Liquidity preferences give investors first dig at any cash with a multiple (ie. we get 2 or 3x what we put in before you get your first dollar).

Digg had raised a little over $10M at the time of the acquisition offer - which would have been a decent return. The $30M round was raised in lieu of the acquisition.

They placated Kevin by partly cashing him out as part of the $30M round.

With that additional investment, the de facto decision by the board and management was that Digg is a billion dollar business, not a hundred-million dollar business.