Investors Feast on Donuts—Which, By the Way, is a Domain Name Registry

Donuts, the Washington state-based domain name registry company, is packing on a whopping $100 million in funding from VCs including Austin Ventures, Adams Street Partners, Emergence Capital Partners, TL Ventures and Generation Partners. Stahurricane (CEO Paul Stahura’s investment fund) is also participating in the investment. The company is naming former ICANN CFO Kevin Wilson to the same role with Donuts and announced a number of other appointments.

PRESS RELEASE:

Applicant will significantly widen Internet identity competition and choice;
Founders add industry veterans to executive team and break ground with new registry services provider

BELLEVUE, Wash. — Donuts Inc., a registry for new top-level domain names, has moved assertively to expand Internet namespace with 307 applications for new and varied generic top-level domains (TLDs) in various character sets. The expansion will bring significant new industry competition and fresh choices for Internet end-users who need better, more specific domain names for their products and services.

The company’s efforts are funded by more than $100 million in capital from multi-billion dollar private equity and venture funds. Donuts executives say they intend to deploy capital—and raise additional funding if necessary—to secure and operate each applied-for TLD.

Donuts effort will expand currently constrained namespace

The now-concluded application period for new Internet names follows the ICANN community’s six-year, multi-stakeholder effort to expand consumer choice and competition in top-level domain options beyond .COM, .NET and other extensions. The current namespace—the fulcrum of commercial online navigation—is badly constrained, and consumers and businesses need new options for Internet identities.

“Finding a usable Internet address is a real problem. There are more than 125 million total names in the top five TLDs, with three fourths of them in .COM alone,” said Donuts CEO Paul Stahura. “The Internet was opened for worldwide use almost 20 years ago, and we’ve had only 22 generic names made available since then. We’re overdue for expansion.”

Stahura also anticipates strong competition to the currently dominant .COM extension. “This expansion is going to be disruptive in a positive sense. There’s no question competition is coming to .COM and other TLDs—how much of the market the new TLDs will take from them is what remains to be seen.”

A well-resourced company

Donuts has raised significant capital—more than $100 million—from notable sources, including:
•Austin Ventures
•Adams Street Partners
•Emergence Capital Partners
•TL Ventures
•Generation Partners
•Stahurricane (Stahura’s investment fund)

Donuts has further obtained a senior secured revolving credit facility with Comerica Bank, one of the United States’ premier banking organizations.

Stahura said Donuts is ready to raise additional funding should circumstances warrant. “Our investors are very optimistic about both this opportunity and our plans,” he said.

“Donuts has a compelling approach to TLD expansion,” said Chris Pacitti, General Partner of Austin Ventures. “Paul has put together the strongest team in the industry, and that team has identified the optimum approach to securing and operating TLDs, presenting actual choice to end-users, and protecting rights holders. Donuts is going to be a formidable presence in Internet namespace growth.”

Groundbreaking partnership with Demand Media
After exhaustive analysis, Donuts selected Demand Media Europe Limited, a wholly-owned subsidiary of Demand Media, Inc. (NYSE: DMD), as its registry services provider, based on its superior technology solution, support structure and overall ability to meet Donuts’ requirements.

“Donuts has developed a well-considered and strategic approach for expansion of the namespace,” said Taryn Naidu, Executive Vice President of Demand Media. “We have built a strong partnership with the Donuts team and believe by working together, we can most effectively help end-users and deliver on the promise of ICANN’s new gTLD program.”
Donuts Chief Operating Officer Richard Tindal added: “We are confident in Demand Media’s technical capability and count them as a valued partner. Their commitment to operational security and stability backs the assurances we’ve given to our investors and the marketplace.”

Industry veterans join executive team

Donuts was founded by Paul Stahura, Richard Tindal, Jonathon Nevett and Daniel Schindler—four industry veterans with extensive experience in registry and registrar operations and industry governance, and who have successfully launched TLDs, built industry-leading companies, and brought value and choice to the domain name marketplace.

The company has rounded out its executive team with three hires, all effective on May 1, 2012, and each with domain name industry experience:
•Kevin Wilson has been named Chief Financial Officer. For almost four years, until January 2011, Wilson was CFO for the Internet Corporation for Assigned Names and Numbers (ICANN, the industry’s policy development organization), and previously held financial leadership positions in varied industries, including Internet, technology, financial services, real estate and others.
•Mason Cole, an executive from SnapNames and Oversee.net and a leader in ICANN policy development, has been appointed Vice President of Communications and Industry Relations. Cole is a 12-year veteran of the domain name industry.
•Alvaro Alvarez, formerly with the firm of Perkins Coie LLP, Donuts’ outside counsel, has been named Vice President and General Counsel. Alvarez has worked with Donuts since its incorporation in 2010 and on domain industry matters since 2007.

In addition, Stella Luu has been appointed as Research Associate, responsible for industry research and analysis. A graduate in Physics from the University of Washington, Luu’s previous experience includes positions with the law firm of Saalfeld Griggs and the University of Washington’s General Clinical Research Center.

Commitment to rights protections

Donuts is mindful of the intellectual property rights of others and has struck a careful balance between consumer and business safety and open access to second-level names. The company has consulted with international law enforcement and IP interests to bring nearly two dozen new rights protection mechanisms that raise user safety to a new level.

Further, Donuts is committed to addressing potential abuse in new TLDs and will aggressively deal with sources of problem behavior with new forceful mechanisms that far exceed the powerful protections afforded in the introduction of new TLDs.

Principle of open Internet
Donuts will operate inclusive TLDs and agrees that no entity or group of entities have exclusive rights to generic terms at the top level, nor do they at the second level.

Donuts will be further inclusive in its registration policies and, in order to avoid harm to legitimate registrants, will not artificially deny access, on the basis of identity (without legal cause), to a TLD that represents a generic form of activity and expression. Donuts believes there are superior ways to minimize the potential abuse of second-level names.

Stahura said Donuts is prepared for arguments for needless restriction, either at the registry or registrant level. “We have resources set aside for handling objections by parties who, for whatever reason, believe only they are equipped to administer a generic term,” he said. “The Internet is an engine of information, ideas and commerce, and one that’s not restrictive unnecessarily. Donuts intends to preserve that openness for all users, not operate a ‘by invitation only’ section of the Internet.”

Launch follows National Donut Day

Coincidentally, Donuts’ public launch closely follows last Friday’s National Donut Day, a U.S. commemoration established in 1938 by the Salvation Army to thank the many women who served donuts to U.S. soldiers during World War I. Donuts has made a contribution to the Salvation Army to mark the occasion, and has designated the day as an annual company holiday.

Entry into evaluation period as next step

On June 13, ICANN will reveal the identities of applicants and the TLDs for which each is applying. Stahura expects to see a large number of applications from well-known companies worldwide.

“Namespace expansion will help the Internet continue its evolution toward specificity for users, some of them altogether new to the Internet,” Stahura said. “Donuts will play a significant role in making that expansion stable, secure and inclusive for all end-users and consumers.”

About Donuts Inc.
Donuts is a domain name registry that is widening competition and choice in Internet identities through hundreds of new top-level domain name choices, securely operated in multiple languages and character sets. Donuts is headquartered in Bellevue, Wash., with offices in Los Angeles, Calif. and Washington, D.C. For more information, please visit www.donuts.co.

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