Paul Lum, president of Registrars.com,
a new dot-com millionaire.
Two 30-year-old Vancouver
entrepreneurs received a $15-million present on Tuesday -- a day late for
Christmas, but a lot earlier than they expected.
Just 14 months after founding Internet
Domain Registrars Corporation, a.k.a. Registrars.com, Paul Lum and William Jo
sold it to Seattle-based Network Commerce Inc. for $15 million in cash and
stock, proving there's life yet in the dot-com sector.
"We weren't shopping around for
buyers at all. We thought we were too young and too small to be bought out by
someone else. We were focused on building critical mass. We had to get to a
million customers before anyone would even consider funding us," Lum said.
Then, in early November, he got a call
from Network Commerce CEO Dwayne Walker. The Seattle company wanted to buy a
domain name registrar, at least in part to access its huge customer base, and
Registrars.com fit the bill.
"We believe this is an important
addition to our technology infrastructure business. We also believe this will be
another avenue for expanding our database of registered customers," Walker
The new management expects
Registrars.com to generate revenue of $30 million Cdn in 2001 and to turn an
operating profit by the second quarter of the year.
The deal provides Lum and Jo, as
owners of Registrars.com, $750,000 US in cash and 8.25 million shares in Network
Commerce, giving them approximately one-fifth ownership in the American company.
Network Commerce shares, which hit a
52-week high of $25.94 US last January, were down a few cents on the day, to 75
cents US. Some analysts maintain a price target for the stock as high as $10 US.
"If the stock market were not
coming down to a low, I would probably not be as interested," Lum said.
"I thought that we could benefit from a turnaround in the stock market as
opposed to merging with a company when it's at its high and then watching the
stock go down."
Lum and Jo had already launched a
successful Internet services provider, Internet Gateway, by the time they got
the idea for Registrars.com last year.
At that time Network Solutions, a New
Jersey company, had the exclusive right to issue Web site names ending in .com.
But in October 1999, the industry body that governs domain names lifted that
monopoly, and Registrars.com was among the first dozen companies to rush in.
Since then, it has become the
sixth-largest registrar of domain names worldwide, having registered more than
600,000 names, 95 per cent of them outside Canada. The company not only
registers .com names, but also .net and .org, as well as country-specific domain
names. It was one of the first to register the new Multilingual Top Level
Domains, for languages such as Korean, Chinese and Japanese.
The basic fee to register a name for a
year with Registrars.com is $35 US, but Lum says the company either already does
or soon will offer subscribers other services, including Web hosting, site
promotion, programming/Web design, e-commerce and advertising services.
That's where Network Commerce comes
in, Lum said.
"We feel that they provide a lot
of valuable services which would take years to develop ourselves."
Registrars.com has 95 employees in its
new headquarters in the Bentall Centre and four in a branch office in San
Francisco. Network Commerce has four locations, in the U.S. and U.K.
Under the new owners, Registrars.com
will become an autonomous unit, with Lum serving as vice president of network
commerce. He expects to hire more customer service and programming staff, as
well as roll Network Commerce's own small domain name service in with the
"We can supply programming
services below cost for them because the average programmer in Vancouver makes
$45,000 a year and the average programmer in Seattle makes $60,000. That's in
U.S. dollars so it's basically double," Lum said.
Do Lum and Jo, who is currently on
vacation in Singapore, have any more business plans up their sleeves?
"I won't rule out anything
in the future. I think for the short term, [I'll be] completely dedicated to
helping mature this company even more," the young Internet tycoon said.
- Stuart Davis, Michael McCCullough
Registrars.com sold for up to $14M by
Started 14 months ago
VANCOUVER - A $500,000-cash investment has
resulted in a potential $14-million payday for two Vancouver entrepreneurs in
the domain name business.
Paul Lum and William Jo, both 30, started
Internet Domain Registrars, better known Registrars.com, about 14 months ago.
Yesterday, Mr. Lum announced the sale of Registrars.com to Seattle-based Network
Commerce Inc. for US$750,000 and 6.75 million shares of Network Commerce stock.
Registrars.com could receive another 4.5
million shares from earnout provisions in the agreement.
Network Commerce closed yesterday at US75¢.
That gives the deal a potential value of up to $14-million.
The deal is quite a coup for the two
Vancouver men, who have made Registrars.com the world's sixth-largest domain
name registry since founding the company in late 1999. Registrars.com has
registered more than 600,000 domain names and has 100 employees working in
offices in Vancouver and San Francisco.
Network Commerce, which offers a range of
e-commerce services to businesses that already have domain names, had only a
small registration business. Buying Registrars.com will enable it to attract new
business from companies that are still looking for domain names.
Mr. Lum, president of Registrars.com, will
continue to run the registration business from Vancouver. He said the
transaction allows him to offer a greater range of services to his customers
because now Registrars.com can do more than simply provide clients with domain
"Securing the customer is the hardest
part. Once we capture the customer, once we make them loyal to us, all the other
services are turn-key," he said.
Network Commerce expects Registrars.com to
generate revenue of US$20-million in 2001, with positive cash flow coming in the
second quarter of 2001.
Network Commerce needs the money. The company
reported a net loss of US$76.5-million on revenue of US$79-million in the nine
months ended Sept. 30.
"Since we expect our domain registration
business to be cash-flow positive by the second quarter of 2001, we fully expect
the addition of [Registrars.com] to provide a new and significant revenue and
cash-flow stream to the company," said Dwayne Walker, chairman and chief
executive of Network Commerce.
Network Commerce has suffered from the
dot-com downturn, with its stock price sliding from more than US$25 last January
to less than a dollar.
About 15% of the company, which has a market
cap of about US$45-million, is owned by major institutional shareholders.
Mr. Lum was also owner (
in separate arms lenth transaction) of
Internet Gateway, an access provider he founded in 1995.
- by Drew Haasselback Financial
Post December 27, 2000