I was sufficiently shocked last week (as was much of the Internet) when I heard that Digg was sold for $500,000. I mean, wasn't that figure missing a few zeroes? 500 GRAND??? As in, house money? But it was true. Sure, there were some ancillary transactions worth a few million, but that was mostly moving money from the right pocket to the left.
I sat there wondering what Kevin Rose must be thinking. 500 grand. That's a borderline insult. If I were running Digg I would sooner shut it down altogether than take 500 grand for it. Especially considering it almost sold for $200 million back in 2008. I don't have much of an ego, but I don't think I could've wrapped my mind around a $500,000 sale of something that was once worth so much.
But that's kinda the story of Kevin's life. And the story is absolutely fascinating. Love him or hate him, he is emblematic of the Web 2.0 era and he's a stark illustration of what can happen when you let a creative run a business. For all his success as an angel investor, the companies he himself started sorta flopped. Business Insider did a fantastic profile on him here, and you should definitely read it.
I've got nothing but respect for the guy, because his design skills are off the charts. He also has a keen eye for talent, which is why he's been hijacked by Google Ventures. The force of his personality is such that he can raise money at will without even having a product. He raised $1.5 million for Milk just by telling investors it was going to be really cool. Milk was acquired by Google a year later for $18 million after having produced a single mobile app which was promptly killed by Google upon acquisition.
Despite his somewhat sketchy history as a founder, his history as an investor would make Buffet drool. He's an angel-level investor in companies like Twitter, Zynga, OMGPOP, and Foursquare. His exits on those deals alone have been and will continue to be staggering.
Every time I think about Digg, though, I can't help thinking about what it must have felt like to grow a company from nothing to the point where Google was ready to pay you $200 million for it. Imagine what that must be like. $200 million at age 31. Imagine the plans you'd have for that money: the homes, the travel, the things you'd do to help your family and friends, the generational wealth that would probably persist for at least a century. Immortality, in other words.
Then imagine the money vaporizing hours before it was in your hands. That's what happened to him. Google got a look under the hood and decided at the 11th hour (literally) that they were walking away from the deal. What must that feel like? What would you do? I know what I would do: I'd max out all my credit cards on an absolutely epic weekend and then kill myself. Lucky for Kevin, he's not me.
However he managed to get over essentially losing $200 million, the sale of Digg for $500,000 had to re-open some old wounds.
I wonder what keeps this guy going.
It's hard to talk about Digg selling for only $500K without mentioning Reddit. As far as I can tell, Reddit killed Digg. It's also one of the best websites on the internet with, I believe, over a billion page views a month and an insanely dedicated and committed community.
That said, it'd definitely suck to lose out on $200M in the 11th hour. But, it certainly doesn't hurt that he got $18M for building an app that was promptly killed. Not to mention, I don't even know what the app was or what it did. Seems a little insane to me.
Reddit for sure picked up where Digg left off. The app that Milk designed was called Oink, it was was a sort of Foursquare/Qype/Yelp kinda thing (you know, GPS enabled reviews and such). Not too many people would put the $18 mil in the win column, I'm afraid. Essentially, Google just paid $18 million to shut Milk down and buy the employees. Good for the investors, not so good for Kevin and the crew. He probably made some decent money out of it, but now he's shackled to Google (which is considered the Evil Empire by most of the hacker crowd).
Also had to be a pretty bitter pill to swallow to take $18 mil from the company that once stood you up for $200 mil, and then have to go work there on top of it all.
It actually sold for a lot more (at least thats my understanding) but the domain name alone was 500k. The tech was 5ish mil, etc.
Yeah, that's true, but the majority of the patents, etc. were "sold" to LinkedIn, and Reid Hoffman was one of the original investors in Digg. So there's no telling if any actual money changed hands (that's what I meant about moving it from the right pocket to the left). I'm guessing the tech was more along the lines of a parting gift for an investor who got roasted pretty bad.
What a beta, this is frustrating to read
LOL. Hadn't thought of it like that (probably because I think most tech geeks are the beta sort), but yeah. He might be the Master Beta. (you see what I did there?)
Looks like tech valuations are coming down to earth. Wait, earlier this week social cam was sold for $60mm. Ha, I guess not...
This is why I am ultimately reluctant to invest in these companies, if/when they IPO. You are betting on the ability of a team/individual to continue to anticipate customer desires. This is a horrible bet. Even top design teams (e.g. FB) end up implementing changes people dislike.
Or you need your website to be a pain to leave. There was nothing preventing users from migrating from Digg to Reddit. Facebook is harder to leave; nobody wants to rebuild their entire network on another site. Google is so entrenched that it's hard not to use.
So I think Groupon and Zynga were wise to IPO when they did...yeah, their stock prices have plummeted. But equity investors got their money out, rather than watch it disappear like Kevin Rose.
@West Coast
I think it's also important to remember that a lot of the most successful tech startups (Google chief among them) had their founders supplanted before going to market. It's one thing to have a creative in charge of product development (where they belong), it's another thing entirely to have them running the whole show.
I think it should be made clear here that Kevin Rose hasn't been running the company for a long time now. He stepped down as CEO in September 2010 and resigned from Digg altogether in March 2011. Not sure if he still had equity and/or decision making power there but hes not the only one to blame for the collapse of Digg.
You're absolutely right. I didn't mean to imply that any of it was Kevin's fault (aside from what you can attribute to his "flighty" management style). It doesn't help to have the CEO check out of a company for months at a time to work on side projects and then decide to throw himself back into the company full bore for a couple weeks, only to check out again though.
Digg simply was made irrelevant by other sites.
Wow $500k is seriously shocking.
But really, it is just the same old song and dance. These websites gain an audience, surge in traffic, and begin a long, slow decline. The timeline varies a lot, but that's the general trend.
Del.icio.us Yahoo MySpace Joost any video blog or lifestreaming site Blogger Friendster TechCrunch anything involving RSS Meetro Ask.com anything created by Google that doesn't involve search Rocketboom Box.net
I can't imagine why he didn't sell it on the way up.
zuckerberg should take note
Rescind that, what was i thinking...
What about WSO? :-)
Digg killed itself, not Reddit. Reddit was just there for the rebound.
Whats Pornhubs valuation???
Go find out...
http://www.yourwebsitevalue.com/
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