Reddit Founders' Journey - A Rollercoaster to IPO

Welcome to our "Founders' Journey" series by CoffeeSpace, where we explore the remarkable stories and cofounder journeys behind the world’s most successful startups.

In this edition, we dive into the origins and evolution of Reddit, the platform that has redefined online communities and become a staple of the Internet. Join us as we uncover the key milestones, challenges, and lessons learned by Reddit’s co-founders, Steve Huffman (@redditspez) and Alexis Ohanian (@alexisohanian), on their path to building a social media giant.

Reddit Founders' Journey: From College Project to Social Media Giant

Reddit, also known as “the front page of the Internet,” has become a central hub for information, entertainment, and social interaction, with millions of active users worldwide sharing content and engaging on the platform daily. This dynamic social media platform serves as an online forum where users can share and discuss topics of their interest.

Founded in 2005 by Steve Huffman and Alexis Ohanian, Reddit has grown into one of the most influential online communities, boasting an estimated monthly organic traffic of 5.5 billion, ranking fourth after YouTube, Facebook, and Instagram. Known for its unique structure of "subreddits," which are individual forums dedicated to specific interests or categories, Reddit allows users to submit content, engage in discussions, and vote on posts, creating a community-driven experience that prioritizes current and relevant content catering to all walks of life.

An interesting vantage point to explore is the journey of the founders—from building and launching the platform to becoming a unicorn and going public earlier this year. Here are some key milestones and conflicts that made Reddit the social media giant it is today and what lessons we can all take away from it.

From MyMobileMenu to Reddit

In 2005, Alexis Ohanian and Steve Huffman, two college friends, initially had the idea of MyMobileMenu in mind. This app was intended for online order-taking, and they pitched it to Paul Graham, who was in charge at Y Combinator. Although the idea was shot down by Graham, he guided the two friends to pivot towards what would eventually become “the front page of the Internet.” This is how Reddit joined Y Combinator's first batch of startups in the summer of 2005. Enrolling in Y Combinator with this new idea, the duo was funded to make their vision a reality. Huffman became the CEO, while Ohanian served as the executive chairman. The founders worked tirelessly to build the platform, even creating thousands of fake accounts initially to make their site appear more populated. Later in 2005, Christopher Slowe joined as the company’s first employee, taking charge of ongoing development and new features, alongside Huffman, who had built the platform from scratch.

Early Growth and Merging with Infogami

January 2006 marked a turning point for Reddit. During this time, the company merged with Aaron Swartz's Infogami, a company he had founded. This merger brought Swartz, an entrepreneur and Internet hacktivist, on board as a co-founder of Reddit. The merger also led to the establishment of a new parent company called "Not a Bug" that encompassed both startups. While there are debates over whether Swartz should be considered a co-founder, some media outlets reported him as an equal owner.

Huffman and Swartz took on the roles of programmers, while Ohanian handled business development and marketing tasks. However, tensions soon arose between the introverted Swartz and the two University of Virginia graduates, Huffman and Ohanian. After an initial burst of productivity working together, the situation became toxic, and it was mutually agreed that selling the company was the best option.

Acquisition by Condé Nast

In 2006, just a year after its founding, Reddit was acquired by Condé Nast Publications for an undisclosed amount, reported to be between $10 million and $20 million. Following the acquisition, Aaron Swartz was let go from his position in 2007, while Ohanian and Huffman continued to work closely with Reddit as members of its board of directors. However, in 2009, both Ohanian and Huffman left the company—Ohanian to build Breadpig and Huffman to co-found the travel search platform Hipmunk with Adam Goldstein. Shortly after Huffman’s departure Slowe also left the company in 2010 to join Huffman in developing Hipmunk.

Ohanian's Return as Executive Chairman and Departure

After leaving Reddit in 2009, Ohanian returned to the company in 2014 after Yishan Wong’s resignation as CEO, taking on the role of executive chairman. During this period, the company also raised a $50 million Series B round led by Andreessen Horowitz, as announced in October 2014. Ohanian helped guide Reddit’s growth and development, steering it toward its full potential of scaling. However, in 2018, he stepped back from the company to focus on investing.

In 2015, Reddit’s interim CEO Ellen Pao faced significant challenges as many users expressed frustration with the new direction of Reddit. A petition with over 160,000 signatures called for Pao to step down as CEO. Huffman returned to Reddit shortly after, replacing Pao as CEO to lead the now-independent company. August 2015 also saw Reddit hiring and announcing their first CTO, Marty Weiner, who was a founding engineer at Pinterest.

Slowe’s Return as Chief Technology Officer

Ohanian wasn’t the only one to leave and later return to the company. In May 2017, Slowe rejoined Reddit as CTO, tasked with overhauling the platform’s technology and infrastructure. His efforts included the site redesign and mobile app development, which were crucial for supporting Reddit’s exponential growth in user base. As of 2024, Slowe still serves as Reddit’s CTO, continuing to innovate and enhance the user experience on the platform.

Ohanian's Resignation from the Board

In 2020, as the COVID-19 pandemic and Black Lives Matter protests swept across the country, Ohanian’s concerns about hateful content on Reddit grew. He advocated for banning groups on Reddit that supported discrimination, while others at the company, including Huffman, were reluctant to take such action. The disagreement over content moderation created a rift between Ohanian and Huffman. Ultimately, Ohanian resigned from Reddit's board in protest of the company’s lax guidelines on hate speech, publicly asking the board to fill his seat with a Black person. Y Combinator CEO Michael Seibel was chosen as his replacement.

Reddit's IPO Filing Without Ohanian

In 2024, as Reddit prepared to go public, the company filed an S-1 form with the U.S. Securities and Exchange Commission. Surprisingly, the filing did not mention Ohanian, despite his significant role in the company's history. The omission was noted by many observers and analysts. Huffman, in a letter included in the filing, referred to Reddit's founding using plural pronouns but never mentioned Ohanian by name.

When asked about his exclusion from Reddit’s IPO filing, Ohanian responded with a shrug emoticon. The two co-founders, who were once close friends, have barely spoken since their falling out in 2020. In an interview with Wired, Ohanian mentioned that he hadn’t thought much about Huffman since his departure from the board.

Market Capitalization at IPO vs. Current Market Cap

When Reddit went public on March 24, 2024, it targeted a valuation of approximately $6.5 billion. This was a significant decrease from the $10 billion valuation it had reached during a funding round in 2021. The IPO was priced at $34 per share, allowing the company to raise about $750 million through the sale of shares—a cautious approach in a challenging market environment for tech IPOs.

Reddit’s current market capitalization has since increased to around $10 billion. This growth can be attributed to various factors, including strategic partnerships, particularly with Google for data licensing, and a resurgence in interest in tech stocks driven by current trends in artificial intelligence and online advertising.

The contrast between the initial IPO valuation and the current market cap highlights Reddit’s resilience and potential for growth in a competitive landscape. The rise in market value post-IPO indicates investor confidence and the company’s ability to adapt to market demands, despite early skepticism surrounding its profitability and business model.

Conclusion

The relationship between Reddit co-founders Alexis Ohanian and Steve Huffman has been a rollercoaster ride, marked by both collaboration and conflict. From their early days as college friends working on MyMobileMenu to their successful launch of Reddit and its subsequent acquisition by Condé Nast, the two entrepreneurs have left an indelible mark on the company's history. However, their differing views on content moderation and the handling of hateful content ultimately led to a public falling out, with Ohanian resigning from the board in 2020. As Reddit has now gone public, the exclusion of Ohanian from the IPO filing serves as a reminder of the complex and often tumultuous relationships that can develop between startup founders. Despite their differences, both Ohanian and Huffman have played pivotal roles in shaping Reddit into the influential platform it is today, offering valuable lessons for aspiring entrepreneurs navigating the fast-paced world of technology and innovation.

Takeaways for Founders / Cofounder Lessons

1. Adaptability is Key: The pivot from MyMobileMenu to Reddit underscores the importance of being flexible and open to change. Founders should be willing to listen to advice and pivot when necessary, as it can lead to greater opportunities.
2. Importance of Cofounder Alignment: The conflicts between Huffman, Ohanian, and Swartz highlight the need for clear communication and alignment on vision and values among cofounders. Differences in personality and approach can strain relationships, making it crucial to address issues early.
3. Navigating Growth and Ownership: The journey from founding to acquisition and eventually going public showcases the challenges of maintaining control and direction as a startup grows. Founders must balance the desire for growth with the need to retain influence over their company's future.
4. Content Moderation and Ethical Leadership: The fallout between Ohanian and Huffman over content moderation reveals the ethical dilemmas that founders might face. Establishing a clear stance on such issues and sticking to it is vital for long-term credibility and trust.
5. Resilience Through Change: Reddit’s fluctuating valuations and eventual success in the public market demonstrate the importance of resilience. Founders should remain focused and adaptable, even when faced with market skepticism or internal challenges.

If you’re inspired by this story and want to start exploring your own ideas and find someone to get off the ground with, join us at CoffeeSpace.

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