of the firm, he still held “apparent authority” at the time of the deal. Reeves and Blacker got to keep Sofa.com. And Galstad’s luck soon ran out.
“The money ran out ten months later,” says Reeves. “So the stripper left him. He started working as a bartender. When he won a “Bartender of the month” prize and ended up in the paper, the police tracked him down. He’s still serving his sentence now.”
Original article: realbusiness.co.uk