What it Would Cost to Buy Digg?

A Digg Acquisition: Running The Numbers — Business Logs Mike Rundle does a run down on what he guesses the valuation for Digg would be and at what price you’d have to sell it to keep the VCs happy. Digg recently received $2.8 million in venture funding and Rundle guesses that they are worth $8 million but that they’d need $20 million before they’d have a price high enough to satisfy the VCs.

“So if we guess that their pre-money valuation is around $8 million, I’d have to say that they won’t sell for under $20 million, just because venture capitalists expect a large return on investment, and they won’t get much of a return unless a Digg sale clocks up 8 figures or more. Now that VCs own a certain portion of Digg, they also have a say regarding to whom Digg can sell and for how much, so if deal comes across the table that isn’t high enough, the VCs can use their power to knock it down with the hopes of getting more money or going IPO.”

Digg is doing some seriously revolutionary technology right now. It’s implications for search and especially news search and ranking make it a very important property. It is a traffic jugernaut on it’s own already and will be expanding into other news subjects beyond tech right now. It is a bargain at $20 million. Yahoo! C-NET, Microsoft, Google and any company that is serious about the next generation of search should write that check tomorrow if that’s all it would take.

Certainly I’m not privy to acquisition talks or attempts that may have already been made or are going on but Digg is a hot little property in it’s own right with an ability to seriously disrupt the world of search as we know it today if used to it’s full potential. Certainly Yahoo!, Google, and Microsoft could try and build their own Digg but time is short and the headstart is worth at least $20 million.