Reddit has raised $200 million in new venture funding and is now valued at $1.8 billion, according to CEO Steve Huffman.
The new funding round, the company's largest ever, should expedite a number of internal product and business efforts, including a redesign of its homepage and its first foray into user-uploaded video, Huffman added in an interview with Recode.
The money comes courtesy of a number of well-known Silicon Valley investors, including firms like Andreessen Horowitz and Sequoia Capital, and individual investors like Y Combinator President Sam Altman (also a board member) and SV Angel's Ron Conway. It also includes money from the hedge fund Coatue, investment firm Vy Capital and mutual fund giant Fidelity.
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Advance Publications — which owns Condé Nast, Reddit's one-time parent company — did not participate in this funding round but still owns a majority stake in Reddit, according to two sources familiar with the arrangement. Condé Nast CEO Bob Sauerberg sits on Reddit's board of directors. Bloomberg reported last month that Reddit was raising more money.
Reddit, which bills itself as the "front page of the internet," has been a longstanding home for all kinds of online communities, both positive and negative, since it was founded in 2005 by Huffman and co-founder Alexis Ohanian. It's had a tumultuous stretch since its last funding round, when it raised $50 million in 2014. When Huffman returned to Reddit in the summer of 2015 amid a user revolt, he became the company's third CEO in less than a year.
But things at Reddit have settled down since — and one thing that hasn't changed much over the past decade is Reddit's product. The network lets users post and comment on links akin to an early internet chatroom, and has amassed 300 million monthly visitors. But Reddit has also retained its early internet functionality and appearance — it still feels like a product that was created for the internet in 2005.
"We have a lot of perception debt," Huffman said from the company's San Francisco headquarters. "Reddit feels old. We don't want to be associated with old."
Huffman's plan for the new funding includes a redesign of reddit.com — the company is literally re-writing all of its code, some of which is more than a decade old. An early version of the new design, which we saw during our interview, looks similar to Facebook's News Feed or Twitter's Timeline: A never-ending feed of content broken up into "cards" with more visuals to lure people into the conversations hidden underneath.
"We want Reddit to be more visually appealing," he explained, "so when new users come to Reddit they have a better sense of what's there, what it's for."
Raising $200 million in 2017 to help redesign a desktop webpage may strike some as odd. But 80 percent of Reddit's 300 million users still visit Reddit on the web, Huffman said, so its desktop audience is still a major priority.
"We will have, probably relative to our peers, a longer desktop life because of text and keyboards," Huffman said. "It's easier to create text from a keyboard. And I don't know if that's a good or bad thing, it's just a thing."
To create the new product, Reddit has been on a hiring spree. The company has about 230 employees, up from around 140 at the beginning of the year. Huffman would like to end 2017 with around 300 full-time staff.
The money is not solely for the redesign, though. Reddit is also beefing up its video efforts, and recently launched a beta feature that lets users upload videos directly to the site for the first time. It's possible Reddit could eventually compete for video ad dollars. Usually video ads follow user video — a way to introduce and get users comfortable with the new medium before selling that medium to advertisers.
Reddit has been selling ads for years, though Huffman says it only really started doing so with structure in 2015. Still, he says making money is "not our top priority," estimating the company spends only about 20 percent of its resources on its advertising business. Huffman declined to share revenue totals. The company is also not profitable.
But Reddit is in a unique position compared to other ad-driven social networks like Facebook and Twitter in that it's still transitioning to mobile — it only launched its first mobile app in early 2016. Many of its competitors have made mobile a top, if not only, priority, and have been selling mobile ads for years.
But Altman says that he's been impressed with Reddit's ability to transition quickly. Only 20 percent of Reddit's users come from mobile, but they account for 50 percent of the total time spent on the site.
"I wish the company had started on mobile earlier for sure," he said. "However, I think that it's been remarkable progress in the last, say, year."
"It was my No. 1 concern two years ago, and it is now not even in my top three concerns for the company," he added.
Eventually, though, Altman and Reddit's other investors will want their money back and then some. Huffman says there are lots of ways for Reddit to exit, none of which he's focused on at the moment.
"I think there are a lot of paths to liquidity," Huffman said. "The one that we're on often ends in an IPO. But we don't have plans for that in the future that we can see."
—By Kurt Wagner, Re/code.net.
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