Why Noah Kagan Spent $1.5 Million Dollars to Own Sumo.com

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Noah Kagan was Number 30 at Facebook, number 4 at Mint and is now Chief Sumo at Sumo.com. Recently, Noah has been in the news for spending $1.5-million for the URL Sumo.com. Interestingly enough, the news came for me at the time my company, GetFeatured.com, was looking at buying a URL priced at $2,500. Thus, I was intrigued on the motivation to make such a purchase.

I finally got the chance to sit down with Noah and ask him why he made the huge investment and also how he thinks about money—as well as his intervention at the age of my MacBook. These are only two of the questions that I got a chance to ask Noah, so be sure to download the full interview below.

How do you decide when to spend money, and why shouldn’t I have an old MacBook?

“There’s certain things that I’m uncertain about. There’s a lot of things I’m uncertain about, and there’s certain things I’m very certain about. One of my true—like this is true beliefs, is that you need to focus on improving the fundamentals of life. What does that mean? That sounds weird, but focus on the foundation. What exactly that means is, what things do you spend, let’s say, more than five hours in a day on? Right, because that’s your foundation of life. You spend more than five hours a day in your bed. You spend more than five hours a day on your phone and more than five hours a day on your computer.

If you were—and maybe for other people, it’s like you spend more than five hours a day with your wife, or on your tractor, or whatever it is. I don’t care. The point there is that you should be spending as much time and money making those as best as possible, and I do. Because I spend the most time there, I should have the best experience there, and it’s the most efficient. If you’re on your computer, it’s a 2008, you’re probably, no joke, wasting an hour to two hours a day just waiting for things.

You multiply that by 365, that’s 700 hours. Okay, let’s do the math. 700 hours divided by 24 is 30 days. You’re wasting a month of your life waiting for your 2008 computer. Now if you spend $2,000 on a better one, for basically $3 a day, your life is going to be, for $3 a day, you’ll get 30 days of your life back.

I just realized, the point is, it’s not about being rich or spending a bunch of money on things, because I don’t. I’m actually—the more money I’ve made, the less I spend, is what I’ve found, just for me. What I do spend on is the things I spend a lot of time on or the things that matter to me.  So my computer, my bed, it’s where I spent my—my phone. Whenever there’s something that’s faster so I can save time, I’ll pay for it.”

Why did you spend $1.5-million on Sumo.com?

“It’s more about getting the things you really want and spending the money on the things that matter to you. For me, sumo.com—we started it as appsumo.com, and I don’t even really like sumos.

A year later, we started making some money. I think we made about $200,000 in revenue our first year, and I didn’t make that much money at all. I emailed the sumo.com people and I said, ‘Hey, will you sell it for $50,000?’ They said maybe. I was like, ‘$50,000? I’m not really even making that much.’ I tried to negotiate, and over the next seven years, I was negotiating for this name.

Ultimately, I gave them a timeline. I said, ‘I’m making a decision by the end of this year, and you will never hear from me again. What’s the final price?’ They, these guys were quoting, at that point, seven years later, $10-million. I said, ‘I’ll pay a million and a half, and I’m never going to offer everything and you’ll never hear from me again. End of story.’ This is after seven years of being persistent. Literally every three months, emailing them. They finally said yes.

I actually thought about this—I was looking at getting a condo. I could get two condos for the price of that name. I can’t even live in the domain. I can’t show it off to a girl, I can’t have anybody sleep in it, nothing, but what I can do is we have this brand that will be forever, or at least in my lifetime.

There’s many things in life that you finally get, and you realize,  it’s not as great as you thought, like getting money for the most part.

I love sending my emails. I love telling people on the phone, because it used to be, ‘Oh, yeah, what’s your email?’ ‘Noah@appsumo.com,’ and they’re like, ‘What?’ I’m like, ‘A-P-P-S-U-M-O.com.’ Now I say, “Noah@sumo.com.’

I’m just like, it puts a smile on my face. I don’t think life is about spending as much money or just making as much money as possible, but the things that really matter to you. Getting a name that represented the official Sumo company was very important, so that’s the story behind it. We also structured it financially where it wasn’t as painful, so for a lot of people out there that want things, is there a way that you can be creative?

For me, I’ve noticed that the best innovations have come through limitations. It doesn’t come when you have a bunch of money.

We structured it financially where we only put up half a million to get it, and then we just pay monthly over the next five years, which is only $15,000. I finally got something I really wanted, but paying it over monthly, it made it a very easy decision where it said, ‘Noah, is it worth $15,000, just this month, to have sumo.com?’ I said, ‘Yeah, that’s cheap for that name.’

Then I also looked at it as like, ‘Well, what percentage of revenue this month is it? Is it like 50% of our revenue? Is it 5%?’ It was a small enough percent where I’m like, dude, to have that name for our company for a long time? Yeah, it’s worth that much percent of our revenue each month. That’s how it came to be.

One thing that I’ve been thinking about and hearing from certain people is, I think a lot of people set themselves up to fail. We’re not buying Sumo.com to think it does okay.

Buy the domain because you think it’s going to do really well, and I do think I have this mentality, and I’m working on it. How do I go in assuming it’s going to do well, and then how do I set myself up to be successful? Like, I’m going to buy sumo.com so I can kick a lot of butt and have this great domain that everyone respects and knows in the right, whoever you want it to be.”

Ultimately, as entrepreneurs, we have to make the decisions we feel are right. Making a decision like Noah did for Sumo shows the confidence that he has in his company and team. Too many times we make small actions that don’t back up the original big vision we have for our companies. I’m not saying that it takes us buying a $1.5-million URL, but it does involve having a whatever it takes attitude—that’s what a large purchase like that demonstrates. For Daniel Gefen and I, it was spending $2,500 on GetFeatured.com. You have to have the confidence that you can create your dream business and act like it will work, not with halfhearted follow through. Be sure to download and listen to the rest of this interview with Noah Kagan.