There are at least two types of investors. One type, we will call them the Warren Buffet types invest in companies that make things and provide basic services. Their value is derived from the fact that they are an important part of the economy, that they have seasoned management and that their products and services are something valued and needed by society.
The other type of investor is one who chases the latest trends. This investor has a herd mentality, if something sounds too good to be true, it is still true. It is the type of investor that drools at the aspect of being able to invest in a company like Facebook, where the substance of the operations is all hype.
Digg, Inc. was at one time a company like Facebook.
Digg was once one of the most promising start-ups in
The website was founded in 2004 as a way for consumers to put together their
own collections of news and other Internet content, rather than relying on the
choices made by newspaper editors.
Digg users would post links on the site's home page, then others would vote on their choices, determining the prominence of the stories they posted. . . . .
The site quickly rose to prominence, in part due to telegenic founder Kevin Rose, a former cable television talk show host. In 2006, Mr. Rose landed on the cover of BusinessWeek with the now infamous cover line, "How This Kid Made $60 Million in 18 Months," referring to the company's valuation at the time.
And like all great success stories, the company was able to raise huge amounts of money from eager investors, investors wanting to cash in on an idea, a concept and a mirage, rather than hard assets and core earnings.
In the fall of 2008, Digg raised nearly $29 million in venture capital from Greylock Partners,
Highland Capital Partners
and other financiers in an investment valuing the company at around $164
million, according to Dow Jones VentureSource.
And because the ‘Greater Fool’ theory says there is always a greater fool out there willing to buy your worthless company, investors could have cashed in big time from Google.
Over the years, the company was rumored to be in negotiations to sell itself several times, including to Google Inc. in 2008 for a reported $200 million. The deal was never completed.
So now the company has been sold for $500,000. As for the employees, there is this.
None of Digg's remaining employees will join Betaworks as part of the acquisition. Chief Executive Matt Williams will join venture capital firm Andreessen Horowitz as an entrepreneur-in-residence.
Digg, the most recent ‘sure thing’ to fail, until the next ‘sure thing’ comes along and fails also.