Donuts

Donuts emerged from a fundamental insight about the internet's domain namespace: the traditional .com and legacy top-level domains were becoming saturated. Bruce Jaffe, a former Microsoft corporate vice president and CFO of Microsoft's online division, joined Donuts as CEO in 2017 to lead a company founded around 2010 with a audacious vision. The governing body of the internet (ICANN) had decided to open up new choices and opportunities for domains, creating a process to bring new TLDs to market. Jaffe and industry veterans recognized this as a generational opportunity.

The company launched around 2013-2014 when it "really started taking off." The road to market was capital-intensive: Donuts raised approximately $150 million in total "in part to secure the licenses and then you had to go into and it's many of these we need to actually bid on to win in an auction." The company built a portfolio of roughly 240 new top-level domains including .coffee, .life, .today, and .news. Rather than going direct-to-consumer, Donuts adopted a B2B2C wholesale model, selling to registrars and hosting companies like GoDaddy, Hostgator, and Squarespace, who would then retail to end users.

The wholesale partnership model proved effective for scaling. Donuts didn't need to build a direct sales force—instead, they worked through established channel partners who already had customer relationships. The company also operated name.com, their own direct registrar based in Denver, which gave them valuable data on customer behavior and churn rates while allowing them to maintain some direct-to-consumer presence.

The unit economics proved remarkably healthy. Donuts prices different domains at different price points but uses an average of $20 per year per domain across their portfolio. The business model offers unlimited inventory—they can produce new domains on-the-fly with near-zero marginal cost. "If a customer says I would like Nathan dot today or Nathan dot social or Nathan dot games we will make that and then we sell it and so the cost our marginal cost is extremely low."

Renewal rates told the real story of product-market fit. Year-one renewal rates hovered around 60-70%, but this climbed dramatically to "the 80s and 90s over the course of time." Customers also showed propensity to expand their digital identity by purchasing multiple extensions. Donuts invested heavily in "statistics and machine learning and AI to figure out all sorts of things whether it's pricing or renewal rates or how to best market and sell."

The company also pursued strategic acquisitions, including a public company called RightSide, to broaden their portfolio and drive synergy value with channel partners.

By the time of this interview, Donuts had sold approximately 3 million domains and was generating roughly $60 million in annual recurring revenue. The company achieved 59,000% growth over the prior four years according to the Deloitte Fast 500 list. Recent year-over-year growth was tracking at 20-30%, which Jaffe characterized as healthy given the law of large numbers. The team had grown to just over 100 people spread across offices in Dublin, Denver, and Seattle. Jaffe emphasized that the company balanced two strategic priorities: acquiring new customers through channel partners while simultaneously innovating beyond simple domain sales. "The providing more users out there who see a dot Social being used makes folks get social proofs and gives people familiarity with the product." The business remained focused on being "a great operating company, a great innovating company and a great accumulating company of more products and solutions."