Investing in Domains
When most people think about investing they think about stocks and bonds. When people think about alternative investment classes, they think about real estate, gold and other commodities, currencies. Ask them to think about something more esoteric and they might bring up venture capital, private equity or even distressed securities.
Most of these asset classes are both huge and sophisticated. They are also dominated by institutional investors. Why? Because institutional investors are managing large amounts of capital and they need to deploy them into large and liquid markets.
But what if you are a relatively small individual investor? Do you compete with the big boys and invest in stocks and bonds or are there more esoteric areas in the investing universe where you can develop an edge and get high returns of capital?
These are thoughts that lead to the creation of Eykol.
Finding Alternative-Alternative Asset Classes
Most individual investors are not full-time investors. Therefore, they are investing on the side and they can't invest in something that requires daily effort in managing. So, a prerequisite of finding "alternative" alternative asset classes is that they should require minimal management. Flipping real-estate while a form of investing is not an asset class and requires high involvement.
Note that we did not say that they should not require research. Every investing requires research and know-how. Investing is never easy.
What if there are more esoteric asset classes that are more suited for small amounts of capital? Asset classes, that are so small that you can't deploy big pools of capital to them and expect a meaningful return? An asset class that is constrained by size, will theoretically have less sophistication and might offer an investor greater chances of deloping an edge and generate high returns. Higher returns than he might generate by investing in more sophisticated markets, such as the stock market, which by design is aimed at larger pools of capital.
Domains as an Asset Class
Domains, viewed as an asset class, are interesting for a number of reasons:
- You can easily buy domains through registrars and your ownership will be relatively secure.
- Domains are unique, hence have interesting supply-demand characteristics.
- As more individuals and, notably, businesses enter the online realm, domains become more valuable.
- There is a relatively deep and active aftermarket for domains, through various marketplaces and brokers.
Investing in domains is not new. Not by any stretch of the imagination. People have been investing in domains ever since the first domain was registered on March 15, 1985. But investing in domains has changed with time.
Domains with Scarcity Value
Most domains do not have any tangible value simply because they are not scarce. TheDomainInvestmentServicesCompany.com is a worthless domain simply for the fact that one could easily think of an alternative domain that would be of equal or better quality. And you could probably find an alternative that has not been registered yet.
The only real way to find value and generate high returns with domain investing is if you can develop a way to identify assets that are or are likely to become scarce and in demand with time.