Digg Raises An Inside Venture Round

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Digg has raised a new round of financing, we’ve confirmed. It’s an inside round, meaning one or more existing investors put in the money.

We’ve heard the amount raised was single digit millions, probably around $5 million. CEO Matt Williams has confirmed the financing to us, but won’t give an exact number on the amount raised.

The real question is around the terms of the deal. Digg’s last round in 2008 valued the company at $150 million post money. But that was a long time ago, and Digg’s influence has waned. One source says the valuation is probably around $35 million. But Williams told me “this was not a down round.”

There are ways to structure a deal to give a better real valuation to investors while keeping the official valuation high. By increasing the liquidity preference, or using debt, or warrants. Williams wouldn’t comment further, though, on the round.

The company has $1.5 million outstanding debt with Silicon Valley Bank, and one source says they were pressuring the company to raise new money to improve the balance sheet. Without this round Digg had about 6 months of runway left before they ran out of cash, says one source. Now, they have more time.