Digg raised $40mm in VC. VCs don't give you money to put in the bank... they give you money to hire people and invest in things that might be profitable in the future.
Yes, Digg could probably have bootstrapped. But they didn't, they raised money, and once they did that, the money that the VCs gave them was meant to invest, which is guaranteed to mean that the company shows a loss.
If there was something useful for Digg to be spending that money on it's one thing, but using more people to do the same thing causes failure. IMO the goal should be to be profitable based on your income stream. With new capital you can setup some R&D or spend that money on new projects outside of your core company or advertising etc, but you need to avoid supporting the core of your company with new capital. That way you can cleanly dump everyone that's not part of making money and not kill the company.
PS: Every dollar you spend that's not supported by revenue should get the company more than one dollar in profit.
Digg raised $40mm in VC. VCs don't give you money to put in the bank... they give you money to hire people and invest in things that might be profitable in the future.
Which begs the question: why exactly did they need 40mm in funding?
Yes, Digg could probably have bootstrapped. But they didn't, they raised money, and once they did that, the money that the VCs gave them was meant to invest, which is guaranteed to mean that the company shows a loss.