The domain was purchased in 2008. The startup that failed was launched only a year ago. So the $500k spent on this domain could not have been used for the daily

The domain was purchased in 2008. The startup that failed was launched only a year ago. So the $500k spent on this domain could not have been used for the daily deals venture because it didn't even exist yet. However you are correct if a startup gets $X funding and spends $Y on a domain and then runs out of funding, if having $Y in cash at the end would have given them enough runway to significantly change their odds of success, spending that money on the domain might not have been the best idea. It doesn't appear that is what happened in this case, though.