Digg's Runway Definitely Longer Than Five Months as CEO Readies New Product

Social media commentator Muhammad Saleem wrote in SocialBeat earlier this month that content-discovery site Digg had only five months of runway -- a statement he corrected in the article's comments and confirmed to LAUNCH.

"I had referenced this Techcrunch story in my post, however as a commenter pointed out, they raised more money, giving them a longer runway," Muhammad explained.

"In my response in the comments, I pointed out that he was correct, and I added that we must still take into account that Digg also has $1.5 million in outstanding debt."

Digg CEO Matt Williams, who joined the company about a year ago, told LAUNCH by email, "The numbers in the VentureBeat Guest Post are inaccurate."

Founded by serial entrepreneur Kevin Rose in 2004, Digg raised a reported $5M in July, and sources have told LAUNCH the company's revenues are around $10M a year.

On Digg's debt issue, one founder we spoke to said, "The debt in a startup company like this is typically a non-issue because the banks making these loans will frequently extend the terms of a loan for extra stock coverage -- warrants -- if their world explodes. They don't ever want to call a loan and squeeze founders because they are in no position to run a company... let alone a troubled one."

In LAUNCH's back-of-the-envelope calculation, we estimate that with costs of $1M a month and average revenue of about $800K per month, Digg is burning around $200K a month. With at least $5M in the bank, Digg has more than two years of runway provided revenues don't drop.

Digg laid off 40% of its staff in October 2010 and has since focused on improving the product. Earlier this month Digg unveiled Newswire, which some folks (including Muhammad) have called a rehash of the Digg Spy feature from 2005 and retired in 2008.

In Newswire, new stories appear in real time and users can view them by when they were posted and what has the most diggs, selecting the range of digged content you want to see (e.g., anything with 1 to 5 diggs). Sponsored diggs still appear in the list regardless of your range, however.

In a company blog post shortly after Newswire's release, Matt invited people to join Digg's beta for its "next innovation." He states that Digg's long-term plan is to "build active communities around major news topics."

Digg is currently hiring for five technical positions and two sales people.

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