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Summary:

Digg has raised $28.7 million in a Series C round of funding. The company made the announcement earlier this morning. Highland Capital Partners is leading the current round, which will see Highland partner Richard de Silva join Digg’s board of directors. The company will use the […]

Digg has raised $28.7 million in a Series C round of funding. The company made the announcement earlier this morning. Highland Capital Partners is leading the current round, which will see Highland partner Richard de Silva join Digg’s board of directors.

The company will use the funds to expand internationally and move into newer offices; it will also hire more people as part of its expansion. Digg had raised $11.3 million in two prior rounds from investors SVB Capital, Greylock and the Omidyar Network, along with a few angels.

The rumor I heard is that Digg founder Kevin Rose got to a sell a nice chunk of his shares in the company, a trend that has become quite fashionable among the Web 2.0 set. Several founders have taken money off the table as their companies wait for a bigger payday. I am sure, however, that he is going to stick around. CEO Jay Adelson declined to comment on the news.

If that was the case, it was a good move for Kevin. Digg, however, is in a bit of a pickle. As this chart from Quantcast makes clear, Digg’s traffic is showing signs of plateauing. There has been a slight uptick in their traffic lately, but what’s troubling is that a mere 1 percent of its users (who can be labeled addicts) are generating 32 percent of the visits, according to Quantcast. They have 224.1 million page views a month, of which 156 million come from the U.S.

This round of financing has been in the works for a while. I was contacted about it by many of my sources, some of whom hinted that the San Francisco-based social news startups was raising a “gigantic” amount of money, but such rumors conflicted with other chatter I was hearing about the company being acquired by larger players. There was talk of Google buying Digg, but last-minute issues might have prevented that deal. Michael Arrington has reported that, “Google was in the due diligence stage of the deal, where they peer deep into Digg’s technology and financial statements,” but walked away due to several reasons.

One way or another, it looks like Adelson, Digg’s current CEO, is in it for the long haul with this company — and so are the investors.

  1. Hats Off to you Om on writing such an blunt and factual post in spite of your friendship with Kevin . Digg has done a right thing . with so much money being poured into advertisement networks there will be mad rush to find publication with significant userbase .This is where Digg will score . and as more and more add networks are buying publishing properties I am sure that digg will find a buyer soon . most probably Yahoo or Microsoft .

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  2. [...] After being passed up by Google for an acquisition in the $200-million range, social news site Digg is going it alone with a fresh $28.7 million infusion of capital. The C round was led by new investor Highland Capital Partners, which as joined by existing investors Greylock Partners, Omidyar Network, SVB Capital. That brings the total amount the company has raised to $40 million since it was founded four years ago. Founder Kevin Rose may have taken some cash off the table, Om is reporting. [...]

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  3. Hey it seems to be a good idea. All markets are ridiculously volatile right now, I wouldn’t trust keeping my money anywhere but in my hands!

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  4. [...] シリーズCラウンドの資金調達をリードしたのは、今回初めて投資するHighland Capital Partners。既存投資家のGreylock Partners、Omidyar Network、SVB Capitalも出資に加わった。これで創業4年で集めた投資は総額$40M(4000万ドル)に。テーブルに積み上がったドルから創始者ローズが懐に収めた分も若干ありそうだと、Omが書いている。 [...]

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  5. Congrats to Digg and I hope Kevin Rose took some money off the table since that is smart if you have the option.

    Maybe Microsoft can buy Digg to compete with Yahoo Buzz and the coming new front page for that portal and AOL (MS seems to like to compete in everything and some eye-poking seems to be going on now).

    I am still curious about this supposed Google-deal and why they walked away once they looked at the financials and tech.

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  6. [...] After being passed up by Google for an acquisition in the $200-million range, social news site Digg is going it alone with a fresh $28.7 million infusion of capital. The C round was led by new investor Highland Capital Partners, which as joined by existing investors Greylock Partners, Omidyar Network, SVB Capital. That brings the total amount the company has raised to $40 million since it was founded four years ago.Founder Kevin Rose may have taken some cash off the table, Om is reporting. [...]

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  7. @David Mullings,

    I agree with you and makes a lot of sense for kevin to take some cash off the table.

    Microsoft buying Digg maybe seem like a good idea but my fear is that they are going to muck it up like some of their previous acquisitions in the consumer internet space.

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  8. [...] crank up the old “burn rate” a little bit, as Valleywag notes. Om says he has it on good authority that Kevin pocketed some of that money by selling some shares, and I’d agree with Om that if [...]

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  9. I think Digg’s momentum has slowed because its core audience keep digging the same kind of content/subjects. There is very little new that will delight new users. When Digg was a brand new thing, it was exciting because it was open and democratic. Now it is virtually controlled by a relatively small number of super-diggers.

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  10. Good for Kevin Rose though. Nice to see a success story and nice to see that he’s been able to be rewarded for his efforts.

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  11. Headline should be: “Digg is digging but hasn’t been able to dig itself out of the hole of lower and lower valuations.”

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  12. [...] Today Digg CEO Jay Adelson announced that Digg was getting a new round of funding of almost $30M, which were going to be used for mainly infrastructure purposes, hiring more behind-the-scenes folk, and other innocent, if mundane purchases, with the usual punditry falling for it. Well, it looks like Om Malik’s the only one with the journalistic cajones, and he only got half of the story right. [...]

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  13. [...] Let me explain: If we want to place our negotiation baseline at $300-million, we can not have the same 1 percent of users generating 32 percent of visits to our site. [...]

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  14. [...] Gigaom digg_url = ‘http://atlchris.com/322/what-is-digg-up-to/’; digg_title = ‘What is Digg up to?’; digg_skin = ‘compact’; digg_window = ‘new’; Published in General Tags: Digg, Facebook, VC Funding [...]

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  15. Trevor Plantagenet Wednesday, September 24, 2008

    Money to founders was happening at the height of the Web 2.0 bubble when people were competing for deals. Given Digg’s current situation, I can’t imagine the competition was such that founder greenmail was required for them to get the deal with Digg.

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  16. [...] After being passed up by Google for an acquisition in the $200-million range, social news site Digg is going it alone with a fresh $28.7 million infusion of capital. The C round was led by new investor Highland Capital Partners, which as joined by existing investors Greylock Partners, Omidyar Network, SVB Capital. That brings the total amount the company has raised to $40 million since it was founded four years ago. Founder Kevin Rose may have taken some cash off the table, Om is reporting. [...]

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  17. [...] of funding. Rumors say our beloved founder has taken some of that money into his own pocket…read more | digg [...]

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  18. [...] Om Malik reports a whisper that Kevin Rose cashed out some of his shares in the round, a trend among startups lately taking extra money, which might explain some of the money. Tek Populi takes the piss with “VC’s Are Livid With Digg: Wanted Cash For Digg BlackMarket, Not More Bongs and Beer,” and although it’s tongue in cheek, there are questions raised that should be asked. [...]

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  19. I agree with Om on the plateauing of Digg.
    Digg is surely out of its prime as the Quantcast numbers are showing. Kevin and Co. should reinvent Digg with something contemporary before they are kicked out by something better.

    http://www.techtrendsdot.blogspot.com

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  20. [...] After being passed up by Google for an acquisition in the $200-million range, social news site Digg is going it alone with a fresh $28.7 million infusion of capital. The C round was led by new investor Highland Capital Partners, which as joined by existing investors Greylock Partners, Omidyar Network, SVB Capital. That brings the total amount the company has raised to $40 million since it was founded four years ago. Founder Kevin Rose may have taken some cash off the table, Om is reporting. [...]

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  21. [...] tastes, including local languages. This makes sense given that the US traffic to Digg seems to be plateauing, while the international traffic seems to be rising slightly. Share [...]

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  22. Let us wait and see that how it is going to turn and makes digg a better place.

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  23. Kevin Rose’s DIGG keeps losing users because he is firing them! Banning regular users like a mad dog. Why on earth a permanent ban is being thrown around like candy against what is explained above as being the top 1% brings in ~30% of the hits is beyond me.

    Yes – thats it Kevin. Fire your users. Ridiculous. No wonder Google (who values their users) walked away. Shaking their heads no doubt at the wasted opportunity.

    DIGG is digging their own grave. Sad really.

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  24. [...] Om Malik reports a rumor that founder Kevin Rose got a chance to cash in, and took it: The rumor I heard is that Digg founder Kevin Rose got to a sell a nice chunk of his shares in the company, a trend that has become quite fashionable among the Web 2.0 set. Several founders have taken money off the table as their companies wait for a bigger payday. [...]

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  25. [...] After being passed up by Google for an acquisition in the $200-million range, social news site Digg is going it alone with a fresh $28.7 million infusion of capital. The C round was led by new investor Highland Capital Partners, which as joined by existing investors Greylock Partners, Omidyar Network, SVB Capital. That brings the total amount the company has raised to $40 million since it was founded four years ago. Founder Kevin Rose may have taken some cash off the table, Om is reporting. [...]

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  26. [...] that founder Kevin Rose and CEO Jay Adelson sold some personal stock in the transaction, as GigaOm first reported. However, our sources say the dollar amount they each took off the table was [...]

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  27. [...] ont vendu des actions personnelles durant cette transaction, comme l’avait révélé  GiGaOM. Mais notre source nous informe qu’il s’agit d’un faible montant et que les VCs [...]

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  28. [...] ont vendu des actions personnelles durant cette transaction, comme l’avait révélé  GiGaOM. Mais notre source nous informe qu’il s’agit d’un faible montant et que les VCs [...]

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  29. [...] that founder Kevin Rose and CEO Jay Adelson sold some personal stock in the transaction, as GigaOm first reported. However, our sources say the dollar amount they each took off the table was [...]

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  30. Google and Digg are great
    http://oetztal.startkabel.nl/

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  31. [...] that founder Kevin Rose and CEO Jay Adelson sold some personal stock in the transaction, as GigaOm first reported. However, our sources say the dollar amount they each took off the table was [...]

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  32. [...] current valuation, after a recent recent $28 million round of funding, is rumored to be around $175 million. From that perspective, the deal looks expensive and [...]

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  33. [...] Terms of Service. As it happened, many of the exiled were top Diggers, which is to say, part of the one percent responsible for driving 32 percent of all Digg’s pageviews. Banning them raises two troubling issues at once: How can Digg represent itself as a democracy if [...]

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  34. [...] home the $60 million that BusinessWeek suggested his Digg value was worth two years ago. However, reports suggest Digg was able to take home some money from the investment, so at least now he can afford a [...]

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  35. [...] HomeAway is more of a private equity business model (the company is buying up Internet properties that list vacation homes available for rent in the U.S. and potentially worldwide cities), so perhaps that explains the short time to a planned exit. But HomeAway isn’t alone. Facebook has allowed its early employees and shareholders to sell some of their shares for cash, despite being only four years old. Digg, the news ranking and aggregation service founded by Jay Adelson and Kevin Rose, raised $28.7 million in September, a deal that rumored to have involved Rose taking some cash. [...]

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