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I'm shocked that the Digg board turned down $80 Million. Unless it was an overly complicated deal, that sounds like a lot more then it was / is worth. The rea

by RBr 16y ago

I'm shocked that the Digg board turned down $80 Million. Unless it was an overly complicated deal, that sounds like a lot more then it was / is worth. The real value in Digg was always the unpaid community that powered it. Programming, I.P. and tangible assets are worth a fraction of what Digg is worth. In essence, someone offered $80m for the opportunity to put their hands on the steering wheel of the once powerful group of people who contributed, dugg and evangelized everything Kevin and crew did. As Digg has proven, communities are fickle and without proper management, motivation and reward, they fail. In retrospect, neither the Digg community nor the assets it has are worth that much money. However, with a carefully crafted goal, properly motivated community and importantly a plan that includes a way to monetize the community, community based services could very well be worth $80 Million or more.

ojbyrne 16y ago
I don't see why you would be shocked. The digg board is made up of VCs playing with other people's money. Their compensation is based on hitting home runs. It would have been roughly $3.5 million dollars for me (without the earnout).
- RBr 16y ago
  That makes a lot of sense. However, a home run would be the highest value possible. With an aging service so deeply rooted in an online community (which are inherently fickle), a 2x value price would seem reasonable if not generous. I have to think that investing in community centered services is a fast game where smart investors get in early and out while the community is still engaged. Then again, everyone needs more yachts to water ski behind.
  - ojbyrne 16y ago
    If it was the offer I think it was, it was significantly higher than 2x, because it was before the Series B (so roughly 5 million invested thus far).
  - johnrob 16y ago
    If there is a non zero chance of a higher exit, no matter how small the odds, the VCs will take it. Thus 80 million is not the home run exit.
- bkrausz 16y ago
  Ouch... Don't worry, I'm sure your other investments will earn you at least that much ;-)
  - ojbyrne 16y ago
    Nooo! That would imply you following the same (long bomb) path. A nice 2-3x would be just fine.
- deleted 16y ago
  [deleted]
bond 16y ago
I was too but after seeing they had $40million invested, that puts things in another perspective... http://www.crunchbase.com/company/digg http://www.crunchbase.com/company/digg
- deleted 16y ago
  [deleted]
  - mikeryan 16y ago
    I think the point isn't the valuation but the motivation of the board. That's a really small exit for a VC backed company. EDIT: Please don't delete comments that have replies, it kind of makes everything below it lose context.
mikeryan 16y ago
According to crunchbase digg has taken $40M in funding. A multiple of less then 2 on the investment doesn't seem to be the kind of deals to get VC's excited. At the time there was really no reason to not try to hold out for an extra $40M or so. Of course Kevin wanted to take it he's walking away with a significant amount of that $80M in his pocket. Heh it makes the Reddit deal ($100k in and sold for $20M) look effing brilliant - and with the uptick in traffic its getting from digg v4 its making that look like the much smarter play.
- points 16y ago
  Agreed @ Reddit. Maybe a winning formula. 1. Find a startup in a new area that is over funded (digg) 2. Copy it, on the cheap. 3. Get bought for a "cheap" price compared with what the over funded startup would request.
  - tptacek 16y ago
    This happens all the time in enterprise security.
  - pkaler 16y ago
    It wouldn't work in this case. Digg did a Round C in 2008 of $28.7m. That's when they were over funded. Reddit was founded in 2005. Digg was founded in 2004 and did a Round A at a reasonable $2.8m in late 2005. http://www.crunchbase.com/company/digg http://www.crunchbase.com/company/digg http://www.crunchbase.com/company/reddit http://www.crunchbase.com/company/reddit The only way your plan would work in this case is if you have a crystal ball in 2005. Basically, your competitor bets after the flop and you're planning on playing the hand while short stacked. And on the flip side you may end up being the Jaiku or Pownce to someone else's Twitter.
    - ahi 16y ago
      Bad example. Jaiku was bought by Google. Twitter keeps getting VC money, but hasn't gone liquid/profitable yet.
  - 16y ago

by RBr 16y ago

ojbyrne 16y ago

I don't see why you would be shocked. The digg board is made up of VCs playing with other people's money. Their compensation is based on hitting home runs. It would have been roughly $3.5 million dollars for me (without the earnout).

RBr 16y ago
That makes a lot of sense. However, a home run would be the highest value possible. With an aging service so deeply rooted in an online community (which are inherently fickle), a 2x value price would seem reasonable if not generous. I have to think that investing in community centered services is a fast game where smart investors get in early and out while the community is still engaged. Then again, everyone needs more yachts to water ski behind.
- ojbyrne 16y ago
  If it was the offer I think it was, it was significantly higher than 2x, because it was before the Series B (so roughly 5 million invested thus far).
- johnrob 16y ago
  If there is a non zero chance of a higher exit, no matter how small the odds, the VCs will take it. Thus 80 million is not the home run exit.
bkrausz 16y ago
Ouch... Don't worry, I'm sure your other investments will earn you at least that much ;-)
- ojbyrne 16y ago
  Nooo! That would imply you following the same (long bomb) path. A nice 2-3x would be just fine.
deleted 16y ago
[deleted]

bond 16y ago

I was too but after seeing they had $40million invested, that puts things in another perspective... http://www.crunchbase.com/company/digg http://www.crunchbase.com/company/digg

deleted 16y ago
[deleted]
- mikeryan 16y ago
  I think the point isn't the valuation but the motivation of the board. That's a really small exit for a VC backed company. EDIT: Please don't delete comments that have replies, it kind of makes everything below it lose context.

mikeryan 16y ago

According to crunchbase digg has taken $40M in funding. A multiple of less then 2 on the investment doesn't seem to be the kind of deals to get VC's excited. At the time there was really no reason to not try to hold out for an extra $40M or so. Of course Kevin wanted to take it he's walking away with a significant amount of that $80M in his pocket. Heh it makes the Reddit deal ($100k in and sold for $20M) look effing brilliant - and with the uptick in traffic its getting from digg v4 its making that look like the much smarter play.

points 16y ago
Agreed @ Reddit. Maybe a winning formula. 1. Find a startup in a new area that is over funded (digg) 2. Copy it, on the cheap. 3. Get bought for a "cheap" price compared with what the over funded startup would request.
- tptacek 16y ago
  This happens all the time in enterprise security.
- pkaler 16y ago
  It wouldn't work in this case. Digg did a Round C in 2008 of $28.7m. That's when they were over funded. Reddit was founded in 2005. Digg was founded in 2004 and did a Round A at a reasonable $2.8m in late 2005. http://www.crunchbase.com/company/digg http://www.crunchbase.com/company/digg http://www.crunchbase.com/company/reddit http://www.crunchbase.com/company/reddit The only way your plan would work in this case is if you have a crystal ball in 2005. Basically, your competitor bets after the flop and you're planning on playing the hand while short stacked. And on the flip side you may end up being the Jaiku or Pownce to someone else's Twitter.
  - ahi 16y ago
    Bad example. Jaiku was bought by Google. Twitter keeps getting VC money, but hasn't gone liquid/profitable yet.
- 16y ago