How Michael Bereslavsky of Domain Magnate is Leveraging Private Equity Deals Under $1 Million

Michael Bereslavsky of Domain Magnate is bringing private equity to online niche businesses. 

Since 2004 Michael has been building online businesses. Over the years, he’s had plenty of hard lessons and unique experiences. 

He found the best complementary strengths and profitability in buying, managing, and selling websites.

Today Michael is now the founder and CEO of Domain Magnate, a micro private equity firm specializing in buying and growing online businesses under $1m. 

In addition, Michael is now a partner at Dealflow Brokerage. 

Listen to the podcast to hear how Michael started, and a few of his most memorable deals. 

Watch the Full Episode

Micro Private Equity

You can find a private equity firm specializing in just about anything. Real Estate, Oil, Public Works, Banking, Royalty funds, and even private equity firms specialize in art investments.  

Domain Magnate has been around for a while now with their investment strategy into the micro online business world (online business less than $1 million). 

Domain Magnate at first glance appears to be similar to a brokerage like Quiet Light Brokerage or Dealflow brokerage. Brokerages typically don’t manage or take investors’ money which is why Domain Magnate is structured as a small private equity firm.

The idea of a private equity firm buying a company to restructure and grow for resale is not uncommon. It’s probably the norm, but historically online niche websites would have been too small or risky and looked over. 

What’s unique is the investment opportunities. Michael and his team bring fresh insight and deal structure to the established websites exit strategy for investors to participate in the profitable deal-making.

Investment Opportunities

1. The Big Fund:
   The first option is for accredited investors only. The fund will allow a larger number of investors to participate, and it will aim to acquire and grow multiple businesses and distribute profits to investors. You can learn more about this fund here. 

   When you invest in the fund, it’s a passive investment, meaning you won’t have much decision making in the process. Domain Magnate will buy websites in the first year, grow those sites, and in the second year begin distributing dividends from either the revenues or sales of the companies purchased in year one.

2. Buy Manage Program:
   In a way, this is similar to the operator model. As an investor, you own 100% of the company that is purchased. The difference between the operator model and the Buy Manage Program that the Domain Magnate team offers is M&A processes.

   A typical operator would handle the website‘s day-to-day, where Domain Magnate will put much more of the focus on the initial purchase and eventual sale of the website for a profitable flip. (in addition to the day-to-day.)

3. Family Fund Investing:
   The third way you can invest with Domain Magnate is through a family fund structure. More considerable family funds or family office investors will come to Domain Magnate to diversify their portfolio by investing in the online website businesses.

   The minimum to invest in this space is currently $500,000-$1,000,000.

Current Portfolio Success

The model is working well for the team. Their first fund generated a total profit of $775,604.40 and an asset value estimate of $275,000. You can see a few of their real success on their site here. 

They’ve sold 4 of the businesses for a combined amount of $494K, and have 5 remaining sites with a combined estimated fair market value of $275K.

If the fund were to be liquidated now at a fair market value, the Total Value would be $1,050,604, with a Total Return of 130%.

Getting Started

It would take some guts to manage someone else’s portfolio of websites and take a lot of faith in the investors. So how did Michael get others to trust him with investing millions of dollars?

Michael started working in Online businesses in 2004. He was 19 going to University to be a software engineer. 

The problem was Michael was a terrible software engineer. In fact, he had trouble coding. He was getting interviews with some of the largest tech companies in the world, but once he reached the coding portion of the interview, he inevitably never got the job. 

It was around the same time, though, that Michael found he could make money with online businesses. 

First Incomes

His first entrance into the online business world was in 2004, and there were no courses that taught you how to make money online. 

Three short years later, in 2007, he made his first 6 figure income. He was pulling in $10-15k per month from Adsense. 

Michael recalls the hassle at the bank having to tell the tellers that he did not work for Google.

“No I don’t work for Google. It’s a Google Ad Network payment”. 

Since then, Michael has completed hundreds of deals. Most of them relatively small sales but have consistently been growing in size. 

What started as $100 acquisitions went to $1000 acquisitions, and then $100,000. Michael even participated as an advisor capacity for 7 and 8 figure deals. 

How to Negotiate Website deals

Michael says the key to negotiating great deals is keeping a cool head and sticking to the facts. 

Deals will often fall through due to a small disagreement. By sticking to the facts, you are able to take a few of the extreme emotions out of the equation and land better and more consistent deals. 

To land a great deal during negotiations, knowing what you want in a deal is the first step. Whether it’s for a client or personally Michael chooses a set of criteria for sites to look at. 

Selecting Criteria

For Domain Magnate one of the key criteria is organic traffic. While there are lots of other factors it really comes down to the buyer. 

For some, that could mean a content site, others a SaaS business. Metrics such as price, earnings, or industry are just as important. 

Each deal Domain Magnate does is a bit unique, but there are a few similarities for each. Here are just a few of the steps Domain Magnate does when managing the process of Buying, managing, and selling a site. 

Domain Magnate Process

• Sourcing Deals: as an early pioneer in the space, Michael has an incredible network. Developing relationships is what allows him to source deals that often are not found on your normal brokerage sites.
  
  Michael is a partner at Dealflow brokerage which was formally owned by Flippa. When it comes to buying sites Michael recommends to let your networks know you are interested in buying.

  When you are the first person someone thinks of when considering selling a website, you often get to be the first at the table negotiating and allows for a great deal for all parties. 
  

• Due Diligence: Each year Domain Magnate aims to do 10-20 larger six-figure deals. Michael himself has participated in 100s of deals in his lifetime.

  This experience allows their team to quickly identify the red flags and minimize the chances of a deal going bad. A fraud selling a site filled with PBNs or false metrics is unfortunately not uncommon and could mean the difference in success or losing thousands of dollars. 

• SEO Managers: Many of the employees at Domain Magnate are SEO managers and assistants. After each site that is purchased goes through a rigorous inspection and review both before and after the purchase. The website will receive a unique strategic plan, which receives a product budget and expectations of the site. If a site has a lot of potential and room for growth, a content plan will be more aggressive than say a site that has been around for years. 
• Link Building: Domain Magnate knows that in today’s market, buying links can be necessary. With the large network, the team has grown a list of operators and site owners they regularly do business with. 

  By leveraging this network link building becomes much easier. At any time they can call on-site owners to build links.

• Monetization: Once a site is added, the team adds premium ad networks and affiliates. With affiliates like Amazon cutting affiliate commissions, looking to other networks like  Shareasale is an easy way to boost commission rates.

  Even more, the Domain Magnate team isn’t afraid to negotiate their own affiliate commissions. When managing multiple sites that small boost in income can add up and be worthwhile. 

Does the process work for all websites? 

Michael admits that it doesn’t. One or two out of every ten sites will fail. We’re all human, and making a profit 80% of the time is not bad at all. 

Some results are swifter than others. Sites are purchased with the intent of selling in six months to a year. Domain Magnate also considers holding onto larger sites cash flowing well. The team understands that the change is consistent and must adapt to the circumstance when necessary. 

What’s next for Domain Magnate?

Michael has seen consistent growth from $100 sites to $100,000 sites. So the natural next step is to go bigger. Michael says they look to buy a few low 7 figure businesses in the near term.

Larger business deals and finding great people to work with are the current priorities at Domain Magnate. 

Domain Magnate currently has twenty employees, and Michael did mention they were hiring more. 

If you want to get in touch with Domain Magnate, learn more about their investment opportunities or available jobs, you can find more at DomainMagnate.com.