yeah, but I think they believed they could grow into something bigger. I.e, the same thing all startups believe, and typically fail to do.
Don't get me wrong, I think they'd have been far better off taking far less money and simply being a profitable property. I think nearly all startups would be better off doing this. I just don't believe that digg did anything abnormal for a typical startup.
Digg was viable previously. Hence the Icarus problem. They tried to fly too high.
Most startups are stillborn. That's a different Greek myth.