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$350 million for business.com - Not a huge payday

We were hearing the rumblings for a little while, that business.com was up for sale. Now, Santa Monica, CA based business.com has been sold to R.H. Donelly Corp. for $340 million, according to WSJ. Donelly publishes yellow pages and white pages directories, in print and offline. WSJ calls it a huge payday, but we beg to differ!

Business.com is the shopping.com for businesses. It is a B2B focused search engine, which lists several categories of services such as legal and healthcare, as well as business related goods - office furniture etc. Revenue is generated through pay-per-click ads.

Started in 1999, after a highly publicized purchase of the domain name business.com for $7.5 million, the highest ever paid for a domain name, Business.com has raised a total of $75 million in venture funding from the likes of Benchmark Capital.

So what did the founders and investors make for all the money they put in? We know the founders bought the domain name for $7.5 million, and an additional $75 million of venture money went it. We don’t know what the friends and family round was, or the seed money raised, but lets say they raised a total of $85 million. On a $350 million sale, we are talking 4x return over 8 years. Positive ROI to be sure, but at about 20% payback for the investors, not that huge!

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July 26th, 2007 Posted by Toni DasGupta | Technology, New Media, Startup | 3 comments

3 Comments »

  1. I’m confused by your analysis:

    400% over 8 years is a spectacular and stunning ROI, especially because it includes a time when many internet businesses were failing dramatically. Also, as you scale up capitalization you can’t reasonably expect as big a percentage gain, though as in this case the absolute gain was spectacular: 345m - 85m = 260m.

    I think the valuation is questionable given EBITA of only 15 million. For a small business you’d expect only 5x EBITA, and for a primarily internet small business even less.

    Comment by Joe Duck | July 26, 2021

  2. Joe, from an investor’s point of view, they are looking for the one spectacular “make the fund” investment that will generate 10-20x. The take here was decent, and in line with what was expected, but a 20% return is not huge given the amount of “bubble” money that went in.

    Comment by Toni | July 26, 2021

  3. Congrats go off to Jake and team. Back when i was working on their search engine, post-bubble, it was looking bleak - all of the nay-sayers were thinking that money was going to just go down the drain.

    Jake and his team made a lot of very difficult business decisions and now, 6 years later, have come out with a nice return. Persistence pays off again.

    Comment by Frank | July 27, 2021

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