Yesterday Revision3 co-founder Jay Adelson spoke at the Failcon Conference in San Francisco on the subject of failure – not that of his current company, which celebrated its fifth anniversary in May – but of his previous venture, Digg, which he left in April 2005 after supposedly turning down multiple offers to sell. When he opened the floor to questions from the audience Adelson had to react, in real time, to some unsettling news: an audience member had just read in TechCrunch that Digg laid off 25 employees – that’s 37% off its staff.
In a fireside chat Adelson explained to Cathy Brooks of OtherThanThat why he had chosen to hold on to the business when he did. “Talk is cheap,” he said. “There was interest, but that’s not the same thing as having an offer.” Adelson had spoken with several prospects about an acquisition, including Google, and had even traveled to Los Angeles for a week of conversations with Fox before leaving without a deal. “In Digg time, one week is a [new] feature,” he explained. The network had essentially taken Digg’s “management out of the car to stand on the road” for nothing more than a “conversation.”
Adelson added that “our valuation at Digg would have been higher if we weren’t a business, if I hadn’t brought in revenue,” he said, “but I wasn’t building for valuation.” Adelson wanted the company to remain independent. At the same time, he knew that he had a “fiduciary responsibility” to accept the right offer. “We’re not stupid,” Adelson said, but “you can’t jump forward in time and see what happens,” and at the time the numbers weren’t adding up.
“When you take money for your idea, you want it to be the next giant thing in tech,” Adelson said. The chances of any company cashing out at, say, 100 times the initial investment are “virtually zero,” he pointed out, but even a smaller profit is still a profit, and entrepreneurs are smart when they can “identify what a good outcome actually is.” Still, “I would not change my decision,” said Adelson. “If someone offered me $5 million in 2005 I would have said no.”
For months after he left Digg, Adelson still woke up checking his smartphone for the messages he used to get as the company’s chief executive, but going forward, he said, “it’s better to mentor others than to be that guy myself” and he’s content to “sit on the sidelines.”
As for Digg’s current situation, Adelson said he felt badly for his former colleagues, who were like “friends and family” to him, but “I don’t work for them anymore,” and the former CEO couldn’t speculate on what had gone wrong. “I’d like to think the company we created was a wonderful place to work,” he said, adding that new CEO Matt Williams‘ decision to downsize “doesn’t make me look back and regret not selling the company sooner. The future of Digg is not going to be this ’100 times’ future, but I do think it has a future.”