During a leadership crisis in 2015, Reddit asked Steve Huffman, one of its founders, to return to run the social networking platform.
Mr. Huffman, who worked for a travel website, did not want to return. Reddit was a headache. He was experiencing a revolving door of executives. Its large community of users was combative with management. Reddit’s ownership was also complicated, and its technology lagged behind competitors.
“I ran into the burning building,” Mr. Huffman said in a 2017 podcast describing his return.
This month, Reddit is poised to go public in one of the first tech IPOs of the year. His movement stands out. Unlike a recent crop of AI-focused startups, the 19-year-old company is a throwback to an earlier era of social media. It is also trying to go public at a time when investors have been skeptical of technology offerings.
But what stands out the most is that Reddit is able to go public at all.
After being early on in social media, the San Francisco-based company remained stagnant for years. She faced questions and controversy about her free-spirited stance on free speech. He struggled to build a sustainable business and was initially resistant to advertising – until he wasn’t.
After Mr. Huffman’s return, the company’s revenue rose to more than $800 million a year from $12 million and its employees to 2,000 from 80. But Mr. Huffman continued to encounter obstacles. Last June, when it raised fees for independent developers using Reddit’s data, many moderators on the site rebelled, shutting down parts of the platform. And questions have swirled about the company’s role in spreading misinformation.
“Reddit has managed to survive, almost in spite of itself,” said Ellen Pao, a former Reddit CEO who runs Project Include, a 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 said it aims to raise up to $748 million from its offering by selling about 22 million shares at $31 to $34 each, according to a filing. That would put its valuation at about $6.4 billion, below the $10 billion valuation it reached in 2021 during a private funding round.
Skepticism about the IPO surfaced in a well-known Reddit community called WallStreetBets, a forum where people discuss stocks and trades, and that helped fuel the rise of the “stock meme.” Some commentators said Reddit had not proven it could monetize its users or data.
“HOW DO I SHORTEN THIS 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. “There seems to be a lot of demand for a nice IPO story,” said Barrett Daniels, co-head of USIPO services at Deloitte. “The reluctance here is to be the 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 University of Virginia dorm room. They wanted to create a start-up that would allow people 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 founded Y Combinator, a startup incubator. Mr. Graham and Ms. Livingston rejected the take-out proposal, but helped the founders come up with what would become Reddit: a link-sharing social message board.
Reddit is reminiscent of old-school online message boards and forums. With more than 73 million daily users, it consists of text-based forums divided into various topics of interest, called “subreddits”. These communities discuss everything from celebrity gossip to beauty tips to Bernese Mountain dogs. Thousands of volunteer moderators oversee the subreddits.
“Reddit is one of those rare places on the Internet where you find niche interests and broad interests all 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 group of die-hard “Redditors” who were very protective of the site.
This group was adamantly opposed to evolving the look and feel of Reddit, fearing it would alienate its core users. Its participants resisted building a mobile app at the height of the iPhone era and were largely disinterested and lacked the bandwidth to turn Reddit into a money-making business.
The company also had a laissez-faire attitude to moderating speech on the website, which sometimes landed it in hot water. Some subreddits were toxic and dedicated to racist themes or non-consensual nude photos, the kind of content that advertisers found repulsive. Many workers were against data collection and more intrusive forms of advertising.
“The community continued to grow, but there was no product innovation,” Mr. Lin said. “It kind of stagnated.”
In 2011, Condé Nast’s parent company, Advance Publications, spun off Reddit as an independent entity after recognizing that the site needed “startup energy,” Mr. Lin said.
Yishan Wong, a former Facebook and PayPal engineer, joined Reddit as CEO in 2012 to power the site. He later brought in Ms. Pao, a former venture capitalist, to work on business development and partnerships.
Mr. Wong helped launch Reddit’s development of mobile apps for the iPhone. Because Reddit had gone without an official mobile app for so long, 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 stepped in as interim CEO. He began changing some of the site’s free speech policies and poured resources into building the advertising business, angering many of Reddit’s users, who believed he had gone too far.
criticized Ms. Pao, who resigned in 2015. Sam Altman, the chief executive of OpenAI, who was then on Reddit’s board, said at the time that the attacks on Ms. Pao “were worse on Ellen because she’s a woman.” Other employees said he was a scapegoat for the general stress of users.
Reddit asked Mr. Huffman to return. “It was one of the hardest decisions he’s ever had to make to come back,” said Ms. Livingstone, whose company was Reddit’s first investor.
Once back at the company, Mr. Huffman continued to make policy changes about speech, including banning users and subreddits devoted to hate speech. The company has created a team to tackle misinformation and acquired artificial intelligence companies to better identify and remove hate speech. He brought in new executives, including Jen Wong, the CEO, and Drew Vollero, the company’s first CFO.
Under Mr. Huffman, Reddit built its advertising business. The company has also leveraged its user data, striking deals with companies like Google that want to use the data to train its big language models, a type of artificial intelligence that powers chatbots, on how to better understand and play. of human speech. Reddit expects more than $200 million in licensing fees over the next few years from these deals.
Reddit also tried to pull its site out of the Stone Age by updating its design. It’s experimenting with revamped features that highlight photos and videos, and has improved its algorithms to suggest different posts based on users’ interests.
It hasn’t all gone smoothly, including a moderator revolt last year. Mr. Huffman said in an interview at the time that there was general concern about Reddit’s changes as part of a natural “maturing 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 bell on the New York Stock Exchange. In a private Slack group created by ex-employees, activity is soaring in anticipation of finally being able to sell their company stock, two former employees who belong to the group said.
Ms. Pao said she was “thrilled that the employees who have worked really, really hard for years can finally take over.”
Some former employees have also been exchanging photos of a “challenge coin” made to commemorate their time on Reddit. Stamped on the coin were the founding date and the company’s mascot (a smiling alien face based on a doodle Mr. Ohanian drew in college), according to a photo shared with The New York Times. The coin also had a short message on it, using the site’s vernacular for when users have read a link: “Been there, Reddit already.”
