Over the past 1-2 weeks, a lot of investors have reached out to me asking my thoughts on the current website investing climate, given what is going on in the world.
I wrote an article about the topic here, and so did Quiet Light Brokerage here, but I wanted to go a step further and write an email with my thoughts to everyone.
Also as Q1 is coming to an end, I thought it would be great to give an update on some of our plans moving forward.
In this email:
Thoughts On The Space
Is now a good time to buy a website, or a bad time? I think the answer is, it always depends.
One thing I can say is that over the last week or two, a lot of websites have had a reduction in traffic and conversions, as the whole world is distracted by the coronavirus sweeping the world.
Incidentally, I hope you are doing ok your end, wherever in the world you are.
Because of these revenue drops, websites will likely lose value over the next month or two. This means you MAY want to hold off on making a purchase right now if a site looks like it is having an earnings dip. It would suck to buy a website that has historically made $3,000 per month, only to have it make $2,000 per month for the next few months.
With that being said, a seller may be nervous, and you may be able to pick up a site at a discount, only to have that site's income pick up speed again if this blows over within a few months. So, there are opportunities.
Equally, if a fantastic site comes on the market, you shouldn't pass up the opportunity to buy it, even if it means taking an earning hit in the first month or two.
Ultimately, you want to think long term.
My personal thoughts are: It might be prudent to wait a short period of time, but ultimately waiting too long will lead to missed opportunities.
There are a lot of debates online about whether or not valuations will drop. I think if a website has an earning drop, it's naturally going to have a valuation drop, but does that mean there will be huge buying opportunities?
If multiples don't go down, then a couple of months of lower income doesn't reduce a valuation too much anyway. For example, a site making $3,000 per month for 5 months and then $2,000 per month, will still have an average income of $2,800 vs $3,000. It will take a few months or some drastic income drops before the price is sufficiently reduced to justify waiting (and in that time, you will have missed out on months of income by waiting).
So, my thoughts are, wait a week or two and see, but don't hold out unnecessarily unless we see continuing declining incomes.
It is still early on though, and the worst could be yet to come, so while these are my current thoughts, they may well change as new information becomes available. It's always important to update predictions and thoughts based on the latest info.
One thing I would say is, at this stage there's no obvious way the space is going to play out. Don't make an assumption and miss out on opportunities because you can't see them. This recession may be different from the 2008 financial crisis in its nature (there is more credit available this time around for example).
Me personally? I'm going to continue as before, but I of course have a vested interest in encouraging you to do the same, so it's important you make up your own minds. Some of my investors have decided to wait, others want to keep moving. I respect decisions both ways.
Updates On Our JVs
A few people have asked if we'll continue doing JV's for the time being. The answer is yes and no. JV4 (the next one to raise) is going to start next week as usual, but we may hold off on JV5 depending on interest.
If everybody wants to keep doing them, then we will of course go ahead. If people want to wait, that is fine too.
We usually end up over-subscribed for each one, so we'll likely have enough interest to keep going.
Note: The JV's are invite-only and only to people who are subscribed to the Groupbuy mailing list, unless you are already subscribed.
Click this link to be added to the list, and receive more information.
A New JV Product
We've actually been thinking of a new type of JV product for a few months, and now seems like a great time to push forward with one. Essentially, we'll be building sites from the ground-up and investing heavily into growing them. In the past, I was against building sites from scratch because it takes so long to get them successful, and success isn't a guarantee.
However, what we've learned over the past year is that if you invest enough cash into a site (We're talking about $50,000 or more), the site is very likely to succeed.
Again, we'll share more information about this product to everyone on the groupbuy list, so make sure to click the link above to learn more.
Moving Forward With Our Fund
A few months ago I emailed a small portion of our subscribers to gauge interest in raising a fund. The interest was positive, and it looks like we'll raise enough to make it worthwhile. While it's mostly open to accredited investors, we do have a limited number of spaces available for qualified non-accredited investors, so fill out this form if you are interested to learn more.
Here's a very brief overview of the fund based on the email I sent to people previously:
For the longest time, Onfolio has been considering launching a fund. The groupbuys are a great first step, but funds do have some advantages:
We are thinking of making it a closed, 5 year fund. This may mean something along the lines of paying out a minimum return per year of 10%, while rolling additional profits forward to acquire more sites and hit a bigger exit in year 5.
We obviously don't want you to have to wait 5 years to see any returns, so giving 10% per year allows you to see good returns but allows us to maximize the year 5 returns by reinvesting additional profits.
Right now, we're just gauging interest among our audience. If you might be interested in participating in a fund, please fill out this form. No need to commit to anything at this stage.
Fund feedback/interest form: https://onfolio.typeform.com/to/npNE1l
This is very early stage so we don't have a prospectus or details yet, but we can move fairly quickly if demand is there.
We actually think that now is the perfect time to push forward with this. By the time the raise is done, the market will either be stable again, or there will be lots of cheap sites available, and being a cash rich fund will give a lot of buying opportunities.
Given that we'll be running the fund for multiple years, starting in a recession and finishing five years later gives a lot of room for growth.
Again, fill out this form to give us your thoughts and be the first notified when we move forward.
Services Updates In General
From April 1st we will be making a few changes to our current services list. Namely:
1.) Our full-service option will have a higher minimum amount
2.) We will offer a consulting option for those who want to run their own site but have us give advice
3.) Our site partnering service for people with existing sites will be paused for the time being.
This email is getting long, so the full details of the above 3 will come in April, but just wanted to give you all a heads up.
Hope you all have a good weekend, and stay safe out there.