Wikipedia (and my memory) say that the Google offer fell through, and that it happened before the bulk of their funding rounds. There was no money to run with, basically.
Right. It was Google that backed off after seeing its books and watching how the company operates. Digg would have been pretty happy to sell if it could. I was spending my time at Digg during that period. That news was over at Digg.
Don't worry, Kevin took plenty of money. It's just the regular employees that don't get shit.
edit: nobody knows the number for sure, but he had enough to do angel investments in foursquare and twitter. See also crunchbase [1]. There was a $28mm series C and the speculation seems to be a bunch went into his pockets.
edit2: after thinking for a couple minutes, there's something just really unseemly about founders getting millions and employees plus investors getting zilch, particularly in the context of a failed business. I think the idea of founders cashing out a bit to free the company to swing for the fences is probably good, but still. There's something about this result that just doesn't sit well.
The reason the investor wants to give the founder an early earn-out is that they don't want the founder to be defensive. If you've invested $45M and you're looking to make ten times that, the site needs to make it really big. And you don't want to have a founder looking for the quick win. You pay him/her an amount in the ballpark of what is often colloquially phrased "fuck you-money", and it increases the chances that he's willing to risk everything to give you that 10x. For the investors, it's a calculated risk.
Nothing unseemly about it at all. He created the damn company. The whole thing was his project. He could have sold the it away for far more than he cashed out. Instead he found investors that would let him hedge a bit while shooting for the stars. They shot and missed, but he got to keep his relatively small hedge.
He always seems a bit sleezy though, you seen that episode of screensavers where he is telling about this website that he found (not founded) on the internet called Digg.
Yeah, how dare he try to promote his website and become a future millionaire. If by sleazy you mean smart and willing to do what it takes to carve out a comfortable life for yourself, then yeah, he's sleazy.
Apparently implicitly lying to your viewers and directing them to a site that benefits you without mentioning that is ethical to you. In contrast, I view it as unethical.
Ethical: check out this cool site I built.
Unethical: here's a cool site I found.
Admittedly, this is pretty small potatoes, but it's still sleazy.
You make it sound as if the employees were all unpaid interns. So long as nothing extra is negotiated at the time of the job offer, then those employees knew (and were probably delighted by) exactly what they were getting. I don't expect my employer to back up the Brinks truck if they get bought out or have a successful run. This sense of entitlement is crippling. The employees were paid, presumably learned plenty, and are better people because of their experience at Digg.
Are you unaware that digg was a startup and that employees were given options / equity as compensation? It doesn't bother you that someone in particular got a return on that (supposedly equal) equity while regular employees didn't? Charactering expecting your employer to fairly pay out equity in the event of an acquisition as, "backing up a Brinks truck" is stupid. What part of expecting your employer to treat the boss' equity and the employees' equity equally, where one only earns if the other does, is "entitlement"?
I don't work for employers to become a better person; maybe you do. I work for them for my salary plus the options we negotiated.
And frankly, it would appear that the leadership at digg was crippling, not the employees.
I guess sometimes you should just take the money and run.