On Tuesday, Reddit announced that it had raised $US50 million in new funding at a $US500 million valuation. It’s not your usual funding round.
Look at the list of investors:
Re/code reports that the investors include Y Combinator president Sam Altman, rapper Snoop Dogg, singer and actor Jared Leto, Peter Thiel, Ron Conway, Andreessen Horowitz, Sequoia Capital, Gmail creator Paul Buchheit, Y Combinator founder Jessica Livingston, Minted CEO Mariam Naficy, Thrive Capital founder Joshua Kushner, Eventbrite executives Kevin and Julia Hartz, and Reddit CEO Yishan Wong.
And then there is the valuation: only $US500 million? If Yahoo or AOL — or anyone — had a chance to buy Reddit for that tiny sum, the deal would already be done. We live in a world where Tumblr is worth more than $US1 billion, after all. The presumed explanation is twofold: That Reddit’s users are so suspicious of monetization (i.e. advertising) that they might leave en masse following an acquisition; and that Reddit is full of questionable content (there is a lot of porn on it, some of it featuring violence against women).
Y Combinator President Sam Altman led the funding round, and explained the investment decision in a post on his blog:
reddit is an example of something that started out looking like a silly toy for wasting time and has become something very interesting. It’s been an important community for me over the years — I can find like-minded people that I can’t always find in the real world…There are lots of challenges to address, of course, but I think the reddit team has the opportunity to build something amazing.
Reddit has charmed stars like Snoop Dogg and Jared Leto through on-site interviews, known as AMAs (Ask Me Anything). After joining the site in 2012, Snoop Dogg has stuck around, and he posts on the site daily.
But it’s not just the all-star cast that’s unusual about Reddit’s new funding. Reddit CEO Yishan Wong hinted in his blog post announcing the funding that 10% of the amount raised would be given back to the community. TechCrunch is reporting that the money will be handed out in the form of an official Reddit cryptocurrency. Regular users of the site could be given “Redditcoins” (or whatever the company chooses to name them) to spend.