Matt Collins is one of the original pawn stars of the domain name industry, and his latest venture continues with a business model to serve companies and individuals who own valuable domain names, patents, trademarks or other intellectual property often shunned by traditional lenders.
If you are a fan of Pawn Stars, Hardcore Pawn or any of the other pawn-related reality TV shows, you are going to love this interview.
Collins has had a long history of involvement in Internet-based businesses, including domain-related businesses almost since the inception of the Internet, and has served as legal counsel for many successful ecommerce companies.
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Pawn Stars, Cajun Pawn Stars, Pawn Queens, Hardcore Pawn – whatever the Reality Pawn TV Show you may watch, the result is the same. Those with valuable assets get quick and fair access to cash. Now, you could so the same with your domain names. Stay tuned to learn more.
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Here’s your program.
Michael Cyger: Hey everyone. My name is Michael Cyger, and I’m the Publisher of DomainSherpa.com – the website where you come to learn how to become a successful domain name investor or online entrepreneur directly from the experts.
I mentioned a slew of new Reality TV Shows that are pawn related. Pawn Stars, Cajun Pawn Stars, Pawn Queens, and Hardcore Pawn. I watch most of them and I find them fascinating. Learning about interesting memorabilia, hearing valuations, watching the negotiations unfold, and seeing people in need of some quick cash walk out the door satisfied. Sometimes the assets are purchased, but most of the time the owner receives a loan on their assets. Today’s guest is doing something similar with intellectual property, such as domain names, as the collateral.
Today we are joined by Matt Collins, Founder of InteLend.com. Matt, welcome to the show.
Matt Collins: Thank you for having me. I appreciate it.
Michael: Can you describe the purpose of IntelLend?
Matt: InteLend.com is designed to fill a need in the domain industry. The domain industry has financing sources out there already, but it does not have financing sources that provide really a short-term financial need that is necessary in the domain business. For instance, InteLend.com is designed to do a thirty-day transaction. That is all. The customer decides whether to go longer than thirty days, and the customer decides every single month whether to extend the transaction a little bit longer. So it is designed to meet a short-term capital need in the domain industry.
Michael: Got you. So when you say that there are other financing options available in the market, Matt, what are those? Because I have got domain names; I am not sure where I would go to get long-term financing. Banks do not understand me. Unless I know somebody who wants to make me a personal private loan, it seems like there are not a lot of options.
Matt: Well, unfortunately, there are not a lot of options. In fact, I have had discussions with various banks. They do not want to touch intellectual property-type transactions like we do. They certainly do not understand the value of domains, especially the intrinsic value that a lot of domains have. They may understand cash flow domains that are developed from a website, but banks tend to look at that as more of a transient kind of situation. Domainers, for years, have had to really rely solely on purchased money financing, where they are getting a loan to buy a domain, owner financing, or traditional financing options that may be offered by the companies. InteLend.com is really designed for people who already own domains. We are really not looking to do purchased money transactions yet. We may do that in the future, but as of right now we are looking for people who have a good portfolio of domain names. The domains that have intrinsic value. In other words, domains that have value in and of itself, or websites where the domains have been developed and actually create cash flow. And then, customers can use those valuable domains – those quality website businesses – to get money from IntelLend.com; then they can use that money to buy new domains or new websites.
Michael: Okay. So I understand there are financing options out there. Like I can go to my bank and I can say: “Here is my two years tax returns. Here is the cash flow that is coming off my website. My online publishing business, for example. Can I get a revolving line of credit?” and they will provide financing on a long-term basis to me. So, there is a cash flow loan, and I can do seller financing through Escrow.com or Zenscrow.com, or something like that, but what you are doing is different. You are saying: “We can do cash flow financing. We can do asset financing. If you have intellectual properties, such as maybe copyrights on a website, or patents, or trademarks, we an value that provide you some sort of financing on that. But we are a short-term financing option. We are thirty days and, if you want to extend it for thirty days at a time after that, you can do that.”
Matt: That is correct. While we do most of our work with domains, domains are really the heart and soul of our business, we do look at the other types of intellectual property, such as copyrights, patents, and trademarks. But here is the thing. Those have to be income-producing pieces of collateral because a patent, or a copyright, or a trademark may or may not have the intrinsic value that a domain has. A domain not only has intrinsic value just because it is a quality domain, but it is more liquid than a patent, trademark, or copyright is. So, as a consequence, we can advance more money on a domain that has that intrinsic value.
Michael: Got it. Now it is perfectly clear for me. Cash flow on trademarks, copyrights, or patents, or domain names; and domain names are the largest part of your business, you are saying.
Matt: That is correct. And when I say cash flow on copyrights, patents, and trademarks, we are really talking about royalty agreements or something that you have in writing that is verifiable, for lack of a better word, that can be used to show a regular cash flow series. And then we will make an evaluation based on the cash flow that you are generating.
Michael: Awesome. All right. What is the most creative mix of intellectual property assets that you have financed to date, Matt?
Matt: Well, for the most part, at this point in time, we have stuck mainly to domains. So, we have a mixture of domains that have that intrinsic value that I mentioned earlier plus also domains that have websites. For instance, a domain that may be totally worthless can have a high value for us to make a cash advance on if it is producing regular steady cash flow via through a parking business, via through an affiliate program, or via through just a website that has been developed on the customer’s own. So we have a lot of different options that the customer can have. They key is the customer, like any financial transaction, has to have some kind of value to the collateral that is being put up. Obviously, the more valuable the collateral, the higher the cash advance we can make.
Michael: Yeah. How long have you been in business, Matt?
Matt: Well, InteLend has been in business for about two months now. So we are a very new company. We are just getting started and, so far, the market has been very receptive to what we are offering.
Michael: So how much have you financed to date given that you have only been in business for a couple of months?
Matt: Well, so far, the collateral that we have financed is well over six figures in value. I cannot give the exact dollar amount of the loans that we have advanced because that is privileged information, but I can tell you that the collateral has been substantial. We have had excellent customers. We have done five-figure deals for individual customers. And so, it has been very good for us so far.
Michael: Nice. All right. So, it is a fascinating business model; and one that I want to dig into because I think a lot of domain name investors can benefit from, but I always like to go back in time, Matt, and figure out how guests got to where they are today. So I want to go back in time right now with you; and I want to jump back and find out what your schooling background is first. What is your educational background?
Matt: Well, I am an Undergraduate Business Major, and then I went to Law School, and I have been a practicing lawyer since 1993. In 1995, I got started with an Internet Company, and it has basically taken over my practice ever since. As many people have been around as long as I have, I got my start on Prodigy. I got an email through Prodigy. I even checked my email once every month or so just to see if anybody bothered to email me. Well, slowly but surely, the Internet took over my life. And by about 2000 or so I was solely an Internet Attorney. I did Internet Law exclusively. Also starting in 2000, I started branching out into being more active with the customers I had, the clients I had, and taking an interest in some Internet ventures that came my way.
Michael: Yeah, it is almost like you get into it, you cannot help but make your own investments in the market as well.
Matt: That is right. Yeah, they dragged me and I cannot get away.
Michael: Yeah. So, you are basically focused completely on intellectual property now – focus on the Internet.
Matt: Well, from my legal practice, I deal mostly with Internet-based businesses. I consider myself an eCommerce Attorney, but that really is business to the core. But as an eCommerce Attorney, I do a lot of software licensing agreements. I work with a lot of companies that run affiliate programs. I work with a lot of clients that are involved in the Internet through either hosting activities or through Internet marketing. So, I have a wide array of customers and I have clients that I work with in my law practice; that also has helped me learn about the Internet, domains, and has given me the foundation of (Unclear 9:27.9) Internet Businesses.
Michael: Yeah. Is InteLend.com the first type of Pawn Company that you have started and run?
Matt: No, actually, I was one of the Founders of DigiPawn.com. We founded that company over ten years ago; then I sold my interest in the company.
Michael: And what year did you sell it?
Matt: Gosh, six years or so ago. It has been quite a while.
Matt: I have been out of the pawn shop businesses for a long time. Maybe even longer than that, gosh, but I have been out of it for quite a while. And then I learned that DigiPawn has ceased operations, and so that got me thinking. I still believe that there is a market for a digital pawn shop business that the clients are out there; the customers are in there. And that DigiPawn’s closing did not have any relationship to the industry as a whole. Granted, valuations in the industry have gone down, but I think that there is still a need for the business that are domain valuations that are worthy of the business, and I struggle to believe that InteLend.com will be very successful.
Michael: So, you sold you interest six or so years ago in DigiPawn. You were doing intellectual property law; focused on eCommerce businesses. And you just came to the realization that hey, there is still a need for this in this industry; I am going to startup another business to serve this need.
Matt: Yeah, that is correct. When I started DigiPawn, I took the position as the attorney that I was going to research it, I was going to learn all about Pawn Shop Law, and that I was going to build the infrastructure to make the company successful. And so, I have the wealth of knowledge. I have all the research. I have everything needed to start the business. What I did not have was the financial investors to back the loans. So, that is what I really spent several months putting into place. And once I got that into place, InteLend.com was born and was ready to go to market.
Michael: Yeah. So tell me about that. Clearly, if you are a pawn broker, you need a lot of cash immediately available to do transactions because you may come across a deal where somebody needs cash immediately; and if you cannot satisfy that, you may not get it for the value that you think is fair that somebody else thinks is fair. So, tell me about your investors. You are not the sole investor in InteLend, I take it.
Matt: That is correct. We have some financial backers who are basically money guys. And they were very attracted to the rates that a pawn shop business can charge because a pawn shop business is not subject to usury laws. We have, by Georgia’s statute, set a range of interests that we can charge. And so, as a consequence, we were able to offer our investors are far better rate of return than they can get in any other kind of business. And that is why it is important that I keep saying that pawn shop business is really for short-term debt, because the interest rates are high. We have to be totally upfront with you and your viewers right now that, in a pawn shop transaction, the interest rate is high, but the trade-off is you get your money. (Unclear 12:32.9) and you can pay it all off in a month and be done.
Michael: Right. And so, I am going to ask you. I do not want the audience to feel like I am glossing over the comments about the interest rates, or how much it is, or how it compounds, and all that sort of stuff because I am going to dig into those details because I want to know them, but really I just want to find out about your investors. Are they just friends of yours, or how did you meet the investors, and how much capital do you have at your disposal to make loans against domain names and other intellectual property assets?
Matt: Well, it is an excellent question. It is really a fortuitous (Unclear 13:08.1) I happened to meet these guys. And it was through a third party who made the introduction. They were looking for ways to get their money into the street at a good rate of return. They did not want to deal with consumer loans per se, so they were looking for an idea on how they could actually get their money out and make a good rate of return. And that is when I pitched them on the idea of the pawn shop business. InteLend.com was very attractive to them, and they have committed, at this time, to invest up to ten million dollars, and would like to invest up to twenty million dollars. Obviously, we have money in the bank right now. We have got out first advance from them, and we are still making loans off that first advance. But they have told us that the minute we need more money, they will be happy to send us more so that we can continue to make new transactions. The bottom line is there is no business that can generate the kind of return for a moneyman – a traditional New York moneyman – than a pawn shop. There just is no greater return. The key is to make good quality decisions on valuations so that the client has the incentive to pay the transaction back or, in the alternative, if they default, we can monetize it quickly.
Michael: Yeah. And I want to ask you about valuations. I want to ask you about why you think domain names are more liquid at the valuation that you are buying. Then, some of the items that I see on, say, Pawn Stars or something. If I am going to buy a classic car and I am going to pay twenty-five percent of the street value of it today, or things like that. But it is fascinating that you were introduced money guys from some other location and that they are backing you; and I want to pursue that just for a minute, Matt, to better understand if there are watchers of Domain Sherpa that are listening to your story and they are thinking to themselves: “I have got a business. It is blowing up. I have got the potential to grow my business and pay investors a good interest rate. It is not what you are going to get from the bank or anything, but a good interest rate, but I need cash fast.” What advice do you have for somebody? I know you were introduced from a mutual acquaintance. What advice do you have for somebody that needs to look for financing like that, where somebody will come in and put a good amount of investment into something, looking for a higher rate of return?
Matt: Well, the people that I am talking to, of course, would not be interested in investing in an individual company. What they like about the InteLend.com model is that we basically invest in lots of little companies. We do not make billion dollar loans. They are generally, if one came along, we would look at it. Most of our deals are basically five-figure to six-figure as high as six-figure deals. That is really the heart and soul of what we are looking at.
Michael: Yeah, that is your sweet spot.
Matt: Right, that is our sweet spot. So, as far as people are looking for the kind of investor you are asking about, those people are looking for angel investors. And that is really far different from the people I was talking to. The advantage I had is that I could talk their game because they are looking for rate of return. They are looking for money on the street. They are looking to make loans. And, really, that is what InteLend does. They are not looking to buy businesses. They do not want to be shareholders in businesses. They do not want to own the customers. But they like to take a quality asset and make a loan on it, and that is what InteLend does.
Michael: All right. I understand that. So, let me ask you this. According to your website, it lists that you have served as legal council for many successful eCommerce companies. We have talked about that, Matt. Are there any of these eCommerce companies that you can name?
Matt: Well, actually, due to client confidentiality, I really cannot name my clients, but I have been practicing in the Internet space, gosh, since 1995. So I have been involved with a bunch of these companies. A lot of eCommerce companies, web hosting companies, and domain companies. So it is a pretty wide range of experience that I have.
Michael: Yeah. All right. And do you have a domain name portfolio yourself?
Matt: Yes, I have tried to buy and sell domains over the years, but at this point in time, I basically sold most of everything that I have. It is just I have proven that I am not qualified to buy and sell domains, and try to flip them, and certainly, I have no skills in HTML. I could not develop a domain name if I had to. So, (Unclear 17:42.3) to do as limitations and, fortunately, I have found mine.
Michael: Yeah. So, explain that to me, Matt. What makes you realize that you are not good at buying domains and flipping them, but other people will trust you with ten or twenty million dollars to buy domain names at a value that you may have to flip if the loan is not paid back?
Matt: Well, that is an excellent question. And the key to that is we have developed what we call our secret sauce, and that is our valuation system. And obviously, because it is actually secret sauce, I cannot go into details as to how we value domains, but I have a staff of people whose job it is to go in to look at the analytics, to look at the traffic results; if it is a website that is generating revenue or an intellectual property item like a copyright, we want to see the stats. We want to see what the deal is. We want to see what the royalty payments are. Those are a little bit easier to value than domains, where we are looking at the intrinsic value, where all you really have to work with is maybe parking page results, or not even that. But an intrinsic valued domain is hard to valuate, obviously, than an established website, copyright, patent, or trademark because those are all generating cash flow.
Matt: So, cash flow businesses are easier to valuate, but we still have our secret sauce when it comes to doing valuations on intrinsic valued domains.
Michael: All right. Okay. So let’s get into the details here of InteLend because I have a ton of questions. Let’s see. So we talked about your financial backers out of New York City that were listed in your press release.
Michael: We talked about how much capital you have at your disposal. You have money in the bank to make deals today, and you have access to additional capital if you need it. We talked about cash for all types of intellectual property – websites, copyrights, patents, and trademarks that are cash flow-based, and you have a valuation for that; and that is very typical to do that type of cash flow. And then you also have domains. But I suspect that the cash flow loans that you are doing, although you do fewer of them, are much more clear-cut. You know the cash coming in. You can average it over the past twelve or twenty-four months. You know how reliable it is, you can put a probability on there, and then you can assign some sort of loan value. Cash flow loans are done probably every day and very frequently through the web, but the domain name loans are what I would like to focus on because a lot of times there is not a lot of value on the domain names. People will sell domain names and they will say: “I do not have data. Just value it based on what you think it is worth.” Can you give me some guidelines that might be useful to our audience to understand how you value domain names – good domain names from the rest of the pack that you will not invest in?
Matt: Well, like I said, part of it is our secret sauce. We do look at analytics. We look at traffic reports. We look at parking revenue. But we also look at what the market is doing. We follow all the auctions very carefully. We watch Sedo. We see what is going on with the market as a whole, and so we try to adjust our valuations based on that. There is no doubt that a lot of it has to do with sort of a gut feeling valuation, but also make no mistake. We do not loan one hundred percent of the value. We cannot do that. We have to loan based on a percentage of the value because that is the only way that we can be liquid. We have to be able to liquidate the domain quickly, and so the market has to be able to support the valuation that we have come up with. And so, much like you mentioned earlier with Pawn Stars and Cajun Pawn Stars and all these Pawn Shows, the bottom line is a pawn shop is only going to offer you a cash advance of a percentage of the total value. Now, for InteLend, we typically value around thirty percent to fifty percent is what we are going to be willing to make a cash advance on. And so, we have to have that margin of error. We have to have that safety net so that we are quickly able to liquidate the domain if necessary.
Michael: Okay. So let’s say I have a domain name that is valued at ten thousand dollars. Your valuation; not my valuation because my valuation is one million dollars or something. So, your valuation is ten thousand dollars. Does that mean that you are willing to give a thirty-day loan on that ten thousand dollars, and you are willing to give me three thousand to five thousand dollars – the thirty to fifty percent that you just mentioned?
Matt: Yes, that is the way that we are looking at. We are looking at thirty to fifty percent of our valuation. So, in your example, if it was a ten thousand dollar domain, we would offer you between three and five thousand dollars. And it sort of depends on how liquid we feel the market it. For instance, my understanding is the market goes up and down, but recently auctions have not been doing too well. So we have to take that in mind. We have to keep that as a consideration. In the alternative, I am under pressure from my finance guys to get money in the street. I have got to do deals, and that is why I am talking to you today and trying to get the word out about InteLend.com, because I have money that I have got to invest. I have got to get it out there for my equity people. And so, as a consequence, right now is probably the best time ever to approach us because we are able to advance more aggressively than we have ever dreamed we would be able to do.
Michael: Yeah. Okay. So, walk me through the rest of that scenario. I have a ten thousand dollar domain at your valuation. I say, “Okay, good enough.” You loan me – let’s just use round numbers – five thousand dollars because it is a great domain that you think will do well in auctions and has more liquidity, or some other values that your secret sauce has valued. On that five thousand dollars that you loan me, how much do I owe you and what period of time?
Matt: Okay. Well, basically, every deal is different. We have flexibility with our lenders, so we do not have to follow any set regimen of interest rates. Basically, what we do is we look at the deal, we look at the domain, we look at the dollar amount, and we set the pricing for the finance charges based on each individual deal. Now, Georgia Law says we can charge up to twenty-five percent interest per month.
Matt: We do not do that. We are way below that.
Michael: Georgia has actually set a Law that says you can charge twenty-five percent per month, and they said anything above that is exorbitant.
Matt: Right. Yeah, that is exorbitant. Yeah, and in fact, the way Georgia Law works is you can charge up to twenty-five percent for the first three months, and then it has got to be twelve percent each month thereafter.
Matt: I could tell you right now we have not done a deal yet at twelve percent. So, we are well below the Georgia maximum guidelines. But remember, these are pawn shop guidelines.
Matt: And, being a Georgia Pawn Shop, we are governed by the State of Georgia Laws, and so we follow their laws in terms of the way we set up our contracts and our agreements. So, back to the original question – what is the process? Once we evaluate the domain, we will get the customer an email saying: “Here is what we can do for you. We can loan you five thousand dollars, in the example, and say yes.” The customer says yes; I will get them a contract. The minute they sign the contract we are ready to go. They do have to transfer the domain to us, so we hold the domain. It is held in one our escrow accounts, and we have accounts at every single major registrar out there. So, it is an easy quick transfer. And then, the minute the transfer is received, I will wire you the money same day. So, basically, you sign the contract in the morning, transfer the domain at noon, and have money in your account at one.
Michael: Okay. And so, back to the interest rate, what is the typical range of interest rates that you charge on a domain like that?
Matt: Well, every situation is different. We try to be flexible for the needs of the client. Some domains are too good to pass on, and so we will negotiate on the interest rate where we can. But generally speaking, we are looking to charge anywhere from five percent and up per month, but it can be a little bit different from time to time. Sometimes we will run special promotions and sometimes the situation requires a higher interest rate.
Michael: Okay. So, if it was five percent, let’s say, because it is a great domain name and you wanted to do it and whatever reason, but it is five percent and up – no higher than twenty-five percent, clearly.
Matt: That is correct.
Michael: So, let’s just say it was five percent. You loan me five thousand dollars. At the end of thirty days, you would need the five thousand dollars back plus two hundred and fifty dollars?
Matt: That is correct.
Michael: Okay. And if I did not want to pay it back at that time, do I have the right to extend the term of the loan, or does it automatically extend if I do not pay back the capital?
Matt: All you have to do to extend the loan is make the finance charge payment. So, in this example, you would pay your two hundred and fifty bucks, and the loan is automatically extended. And the way Georgia Pawn Shop Law works is that you can keep extending the loan month, after month, after month forever. There is no way that we can ever require you to pay the balance back. Now, that is expensive long-term money. So, I have to warn the viewers, this is not a great long-term financial option, but for some customers this is the only financial option that they have. We recommend InteLend.com for truly a short-term business capital need so that you can pay it back and then move on with your business. But make no mistake. We understand that there are customers who view this as a long-term bill, and are going to hold on to the transaction and keep renewing it until they are able to sell the domains, liquidate other parts of their portfolio, or until other financial segments of their lives improve to the point where they can pay it all.
Matt: Now, the good thing is that InteLend.com is more than happy to continue to hold the note. We will continue to renew the agreement every single month as long as the customer wants to.
Michael: Okay. So, in my example, ten thousand dollar domain. You loan thirty to fifty percent. Let’s just say it is at the high level of fifty percent, so I get five thousand dollars. Let’s say it is a ten percent loan. I pay five hundred bucks back to you at the end of every single month. If I continue to pay that five hundred dollars every single month, there is no problem; I continue to carry the debt that you are financing. Now, what happens if I do not pay my five hundred dollars at the end of any given month?
Matt: Well, Georgia Law requires that there is a ten-day grace period.
Matt: So, actually, you got ten days to pay the finance charge and renew it for another month. So, after that ten-day grace period, then, at that point, we take control of the domain. We use the word default, but really, in a pawn transaction, there is not such thing as a default because truly you have already given up control of the domain.
Matt: And so, as a consequence, there is no negative credit effect. There is no default in the traditional legal sense of the word. Being a lawyer, I guess I got to define that. So, I use the word default loosely, but default really is not the appropriate word because there is no default in a pawn-type transaction. The customer truly has every legal right to not pay the finance charge and just let the agreement expire, and then we assume all the risk, we now own the domain, and we could do with it whatever we want. Typically, our plan is to liquidate the domains via an auction, or through a private sell. Some domains we may hold on to until market conditions change. We are keeping a flexible option. And, of course, you have the customer comes back down the road and wants to buy the domain. We are always open to that opportunity also.
Michael: Okay. Is there a late fee if I pay after the thirty-day term but before the ten-day late period is up?
Matt: No, there is no late fee.
Michael: Oh, wow.
Matt: No late fee at all. All you have to do is pay the finance charge and it automatically rolls it over.
Michael: Now, what if I only pay you four hundred dollars of the five hundred dollars that I owe?
Matt: We have to send you that four hundred dollars back.
Matt: And that is an important point to make. We cannot take partial payments. We are not allowed to accept partial payments towards the principle. The principle has to be paid all at once or not at all, so you have to pay the finance charge or not at all. And that is basically to separate pawn-type transactions from a traditional financing. A traditional financing deal – you pay a little bit of principle and a little bit of interest every month. In this type of transaction, InteLend.com charges only the finance charge. That is all you pay to renew your deal. So, the principle stays outstanding. And in fact, it is an interest-only loan.
Michael: Yeah. And it is very similar to some financing options that you can get on your home, where it is interest only and then you own a balloon payment at the end of it. In that case, in the home financing case, you must pay that balloon payment at the end of a certain period of time whereas, in your case, it will just continue indefinitely.
Matt: No, we do not have any expirations. Our contracts under Georgia Law do not allow us to say: “This money is due two years from now two years, five years, or ten years down the road.”
Matt: The law says we specifically have to honor a renewal every time the client pays the finance charge.
Michael: It is interesting that you clearly are located in Georgia; you need to follow the Georgia Law. Was your thought process: “I am in Georgia. I want to stay in the United States to serve clients rather than moving offshore, where you are not bound by any United States laws.” Pros and cons. Did you think about that when you formed InteLend?
Matt: Well, this is my own philosophy when it comes to “going offshore”. As an attorney, I have always taken the position that, as long as you reside in the United States, US Government can and will find you. That is number one. Number two: InteLend.com is very proud of what we do. We are very proud of the services we offer. I feel that going offshore gives a negative connotation that I do not want to deliver because I believe that we run a totally legal, legitimate business. We are following Georgia Law. Every transaction takes place in Georgia. The domains are sent to us here, in Georgia. So we have basically the domicile for the domain that is registered here. Every transaction occurs pursuant to Georgia Law. We follow the law very carefully. Being a lawyer, I have to make sure we follow the law very carefully.
Michael: I should hope so, Matt. All right. So we talked about a ten thousand dollar domain name that you are financing. That was a single domain name. What if I come to you, Matt, and I have three hundred domain names that are valued at ten thousand dollars? Does that affect the deal at all? Would I still qualify? Do you look at the quantity of domain names versus the valuation? Clearly, a single domain name with a high valuation might be an easier transaction.
Matt: Yes, basically, a single domain with a high valuation would probably get us a higher advance amount. A large portfolio of domains – we do that all the time, but the thing is it is harder to manage. And do not forget the customer is responsible for the domain renewal fees. So, that increases their monthly cost in the transaction, but it is money they would spend anyway. So, as a practical matter, we will do large portfolios and small portfolios. We do whatever it takes to get the deal done.
Michael: Okay. So it is not a turn-off to you if somebody comes to you with one thousand domain names that they want to finance versus two domain names.
Matt: I would be more than happy to do that. Bring me a million dollar portfolio with one thousand names in it; I would love that every day of the week.
Michael: I would too. What is the minimum asset value that you will entertain a loan for?
Matt: We have not set any minimum asset value. We will do a two hundred dollar loan. We will do a five hundred dollar loan. We do thousand dollar loans. We will do five thousand dollar loans. And then we do fifty thousand dollar loans. So, we do a wide range of different advancing options based on what the collateral is worth.
Michael: Two hundred dollar loan? That cannot even be worth your time and the wire fees, Matt.
Matt: Yeah, well, if the customer has that need that is what we will do. So, to some customers, two hundred dollars is a life or death situation.
Matt: To some customers, fifty thousand dollars is a life or death situation. So every case is different.
Michael: Okay. Any maximum amount?
Matt: No sir, not yet. We have not hit any yet. But with my financial backers, I feel confident we can meet any maximum that may come in. I am not the least bit worried about that. Bring me good collateral and we will get a deal done.
Michael: Yeah. So, this seems a lot better than a typical pawnbroker that is located in a physical location. I watch these shows. I find them fascinating, as I mentioned earlier. And let’s say I own a thousand dollar guitar that I want to pawn. I might expect to get maybe two hundred and fifty dollar for it at a pawn shop on one of these TV Shows after I have negotiated with them for a while. Are you able to offer more – your thirty to fifty percent of your valuation – because you are on the web and you have access to a much larger pool of buyers than a local pawn shop in a specific geographic area?
Matt: Yes, I think that is actually a very important part of it. We can take a domain and go put it on Sedo or put it in a traffic auction. We can do that whereas a pawn shop really is limited to their geographical area; and if no one in their geographical area wants to buy a guitar, then they cannot sell it whereas I can take the domain that we get and I can sell it to anyone in the world. So the world is our marketplace.
Michael: Yeah, there are a lot more buyers for Guitar.com than my cheap little guitar that I have in the other room here.
Matt: That is correct.
Michael: So, we talked about valuation formulas. This is the key. I understand how your process works. You determined a value. You tell me: “Hey Mike, I think your domain is worth five thousand dollars; I am willing to give you thirty percent of it at this interest rate. Take it or leave.” Then the first thing I got to say is: “Well, is the valuation fair? Is it fair market value for that domain?” And that is the million-dollar question, right, Matt?
Matt: That is a very difficult question. And that is probably the biggest challenge that we have dealt with so far. Many of our customers, or potential customers, bought domains ten years ago and paid a lot of money for them. Well, as you well know and all your viewers know, in 2008, the world collapsed not only for the real estate market, but also for the domain business. Valuations today still have not recovered to the point that they were at in 2007, and they never recovered to the point they were at in 2007. So, as a consequence, part of our job is to explain to the clients that the domain valuations are not what they thought they would be, they are not what they were when they bought the domain name, and that we have to live in the world of 2012. We cannot live in the world of 2007. So we have to do business based on the current economic conditions. While I strongly believe in the domain business, I strongly believe that the domain valuations are going to come back and are going to come up. I think that we have to be a little bit conservative at this point in time because they are not back yet. Give it time, yes, but I think that the domain business is still going to be a good quality business to invest in for years to come.
Michael: Yeah. So, I am envisioning that people may be interested in this service after they watch this show, Matt. Let’s say that you are going to get some spreadsheets email to you. Can you give some guidance on the type of domains that you would like to see and the type of domains that you would not like to see?
Matt: That is a good question. First, the domain we do not want to see. I do not want to see anything with trademarks in it. I guess that probably goes without saying, being a lawyer, I got to get that kind of disclaimer out there. If it is a (Unclear 38:02.2) illegal domain, such as something that is trademarked, has a trademark as part of it, or is involved in some kind of illegal activities. We do not want to deal with casinos, and poker, and things like that. But other than that, we are looking for two types of domains I mentioned earlier. Domains that have intrinsic value that make them valuable just in and of itself. Keyword domains. Domains that are short. Common word domains that are easily marketable. And we are looking for websites that are actively built. And so, if you have a domain or a portfolio of domains of all active websites that are built, then we will be more than happy to value those. Just like with the copyrights, trademarks, and patents, cash flow is king. Those are the easiest to value.
Michael: Yeah, cash flow is king and those are easy, but a lot of people have domain names and they made need some cash and they do not have cash flow because parking has dried up and they have no other value to their domain names besides the intrinsic value. So you want to see generic keywords. You want to see short domain names. Good brandable. Numbers. Do you like numbers?
Matt: Yes, numbers work too. Once again, short, quality numbers that can be easily associated with products and services, I think, could be very valuable. Obviously, if it is a ten-digit number, that may work for a Canadian company, but that is not going to work really that well. But by the same token, send us anything. We will look at any domains; any assets that you have. We will give it a fair valuation.
Michael: Okay. So I understand the cash flow part, but on the domain name part for valuation, you have got this black box. You have got a secret sauce. I need to send you my domain names, you are going to run them through some sort of formula, and then you are going to come back to me and say: “Hey Mike, the valuation that I can give you on your domains is X.” Is there any way for me to figure that out without sending my domain names to you?
Matt: Generally, no. I mean we cannot. And by the way, we are probably will not give you the actual valuation. We are going to tell you what we can advance – what kind of dollars we can advance. I want to be flexible in how I value domains, and so I do not want to come into a situation and have someone say: “Well, Matt said the domain is worth ten grand.” I am not going to say that. I am going to say I can give you five.
Matt: I can give you thirty-five hundred or something to that effect.
Michael: I am glad you clarified that.
Matt: I do not want to be put on the spot later.
Michael: So, people who are thinking: “Oh, I am just going to email my portfolio to Matt and get free valuations on everything,” you are not doing valuations for free.
Matt: No, we are not.
Michael: We will quote what somebody can get a loan for on that portfolio.
Matt: That is correct. And that is really the fairest way to treat the customer because we are not a professional valuation company. We do valuations that are going to be approximates based on what we think we can get for the domain in a fire sale. And that is how we look at it. So, the valuation is not really a fair market value valuation of what you can expect to get with proper time to market, and sell, and promote the domain.
Michael: So, you just said one thing that I just want to clarify. You will value the domain based on what you think you can get in a fire sale?
Matt: Right. We want to know what could the domain sell for as a liquid.
Michael: Today, if you had to sell it today.
Matt: If i had to sell it today. And so, by the same token, when I say I have to sell it today, I am not talking about only going to Sedo. I am talking about looking at other sales options, such as brokerage, third party selling, and marketing. There are a lot of those services available out there. Also, running an auction at TRAFFIC. I mean there are a lot of ways we can sell a domain, but I like to think of those all together as the way that we would sell a domain if we had to. And so, I want to be able to say: “If I had to use one of these different services and options, what would I expect to get from the domain in that kind of situation?”
Michael: Right. And you have to take into account that you have got costs associated with that. It takes your time, or your staff’s time, to come up with the marketing for the domain, you need to put it into the auction, you are going to have to pay fees against that auction if it sells successfully, and everything else associated with it. The legal paperwork.
Michael: Have you found a service online that does fair wholesale valuations that people might be able to use as an estimate for the domain valuation that you may provide? For example, can I go to EstiBot, do a valuation of a domain name, and look at the wholesale value – not the retail value, but the wholesale – to see what I think I might be able to get a value for on the domain?
Matt: Well, I mean that is certainly an option a customer has. Frankly, I would advise the customer to send me the results of any kind of service like that. Any kind of evidence or piece of information that a customer has that will help us make a decision is very much appreciated. As I said earlier, I want to do deal. I want to get the money out there. I am not personally able to set values on domains. That is why I have number crunchers and tech people who do that. So, any information you can give me to help me make my job easier is very much appreciated. So, I would not say that necessarily a third party service would clearly help identify what our secret sauce would give up. It may, nevertheless, influence our secret sauce. From a human element, say: “Well, they got these appraisals over here. We think the domain is worth X, but the appraisals say Y. We may be better able to increase the amount we would advance in that kind of situation. So, that could be good for the customer.
Michael: Yeah. All right. We went over a lot of details of your service, Matt. I am always interested, from a business standpoint, how other service providers are marketing their new business. You have been doing this for two months. You probably had a game plan going in that you were going to do some sort of marketing, like coming on the show; when we asked you to, you thought that could be a great way to get some promotion and marketing. What other ways are you doing marketing, currently or do you have planned in the future, to grow your service business?
Matt: Well, that is an excellent question. What we are doing right now is we have purchased a listing in the Directory on Domaining.com. We are also in the process of setting up an affiliate program. Right now, you can contact us directly and we will add you to our affiliate program, but we are going to be adding a new page to the website in the near future where people can sign up online to be an affiliate. And basically, the way the affiliate program is going to work is, for every customer you send us who signs a deal and pays the first month finance charge, we will send you commission on that finance charge. So it is based on we have got to be paid the finance charge at least one month in order for the commission to be applicable, but we believe it is a very generous affiliate program. And right now we are going to be paying approximately three percent of the first month’s finance charge as a commission to affiliates. I think that is a very attractive affiliate business model, especially for people who run websites catering to the domain business, or newsletters, or any other kind of marketing system that is in touch with the domain cobweb, for lack of a better word. Get those people to at least know that we are out there. I think that every business, or individual, goes through times when they need cash. And there is no bank that is going to finance them, but they can come to InteLend and get money on the same day. That is an option that needs to be concerned, and so I tell people and say: “Well, doing the domain pawn is not something that you may want to do, but what about your friends who need the money? Don’t they have a right to know about this as an option and make their own business decision? Let them make the decision; and you get paid.”
Michael: You are a good marketer, Matt. I like it. You are always hitting the points. All right. Three percent of the money that comes in the door, as an affiliate, for your service. Now, you said three percent of the first month’s money that comes in the door of that interest payment.
Matt: No, I am sorry. I misspoke. It is three percent of the total amount of finance.
Michael: Oh, of the total amount financed.
Matt: Right. So, if we charge a five percent interest rate, we will pay three to the affiliate on the first month. That is an example. If we charge two percent, we will still pay three. But we want to have a very attractive financial return for our affiliates.
Michael: I am sorry. I just want to clarify one more time. So, if refer you somebody who you finance ten thousand dollars. The value is ten thousand dollars – going back to our original example -, and let’s say you gave them five thousand dollars on that. And so, the monthly payment due back, let’s say, is five hundred dollars at ten percent. What are they getting three perfect of? The five thousand dollars or the five hundred dollar payment?
Matt: They are getting three percent of the five thousand dollars.
Matt: Of the amount financed.
Matt: So, of the five hundred bucks, they get three hundred of it.
Michael: Right. Okay. Great. I was going to say if it was on the interest payment and you are only paying the first month, well, maybe going long-term would be better, but in this case, yeah, three percent of the entire amount financed. That seems very generous.
Matt: I agree. Thank you.
Michael: All right. So we talked about that. Let me ask you this. TLDs, Matt. Will you only finance .COMs? Is .COM always king? Will you finance a .ORG? What is your feeling about .NET, .ORG, .INFO, .CC, .LY, and all those other TLDs?
Matt: Well, I think the TLD world is only going to get bigger. It is growing every day with the ICANN enrichment program. They are going to keep selling these things. So, new TLDs are going to be part of our life, but it is just like any .COM. The bottom line is if it is a good quality domain or if it is a domain that a customer has taken, and marketed, and created a website, then we will do the deal all day long.
Michael: Yeah, clearly, if they have a website that is cash flow. I understand that. But if I came with you Porn.mobi, clearly, it does not have the same value as Porn.com.
Matt: That is true.
Michael: Is it even worth my time to bring you .MOBIs, or .LYs, or .INFOs?
Matt: I would say bring us the domains, let us run it through our secret sauce, and let’s see what kind of traction it has. I mean, obviously, .COM is king. It is right now. .NETs are second and .ORGs are third, and other TLDs have some values to them. But I would hesitate to say we do not want to see something because I want to encourage customers to bring us deals and then we will make the biggest advance that we possibly can based on the domain.
Michael: All right, makes sense. So, people should contact you if they want to be involved in your affiliate program. Should they use a contact form on your website InteLend.com, or should they contact you via email?
Matt: Well, we do not have the affiliate page up yet.
Matt: We are working on that. So, as of right now, contact me directly – Matt@InteLend.com. I will be happy to set them up with our affiliate program and get them their linking codes.
Michael: Yeah, all right. I think I have got all of my questions answered here, Matt. Let me bring up the new GTLDs since we broached the subject on alternate TLDs to .COM.
Michael: And I am bringing it up with every guest. What do you see happening to the market? Clearly, it is getting bigger, but what do you see is going to happen to the market and to the valuations when tens and hundreds of new GTLDs enter the Internet in a year or two from now? What will happen to valuations?
Matt: Well, I went to the ICANN conference a few years ago, when they were first starting this whole conversation about GTLDs. And I believe that GTLDs will have a place in the marketplace. So, I think there is going to be an opportunity for people to get good quality GTLD names and develop them, and have some intrinsic value as well as develop domain name websites. So I think that the market, from our standpoint – from InteLend’s standpoint -, is going to accept these new domains. As a general rule, I still think .COM is going to be king. If I am going to buy a domain for my business, I want a .COM, and that is the way I personally feel. So, for your question, you really want to know how I personally feel. If I am starting a new business, I did not go buy InteLend.tv. I bought InteLend.com. And if InteLend was taken, I would have come up with another name. So, I feel very strongly about .COM as a central source for commerce, hence .COM. I think that is the commerce stratus that we should be working in and that is where I think the future of business is still going to be with a place for GTLDs that are coming out as well. I do not think it is going to forestall the growth of GTLDs because I think there is a certain marketing cache that can be attached to certain GLTDs if they are branded right, and can create intrinsic value in its own way. So, like the whole .BIZ was supposed to be.
Michael: Right. Yeah. And I did not do a WhoIS search beforehand, Matt, to see if you had purchased InteLend.com from somebody else. Was it a hand registration recently?
Matt: Yes, it was hand registration. We sort of came up with a name, saw it was available, and took it.
Michael: Intellectual property lending shortened to InteLend. Great brandable name. If you have a follow-up question for Matt, please post it in the comments below and we will ask him to come back and answer as many as he can. Matt, if people want to just reach out to you to ask you some questions – they do not want to make it public on the comments, but they want to ask you something -, is it okay if they email you at Matt@InteLend.com?
Matt: Absolutely. Please do.
Michael: All right.
Matt Collins, Founder of InteLend.com. Thank you for coming on the show, explaining your new cash advance business that serves the domain name industry as well as other areas, educating us on these intellectual property loans that you do, and thank you for being a Domain Sherpa.
Matt: Thank you very much. I appreciate your time.
Michael: Thank you all for watching. We’ll see you next time.
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