Reddit's long and rocky road to an IPO

During a leadership crisis in 2015, Reddit asked Steve Huffman, one of its founders, to return to lead the social media platform.

Mr. Huffman, who worked at a travel site, was not eager to return. Reddit was a headache. He lived a revolving door leaders. Its large user community was combative towards management. Reddit's ownership was also complicated, and its technology lagged behind its competitors.

“I ran toward the burning building,” Mr. Huffman said in a 2017 statement. podcast describing his return.

This month, Reddit is ready to go public in one of the first technology initial public offerings of the year. His gesture stands out. Unlike a recent crop of startups focused entirely on artificial intelligence, the 19-year-old company is a throwback to an earlier era of social media. It's also trying to go public at a time when investors are skeptical of technology offerings.

But what stands out most is that Reddit is capable of going public.

After being very early on social media, the San Francisco-based company stagnated for years. He has faced questions and controversies due to his outspoken stance in favor of free speech. She struggled to build a viable business and was initially advertising resistant – until it’s no longer the case.

After Mr. Huffman's return, the company's revenues grew from $12 million to more than $800 million a year, and its employees from 80 to 2,000. But Mr. Huffman continued to run into obstacles. Last June, when it increased fees for independent developers who used Reddit data, many the site moderators revolted by closing sections of the platform. And questions swirl around the company's role in spreading misinformation.

“Reddit has managed to survive, almost in spite of itself,” said Ellen Pao, former Reddit general manager. runs the project Includea Silicon Valley nonprofit focused on diversity.

This week, as Reddit launched a roadshow to attract potential investors, the obstacles it faced were evident. The company declared it aimed to raise up to $748 million in its offering, selling about 22 million shares for $31 to $34 each, according to a filing. This would place its valuation at around $6.4 billion, below the Valuation at $10 billion it was picked up in 2021 during a private funding round.

Skepticism of the IPO was evident in a well-known Reddit community called WallStreetBets, a forum where people discuss stocks and trading, which has helped fuel the rise of “meme stocks.” Some commenters said Reddit hasn't proven it can make money from its users or data.

“HOW CAN I CUT THIS DUMPKIT FIRE STOCK!” » a WallStreetBets user wrote last month. (Reddit cited the forum as a risk factor in its regulatory filings, warning that it could cause “extreme volatility” in the company’s stock price.)

Others said the public markets were hungry for tech deals like Reddit. “It looks like there’s a lot of demand for a great IPO story,” said Barrett Daniels, co-head of USIPO services at Deloitte. “The reluctance here is to serve as a guinea pig.”

Reddit declined to make executives available for an interview, citing the quiet period before an IPO.

Mr. Huffman and Alexis Ohanian founded Reddit in 2005 from a dorm room at the University of Virginia. They wanted to create a start-up to pre-order food on a mobile phone, called My Mobile Menu or MMM.

They pitched the idea to Paul Graham and Jessica Livingston, who were creating Y Combinator, a startup incubator. Mr. Graham and Ms. Livingston rejected the food ordering proposal, but helped the founders create what would become Reddit: a social link-sharing forum.

Reddit is reminiscent of old-school message boards and online forums. With over 73 million daily users, it is comprised of largely text-based forums divided into different topics of interest, called “subreddits”. These communities discuss everything from gossip has cosmetic tips has Bernese Mountain Dog. Thousands of volunteer moderators oversee subreddits.

“Reddit is one of the few places on the Internet where you can find niche interests and broader interests in the same place,” said Alfred Lin, a partner at Sequoia Capital, a venture capital firm that has invested in the company.

In 2006, Condé Nast bought Reddit for $10 million, turning Mr. Huffman and Mr. Ohanian into young millionaires overnight. Both founders eventually left, leaving Reddit in the hands of a small team of die-hard “Redditors” who were very protective of the site.

This team was adamantly opposed to changing how Reddit looked and functioned, for fear it would alienate its core users. They resisted creating a mobile app until the iPhone era, and were largely disinterested and didn't have the bandwidth to turn Reddit into a lucrative business.

Employees have also had a laissez-faire attitude when it comes to moderating speech on the site, which has sometimes landed the company in hot water. Some subreddits were toxic and devoted to racist themes or non-consensual nude photos, the type of content that advertisers found repulsive. Many employees were against data collection and more invasive forms of advertising.

“The community continued to grow, but there just hasn't been any product innovation,” Lin said. “It’s kind of stagnated.”

In 2011, Condé Nast's parent company, Advance Publications, spun Reddit off as an independent entity after recognizing that the site needed “start-up energy,” Mr. Lin said.

Yishan Wong, a former Facebook and PayPal engineer, joined Reddit as general manager in 2012 to boost the site. He then brought in Ms. Pao, a former venture capitalist, to work on business development and partnerships.

Mr. Wong helped jumpstart Reddit's development of mobile apps for iPhone. Because Reddit had gone so long without an official mobile app, independent developers had created their own versions of a Reddit app that users could pay to download.

When Mr. Wong left Reddit in 2014, Ms. Pao became interim CEO. She began changing some of the site's free speech policies and devoting resources to expanding the advertising business, angering many Reddit users, who believed that she had overstepped.

They criticized Ms. Pao, who resigned in 2015. Sam Altman, the chief executive of OpenAI who was then a member of Reddit's board, said at the time that the attacks on Ms. Pao “were worse against Ellen because she is a woman. .” Other employees said she was the scapegoat for users' general angst.

Reddit asked Mr. Huffman to come back. “Coming back was one of the hardest decisions he ever had to make,” said Ms. Livingston, whose company was Reddit’s first investor.

Once back at the company, Mr. Huffman continued to make changes to the speech policy, including banning users and subreddits dedicated to hate speech. He brought on new executives, such as Jen Wong, chief operating officer, and Drew Vollero, the company's general manager. first financial director.

Under Mr. Huffman's leadership, Reddit grew its advertising business. The company has also tapped into its troves of user data, striking deals with companies like Google that want to use that data to train their large language models, a kind of artificial intelligence that underpins chatbots, on how to better understand and reproduce human speech. Reddit expects more than $200 million in licensing fees over the next few years from these deals.

Reddit also tried to bring its site out of the Stone Age by updating its design. It is experimenting with revamped features that highlight photos and videos and has improved its algorithms to suggest different posts based on user interests.

Not everything has gone well, including the moderator revolt last year. Mr. Huffman said in an interview at the time that there was general concern about the changes Reddit was making as part of a natural “maturation process.”

Many current and former employees are relieved that after nearly 20 years of drama as a private company, Reddit is now days away from ringing the opening bell for the New York Stock Exchange. In a private Slack group created by former employees, activity is soaring while they wait to finally sell their company's shares, said two former employees who were part of the group.

Ms. Pao said she was “excited that employees who have worked very, very hard for years can finally get a benefit.”

Some former employees also exchanged photographs of a “challenge coin» made to honor their time on Reddit. The date the company was founded was engraved on the coin and mascot (a smiling alien face based on a doodle Mr. Ohanian was drawing in college), according to a photo shared with The New York Times. The piece also featured a brief message, using the site's vernacular when users read a link: “Been there, already Reddit.”

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