Digg that was intended to bring it into the age of Facebook and Twitter. Instead, the new Digg disastrously backfired, sending many of its 20 million monthly users elsewhere — including into the open arms of Reddit (like Wired.com, owned by Condé Nast).

But Adelson’s been busy. He’s already plotting a new venture, and even let slip in an interview that he’s got co-conspirators. Though he’s now 40, he’s got a 27-year-old’s mop of hair and easygoing style, and he’s using his low-key charm and long-limbered looseness to woo VCs for his next venture.

There’s been no pilgrimage to Tibet for Adelson. Instead, he’s been getting his kids used to Silicon Valley and his schedule has quickly filled up with appointments as he’s been advising 15 different startups since he left Digg. It’s not surprising for a guy who helped turn Digg into a cultural phenomenon, even as he founded and ran the online video production studio Revision3.

But Adelson is also devoted to his wife Brenda and their three children. And Brenda knows what it means when he gets that wild look in his eye — like when he began advising Digg founder Kevin Rose back in Connecticut after successfully creating a boom-era tech startup called Equinix, specializing in data centers, that later turned into a 4-billion-dollar business.

“My wife has been supportive but she’s watching carefully because she knows I am addict,” Adelson said, “and it would be so easy for me to go, ‘I’ll be CEO. Let’s go. Let’s rock this sucker out.’ It is so natural for me to do this. This is what happened last time with Kevin (Rose).”

Adelson saw a bit of himself in Rose, and soon the two were plotting over the phone — Rose being firmly planted in Silicon Valley — while Adelson was working in New York City and living the commuter life in Connecticut.

And then, the two decided he’d become Digg’s CEO.

And bang — there went the bucolic home life. Digg became the darling of the internet. Journalists jockeyed to get their stories on the homepage, aching for the “Digg effect” of tens and even hundreds of thousands of Digg users reading their story. The press was rife with rumors of buyouts and BusinessWeek anointed Rose a $60 million man.

But Digg never got bought for a billion dollars, or even for half a billion. It just never sold, and much of Silicon Valley now thinks of it as a failure.

But as Adelson explained this week onstage at Failcon, a San Francisco conference on learning from failure, only two buyout offers were real — one from Al Gore’s CurrentTV and the other from Google. As the entire valley has since learned, Google nearly bought Digg in 2008. Google even poured over Digg’s code in due-diligence sessions. Post-Google’s billion-dollar purchase of YouTube, the buy made a certain sense, even though Google wasn’t about social networking and has a culture driven by engineers, not by a belief in the wisdom of the crowd.

But at the last minute, Google backed out.

“I don’t think it could physically get any closer,” he said of the deal.

And then the tech press’s interest turned to Facebook and Twitter, all but dismissing as dead a website that has 20 million users a month. Adelson is clearly bitter about this, blaming a valley and tech media culture stuck on the idea of billion-dollar winners, and dismissing the rest as failures.

“Can you get off how many billions these companies are going to make?” Adelson said in an interview with Wired.com after his Failcon talk, which came the same day Digg laid off 37 percent of its staff to his obvious consternation.

“A lot of these entrepreneurs aren’t thinking about becoming Zuckerberg,” he said. “They are thinking about having fun and their lifestyle and can they sustain it for a long period with a single company.”

And that, it turns out, is Adelson’s new project.

“I’d like to find a way to enable that,” Adelson said. He adds, in a whisper, “That’d be awesome.”

He wants to build a new system for helping companies get as big as they want to be — not as big as investors want them to become, and he says plans to launch it this spring.

Tech incubators are hot these days.

YCombinator is the most successful of the new breed. Twice a year, Paul Graham along with co-founder and now-wife Jessica Livingston choose 30 or so companies from thousands of applicants, invest about $25,000 in exchange for about 6 percent of a company. They then mentor the groups for a few months, urging them to build and launch quickly. The program is so successful that its graduation ceremony — a demo day for follow-on investors and the press — now has to be held on multiple days, and in this summer’s class, 30 of 36 companies landed follow-on investments.

There are lots of others incubators and early stage investing companies that provide mentorship as well, each with a slightly different model, including TechStars, I/O Ventures, True Ventures and BetaWorks.

Startups can also turn to a growing network of angel investors and so-called superangels, such as Ron Conway’s SV Angel, Chris Sacca’s Lowercase Capital and Dave McClure’s 500 Startups, to get early capital without giving up board seats or too much equity.

But Adelson still sees a problem even in this new ecosystem — even angel investors want what’s known in Silicon Valley as 100x (pronounced “a hundred X”). That is, even the small investors are pushing for companies to hit it big, and sell for 100 times as much as investors valued the company when they invested, to make up for the companies that go bust.

And that, according to Adelson, takes the fun out of building a company.

“How you can create principles around how companies are built that impacts how much fun it is to work there?” he asks.

It’s clear, but unspoken, that this question comes out of his experiences from Digg and from even before that.

So now he’s on a yearlong research mission, trying to find an incubator model that can work for companies ranging from one trying to create a sustainable small company (what the valley derisively calls “lifestyle companies”) to ones trying to change the world.

He’s even talking about the idea of including old-fashioned loans in the mix.

“I wonder, if you really dug deep with an entrepreneur you couldn’t find out which of these models make the most sense for them,” Adelson said.

“It would be cool if you could satisfy all of them with one kind of incubator fund/service or whatever you want to call it but there are legal and structural complications,” Adelson said. “I have some ideas, some will be good ones and some will be stupid and what we will do is, we will experiment.”

He’s elusive on who the “we” is, though it’s clear they are names in the tech world. “I have some co-conspirators, but I can’t talk about them because that would compromise their situations,” Adelson said.

Adelson says it’s taken him months to stop feeling like he works at Digg, and even after his departure, found himself reaching for his mobile phone even before he’d gotten out of bed in the morning, something he thinks is unhealthy.

So naturally, his new all-consuming project is to find a way to make starting a company not all-consuming, and perhaps find a way to get back a bit at the forces that made his earlier companies not as fun as he wish they could have been.

Photo: Jay Adelson, the former CEO of Digg, talks onstage at Failcon ‘10 in San Francisco on Oct. 25, 2010. Ryan Singel/Wired.com

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See Also:

• SXSW: Digg's Big Redesign Taps Into Social Web
• Digg's Jay Adelson: No Damn Comment on Acquisition Rumors
• Digg in Decline? Here's Some Data
• Reddit Versus Digg: A Rivalry by the Numbers
• Digg Cuts Staff by 10% (Again)
• Wired 15.03: Herding the Mob

Authors: Ryan Singel

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