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Reddit's long, difficult road to an IPO| GuyWhoKnowsThings

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

Mr. Huffman, who was working on a travel site, was not eager to return. Reddit was a pain. She was experiencing a revolving door of the executive heads. Its growing community of users was combative with the management. Reddit's ownership was also complicated and its technology lagged behind its competitors.

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

This month, Reddit is ready to hit the stock market in one of the first technology initial public offerings of the year. His movement stands out. Unlike a recent generation of startups that focus exclusively on artificial intelligence, 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 are skeptical of technology offerings.

But what stands out most is that Reddit can be made public.

After arriving early on social media, the San Francisco-based company stagnated for years. He faced questions and controversies over his free stance towards freedom of expression. He struggled to build a viable business and was initially advertising resistant – until it wasn't.

After Huffman returned, the company's revenue increased from $12 million to more than $800 million a year, and its employees from 80 to 2,000. But Huffman continued to encounter obstacles. Last June, when he raised fees for independent developers using Reddit data, many The site's moderators rebelled. closing sections of the platform. And questions have been raised about the company's role in spreading misinformation.

“Reddit managed to survive, almost despite itself,” said Ellen Pao, former Reddit CEO who runs Project Includea nonprofit organization in Silicon Valley focused on diversity.

This week, when Reddit began a tour to attract potential investors, the obstacles it faced were evident. The company said Its goal was to raise up to $748 million. in its offering, selling about 22 million shares at between $31 and $34 each, according to a filing. That would put its valuation at around $6.4 billion, below the $10 billion valuation It was obtained in 2021 during a private financing round.

Skepticism about the IPO manifested itself in a well-known Reddit community called WallStreetBets, a forum where people talk about stocks and trading and that helped fuel the rise of “meme stocks.” Some commentators said Reddit had not demonstrated that it could make money from its users or their data.

“HOW CAN I CUT THIS STOCK OF FIRE OUT OF THE CONTAINER!” a WallStreetBets user wrote last month. (Reddit has 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 public markets were hungry for tech offerings like Reddit. “There seems to be a lot of demand for a good IPO story,” said Barrett Daniels, co-head of USIPO services at Deloitte. “The reluctance here is being the guinea pig.”

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

Huffman and Alexis Ohanian founded Reddit in 2005 from a dorm room at the University of Virginia. They wanted to create a startup that would allow people to pre-order food from 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. Graham and Livingston rejected the proposal to order food, but helped the founders come up with what would become Reddit: a social forum for sharing links.

Reddit is reminiscent of old school online forums and bulletin boards. With more than 73 million daily users, it is primarily made up of text forums divided by different topics of interest, called “subreddits.” These communities discuss everything from celebrity gossip to cosmetic 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 narrow 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 Huffman and Ohanian into young millionaires overnight. Both founders eventually left, leaving Reddit in the hands of a small team of hardcore “Redditors” who were very protective of the site.

That team was adamantly opposed to evolving the look and feel of Reddit, for fear of alienating its core users. They resisted creating a mobile app until well into the iPhone era, and were largely disinterested and didn't have the bandwidth to turn Reddit into a profitable business.

Employees also had a laissez-faire attitude toward moderating speech on the site, which sometimes got the company into trouble. Some subreddits were toxic and dedicated to racist themes or non-consensual nude photos, the type of content that advertisers found repellent. Many employees opposed data collection and more invasive forms of advertising.

“Community continued to grow, but there was simply no product innovation,” Lin said. “It kind of stagnated a little bit.”

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

Yishan Wong, a former Facebook and PayPal engineer, joined Reddit as CEO in 2012 to power the site. He later hired Ms. Pao, a former venture capitalist, to work on business development and partnerships.

Wong helped drive Reddit's development into mobile apps for the iPhone. Because Reddit had been 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 Wong left Reddit in 2014, Pao took over as interim CEO. She 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 that she had gone too far.

They criticized Ms. Pao, who resigned in 2015. Sam Altman, the CEO of OpenAI who was then on Reddit's board, said at the time that the attacks on Ms. Pao “were worse for Ellen because she is a women”. .” Other employees said she was a scapegoat for general user distress.

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

Once back at the company, Huffman continued to make changes to speech policies, including banning users and subreddits dedicated to hate speech. He brought in new executives, including Jen Wong, chief operating officer, and Drew Vollero, a company director. first financial director.

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

Reddit also attempted to bring 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.

Not everything has gone well, including a moderator revolt last year. Mr. Huffman said in an interview at the time that there was widespread anxiety about Reddit's changes 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 days away from ringing the opening bell on the New York Stock Exchange. In a private Slack group created by former employees, activity is skyrocketing as they wait to finally sell their shares in the company, said two former employees who are part of the group.

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

Some former employees also exchanged photographs of a “challenge coin”made to honor his time on Reddit. The date of founding of the company was stamped on the coin and pet (a smiling alien face based on a scribble Ohanian drew in college), according to a photograph shared with The New York Times. The coin also had a brief message, using the site's vernacular for when users read a link: “Been there, Reddit.”

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