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Marketplace Morning Report

Less than zero

Sep 17, 2019

Reddit raises $50 million and wants to share with users

Tracey Samuelson Oct 1, 2014
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Reddit is a digital bulletin board of sorts, the self-proclaimed “front page of the internet,” where gazillions of users post, share and read about almost any topic area, or “subreddit,” that you can conceive of and many that you honestly couldn’t (or perhaps shouldn’t).

“The content is 95 percent of the time relevant and interesting, which is really cool,” says user Colin Grussing, of his favorite subreddits, which mostly include entrepreneurship. “I don’t know if there’s any other site on the Internet that does that so well.”

Reddit has just announced that it raised $50 million from a series of investors, including top tech venture capitalists and stars like Jared Leto and Snoop Dogg.

The company will use the money to:

“… hire more staff for product development, expand our community management team, build out better moderation and community tools, work more closely with third party developers to expand our mobile offerings (try our new AMA app), improve our self-serve ad product, build out redditgifts marketplace, pay for our growing technical infrastructure, and all the many other things it takes to support a huge and growing global internet community.”

“I grew up with a computer, and many of my friends were people I met online,” says Sam Altman, the president of Y Combinator and the lead investor in this round of funding. “I think one of the most fundamental societal transitions in the last 20 years is this idea that people connect to some of the closest people in their lives and have some of these important parts of their personalities get developed in online communities.”

But he also thinks Reddit’s passionate, highly engaged users will make the site a good long-term investment.

Like other large community sites, he says Reddit could make money in three ways.

“One, obviously, is with ads,” he explains. “Two is with charging users for premium features, and three is some version of commerce. That’s more in the experimentation phase, but where you let people basically spend money on the site and take part of that transaction.”

Altman and his fellow investors want to give 10 percent of their shares back to the community, because users have helped build the site, and, as he says, people treat a car they own better than a rental.

It’s a relatively simple idea, but one that’s very difficult to execute legally, says Lance Kimmel, a securities lawyer.

“I think Reddit really has their work cut out for themselves,” he says. “This stuff is really, really complicated.”

The Securities and Exchange Commission has shut down other companies’ attempts to do something similar, says Kimmel.

In announcing the idea, Reddit admitted that it has been interested in a similar move in the past, but hasn’t found the right legal avenue.

Its CEO recently floated the idea of giving users a cryptocurrency backed by shares, though Kimmel is skeptical about the legality of that approach as well. 

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