Did Kevin Rose Take Some of Digg’s New Cash?

Digg has raised $28.7 million in a Series C round of funding. The company made the announcement earlier this morning. Highland Capital Partners is leading the current round, which will see Highland partner Richard de Silva join Digg’s board of directors.

The company will use the funds to expand internationally and move into newer offices; it will also hire more people as part of its expansion. Digg had raised $11.3 million in two prior rounds from investors SVB Capital, Greylock and the Omidyar Network, along with a few angels. [digg=http://digg.com/tech_news/Did_Kevin_Rose_Pocket_Some_of_Digg_s_New_Cash]

The rumor I heard is that Digg founder Kevin Rose got to a sell a nice chunk of his shares in the company, a trend that has become quite fashionable among the Web 2.0 set. Several founders have taken money off the table as their companies wait for a bigger payday. I am sure, however, that he is going to stick around. CEO Jay Adelson declined to comment on the news.

If that was the case, it was a good move for Kevin. Digg, however, is in a bit of a pickle. As this chart from Quantcast makes clear, Digg’s traffic is showing signs of plateauing. There has been a slight uptick in their traffic lately, but what’s troubling is that a mere 1 percent of its users (who can be labeled addicts) are generating 32 percent of the visits, according to Quantcast. They have 224.1 million page views a month, of which 156 million come from the U.S.

This round of financing has been in the works for a while. I was contacted about it by many of my sources, some of whom hinted that the San Francisco-based social news startups was raising a “gigantic” amount of money, but such rumors conflicted with other chatter I was hearing about the company being acquired by larger players. There was talk of Google buying Digg, but last-minute issues might have prevented that deal. Michael Arrington has reported that, “Google was in the due diligence stage of the deal, where they peer deep into Digg’s technology and financial statements,” but walked away due to several reasons.

One way or another, it looks like Adelson, Digg’s current CEO, is in it for the long haul with this company — and so are the investors.