As you can see, I’m still struggling to keep up with the blog. It’s been a hectic couple of weeks, partly because of my recent (lateral) transfer into a new department,
meaning: new responsibilities, a rush to implement/execute new strategies, and a learning curve to boot. Oh well…not everyone can quit their day jobs and blog
full time (we should be so lucky, huh?). Anyway, I’ve been meaning to post this one for a while, so—as they say—better late than never, I guess…

A couple of weeks back, Business Week had a cover story on Kevin Rose (Founder, Digg.com) “…and the new wave of young entrepreneurs running the hottest of the top 100 Web 2.0 companies”, called Valley Boys. It’s a fascinating read that (pardon the pun) digs deep into the growing trend of the “community first” business model that is sweeping the Web 2.0 world (e.g. Digg, YouTube, MySpace, etc.), which has given rise to soaring numbers and, ultimately, resulted in high valuations of these companies and incredible post-bubble acquisition deals (e.g. MySpace = $580 million). And with Digg’s estimated value at ~$200 million, Biz Week pegs Kevin Rose—who retains 30-40% of the company—to have an estimated worth of around a cool $60 million…in just 18 months (since Digg’s launch). Not too shabby, huh? Here’s a quick excerpt from the article:

That’s why some smart money is on Digg to become an ad magnet à la MySpace.com. Some even refer to Digg as the new New York Times. News sites are discovering they can benefit too: Get a story on Digg’s front page, and in comes a flood of traffic from people clicking on the link to read the story on your site. Digg gets advertising via Federated Media, the company Silicon Valley veteran John Battelle created to pair Web sites with advertisers (Digg sparingly places ads in a narrow band at the top of the Web page). So far, Digg is breaking even on an estimated $3 million annually in revenues. Nonetheless, people in the know say Digg is easily worth $200 million.

It’s not as dot-com déjà vu as it sounds. YouTube, the enormously popular video site, posts similarly fledgling revenues, but some experts say it could easily fetch $500 million. What’s more, Digg registered users have been doubling every three months. As such, Digg is attempting to follow the path laid out by Google Inc. and now being adopted by many Web 2.0 companies: focus on building a user community, and the ads will follow. “It’s one of those things where we know we could put crazy ads all over the site and clutter it up, but we don’t want to do that,” says Rose. “We have a clear path toward becoming a profitable company, and we’re fully funded. We don’t have to worry about it now, as long as we keep hitting our numbers.”

Accompanying the article, is a light-hearted (but interesting) podcast with authors Sarah Lacy and Jessi Hempel, who candidly discuss the rise (and trends) of these 2.0 entrepreneurs and—with plenty of giggling and enthusiasm—how some of these former high-school geeks have now been elevated to a status of silicon stud-dom (not in the nip/tuck sense, of course):

Rose’s social stock has climbed, too. He has more than 11,000 friends on MySpace. He was a runner-up in blog ValleyWag’s “Hottest Guy in the Valley” contest…and he co-hosts a hot weekly video podcast called Diggnation….At a party for the 50th show, Rose was mobbed by fans and even photographed signing a pretty brunette’s cleavage. The snapshot was posted on Flickr the next day, prompting one viewer to comment: “When did they become rock stars?”

So far, Digg’s traffic just keeps growing. And Rose is picking up a bit of swagger. His shyness is fading, and his wardrobe has gotten a hipster upgrade. Girls on MySpace swarm him…The tech bust notwithstanding, the Valley is still the only place on earth where geeks with good ideas can become celebrities overnight. But wannabes be warned: As nearly everyone found out six years ago, the fall from rock star to pariah can be just as quick — and not nearly as much fun.

However, while Biz Week paints such a pretty picture for Digg, it seems that the article also incited a lot of attention in the blogosphere; and not all of it good. For example, check out  ValleyWag’s summary of Digg Fallout stories, including Jason Fried’s (pretty strong) response:

Wait a second. This $60,000,000-on-the-cover figure came from multiplying the fictitious “people in the know” number of $200,000,000 by an estimated 30% ownership? 30% of $200,000,000 is $60,000,000. Is that the math that made the number that made the cover? SLIPPERY. And then Rose and BusinessWeek acknowledge it’s “only paper wealth” and “this could be a jackpot” which means it’s not real anyway. So BusinessWeek is using fuzzy math to put a fuzzy number on the cover that isn’t real anyway? All together now: BULLSHIT!

Of course, there are also folks like Chris Pirillo who basically think quite the opposite:

I agree with what some of these guys are saying: the number is wholly inaccurate. Kevin and the Digg brand are likely worth twice that amount…I believe that Digg (and its entire community) is worth more than $60m $200m today. Then again, I’m an idealistic sonofabitch. Even if Kevin was a billionaire, I’d still insist on buying lunch for him.

In the end, I don’t really care (too much) about what Biz Week estimates the value of Digg to be. What I do care about, is what this article is trying to convey about being an entrepreneur in this Web 2.0 age and the current environment of startups and investors. Clearly, times have changed from the first internet bubble and the folks leading the pack are very different in nature and think very differently as well (e.g. “community first, money later”), so I thought I’d end off with one final quote from the article that depicts this rather well:

Clearly much has changed since 1999, and Rose and his fellow wealth punks have little in common with the sharp-talking MBAs in crisp khakis and blue button-downs who
rushed the Valley as the NASDAQ climbed. In the late 1990s, entrepreneurs were the supplicants, and Sand Hill Road, dotted with venture-capital firms, was the mecca. Dot-commers relied on VCs for the millions needed to buy hardware, rent servers, hire designers, and advertise like crazy to bring in the eyeballs. For their big stakes of, say, $15 million for 20% of a company, venture capitalistsreceived board seats, control of the management levers, and most of the equity.

Now, it’s more like: Maybe we’ll let you throw a few bucks our way — if you get it. Otherwise, get lost. That’s possible because the cost of jump-starting a good idea has plummeted. At the same time, the sources of money have multiplied, swirling in from new VC shops, angel investors, and strategic partners galore. The awash-in-capital environment has flipped the power dynamic…