First Time Founders with Ed Elson – The Story of Reddit

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0:35Thank you, brother. Hey, how's it going? Good to see everyone. Thank you all for being here. And thank you to YPO for putting this on. I think we're recording right now. So just so you all know, this is a live podcast recording as we speak. It's really great to be here. I want to thank the Global Entrepreneurship Summit for putting this on. Thank you to the Palace Hotel for making this all possible. I'm just going to bust right into it because I have one hour and I want to get as much as I can out of the man who's about to walk on the stage here and we're going to start with just a little introduction which is something we usually do on this podcast so in 2005 my next guest had a simple idea to create an online bulletin board where anyone could share links ideas and conversations he was 21 years old at the time and within a year he sold his idea to Condé Nast for 10 million What happened over the next two decades defied all expectations.

1:35After leaving for several years, he was brought back to the company, and under his leadership, this once scrappy website transformed into a behemoth, going from$12 million in revenue to$1 billion in revenue. It's now a vast ecosystem of more than 100 ,000 active communities, covering everything from breaking news and niche hobbies, to pop culture and global markets. And now with nearly 400 million weekly active users and more than 22 billion posts and comments today, this is no longer just a website. This is a cornerstone of our digital age. So please join me in welcoming the co-founder and CEO of Reddit, Steve Huffman.

2:22Thanks. All right. All right. So I just got to tell you before we get into this, I'm a huge fan of Reddit these days. And I got into Reddit probably five years ago during the pandemic. I was living in my mom's basement. I was actually a senior in college at the time, and I had nothing to do but go on Google and look at Wikipedia pages and just get interested in very weird, nerdy things. And I found Reddit, and it became almost like an escape for me. It was It was honestly a really big part of my life at the time. And I mention that because I think Reddit is the same for millions of people around the world.

3:02It's a place to socialize, but I think for many, it's also in a lot of ways an escape. So I want to thank you for creating Reddit, and I want to thank you for being here. Thank you. And I just want to thank you for, you know, solidifying the stereotype that our users are all joining us from their mom's basements. Well, I got out of her basement. I'm still a power user. We'll have to start somewhere. I'll take it. And thanks for having me here today, folks. So this is going to be a regular first-time founders episode as usual, but we've also collected some questions for you that we gathered on Reddit.

3:41So I'll be doing a regular interview, but we'll also sprinkle in some of those questions as well. And I want to start at the beginning. The year is 2005. You're a senior at the University of Virginia. You're studying computer science. And you and your roommate, Alexis Ohanian, have this idea not to start an online message platform, but to start a food delivery app, which is strange. So tell us the story of Reddit. How did we get here? So, yeah, this was early 2000s. I had had this idea of people ordering food from their cell phones, which I think would later become a good idea um you know DoorDash and and what have you but back then there were some pretty big limitations on it one is not everybody had cell phones two cell phones didn't really run software um and three restaurants weren't on the internet nevertheless so something we pursued and that led us to Y Combinator and so Y Combinator had kind of during this beginning part of the story became.

4:55YC didn't exist at the beginning. A few weeks later, after we met Paul and the team, YC did exist. We applied with the food idea, but we were ultimately rejected. But Paul and the YC teams, this is Paul Graham and the Y Combinator team, invited us back to basically figure out what else we could work on. They liked us, but not that idea and so that something else would end up becoming reddit and so uh i think it was a good call on on yc i hope one on not doing a food thing and two on on bringing us back it seemed to have worked out for everybody um but i think it goes to show that you know ideas are not necessarily the hardest part in in getting things off the ground i think great teams can bring can do a lot with many ideas and not great teams can ruin the best of ideas.

5:52And it's really hard to tell in the beginning what's a good idea and what's a bad idea. And the food one's a great example because we could argue both sides of it. I don't know if it was a good idea eventually. I don't know if it was a good idea then. I don't know if we would have been able to get that one off the ground then. Yeah, you mentioned Paul there. And for those who don't know, Paul Graham is the founder of Y Combinator, legend in Silicon Valley. And it is so interesting that you went to Paul and you had this idea. He said no, but then he said, but come back and let's do something else.

6:24So what do you think Paul saw in you and how influential was he in starting this company? One part of that story though is before Paul said no, he said, why don't you come pitch the food idea? Because he had given a talk at Harvard called how to start a startup. And so after that talk, we met Paul and pitched him on the food idea, and he really liked it. And then he started Y Combinator, and he invited us to interview, and then he said no. So it was a little bit of a journey there. And so when we had come back to brainstorm new ideas, the start of the conversation, there's kind of two sides to it.

7:04So Paul was a big fan of a website at the time called Delicious. Delicious is no longer around. But back in that era, it was a website for bookmarking. So a website for bookmarking other websites. Delicious was a neat product. It also, among other things, invented the idea of the hashtag as an organizational thing. But the problem with Delicious is you bookmark things that are boring, that you want to come back to later. so it's like things i can't finish reading in one sitting or i want to reference later and so delicious had this um side effect uh or it had to had this page called delicious popular that would show the most commonly things most commonly bookmarked and so it's really interesting dynamic of of kind of interesting links on the internet that were too boring or long to read in one sitting and so paul was like well what if there's something like delicious but the content was good.

8:03That was kind of half the idea for Reddit. And the other half of the idea was from Slashdot. And so I was a big Slashdot user. And Slashdot's still around. You can go to Slashdot.org. The website is a list of links, basically, headlines to tech news. But what's really magical about Slashdot was the community that lived in the discussion about the news. and the news was really just the prompts for conversations. And so it's really these two ideas, this kind of like bookmarking, user-powered dynamic platform with a community that lives in the conversation about these things. And so that really was the genesis of what would turn into Reddit.

8:48And that really still is the core of Reddit today, which is communities of people having conversations about things on the internet. So you start the company, around 12 months go by, things are going well. And I don't think people realize this, but you sell the company. And I would call that an extremely early exit. You stick around for a few years, but take us through your decision to sell. Why did you sell the company so early on? Paul started a company in the bubble called ViaWeb. ViaWeb pioneered e-commerce. He got bought, their company got bought by Yahoo. It became Yahoo Store. And so it was one of the first kind of big e-commerce plays on the internet.

9:28And Paul would write essays talking about startups and evangelizing startups as a path to creating wealth. And so that was kind of the spirit of Paul and the spirit of Y Combinator is you start a company. You know, your advantage is you're young. You can work really hard. You don't have any preconceived notions about what products should or shouldn't exist. and the end of the story is and you sell your company to a bigger company yeah um and so that was just kind of the the prophecy and so in yc we started this thing reddit um and then condé nast also known as advance i'll use those words interchangeably but advance is the technical name of the parent company offered to buy us and so we thought we were just fulfilling the prophecy and when we ultimately you know when the offer came in i i was still 21 i didn't know what uh success looked like the advice i'd give to founders now is never sell a winner but i didn't read it didn't feel like a winner to me i think if we went back and looked at our numbers it would be there'd be signs of that like we were growing and we didn't know why that's a great sign right if you have so much product market fit you don't know why your product is working um but we didn't really know that at the time at the time it felt like we were dysfunctional internally um we didn't really know what to do we didn't really know how to fundraise there's just so much i think ignorance and naivete that like when a company came and offered us real money for this thing we're like we would be really silly not to take it right and i think we would have been silly not to take it.

11:15We didn't know what we were doing yet. And so our time at Advance, Advance is still our largest shareholder. Our time at Advance for the next three years after that acquisition, I think actually gave Reddit and we as individuals time to mature a bit, which in hindsight, I think worked out really well. Yeah. So you stick around for a while, you end up leaving in 2009. And then during those six years, Reddit is growing and growing and growing. And then things start to get a little bit controversial around the company. There are issues with content moderation, issues with censorship. While you're gone, some core members of the team were fired.

11:58The then CEO, Ellen Powell, was under a lot of scrutiny. And then you come back in 2015. Give us a sense of what happened in those six years and tell us the story of returning to the company as CEO. So during that time, so this is basically 2010 to 2015, I had left to start a different company, completely different company called Hipmunk. We were doing travel search. Couldn't be more different. Reddit spun out from advance, which basically meant Reddit became an independent company again. had some cash on its balance sheet, had stock that can pay employees with. It was one of the big challenges I had during the acquisition years was we couldn't recruit with stock.

12:46So we were recruiting against other tech companies, but basically to be an employee without equity. And so that was really difficult. And so they realized that. And so they gave Reddit its own cap table again. Reddit grew, continued to grow. um reddit brought in a couple external ceos and then reddit started to be tested on the content policy side now in the early days so call it i kind of that first reddit era the first five years or so our content policy was we don't take things down um and and this was kind of the founding principle of reddit which was we didn't want to be the gatekeepers right we didn't want to be the deciders of what people can say on the internet.

13:34That was kind of the reason we started Reddit is the alternative was news or even platforms like Slashdot where there were editors. So there were gatekeepers and we're like, we're not the gatekeepers. Now that was a relatively easy position to take because we didn't have much to take down. And so more difficult decisions about which content should be allowed or not they weren't really on our radar um you know most of this stuff was like there's like swear words some edgy content and lots of stuff critical of reddit but the content challenges we'd face later around um you know just kind of call it generally bad behavior um weren't really an issue for us and in that time when i was gone they became it became an issue and the challenge the company faced is and i learned this when i came back to the company in 2015 and i was talking to folks i was like why aren't you doing anything and they're like well we don't know what to do or rather it was like we're afraid if we do anything we're going to break reddit we don't know how reddit works we don't know why reddit works and if we make any change we're afraid we're going to break it right and it was really challenging culturally um because reddit was in the press for all of the wrong reasons so this is like 2015 and the press for all of the wrong reasons as being like a bad player on the internet and it was really demoralizing for the team there's about 70 employees at the time uh they were really demoralized they wouldn't wear their swag recruiting was really tough we would actually call people and they would laugh at us sometimes or get offended like how dare you suggest that i'd work at reddit um and and i remember asking the employees at the time it's like if this is so difficult and you're so unhappy why are you here yeah and they they'd say well because i love reddit and i know reddit's really special um and you know reddit's played a really important role in my life some of them would say i met my spouse who by the way also works here on reddit um and And I would say, well, that's why I'm here too.

15:44Because we knew it was really special. And though we were in the press for all of the wrong reasons, it was still a minority of the content on Reddit, but it happened to be the stuff that was on the front page and getting picked up on. And it was like, you know, the other 99 % of Reddit was really amazing. I think really showing off the best of people and the best of humanity. and so well i said look it's it's not uh if we change we'll die it's it's if we don't change we will die by the way we're dying like that's why i'm here this thing is dying and it would be a real shame if it died yes so we need to make some changes and so that's when we created our content policy content policy was basically non-existent created the content policy wrote the first version of the rules created the safety team started enforcing those things and it was a process um that we had to go through publicly and with the community um of of drawing the line figuring out where the line is figuring out how to articulate it and look it's a journey we're still on um but i think it's it's a it's a i think us being able to navigate that um i think in a very human, authentic way has allowed Reddit to grow into what it is today.

17:03Yeah. I mean, that was 10 years ago. It was doing 12 million in revenue. Fast forward to today, a billion dollars in revenue, sitting at around a$20 billion market cap. Today, you just IPO'd. We'll get to that. And we'll get to the content moderation as well, which is important. But if you had to give us a few of the main changes that you made in this past decade, When you came in to today, what would you say are the biggest changes that you made that had the biggest positive effect on the company? There are a lot. The big ones, I think, are relevant to any company. Maybe all of these are relevant to any company.

17:43The biggest one is we have to use some common sense. And so this is back to the story I was just telling, which is it's not change and die. It's change or die. Right. And asking the question of what is this platform for? What experiences do we want people to have on it? And what do we need to do to get to the best version of ourselves? And you have to be willing, I think, to throw out things that you once believed. And you have to be willing to evolve and grow and look at the world through the lens of reality, not the not the lens that we maybe had when we started the company you know whenever that was uh 10 years prior and that's still something i tell the company is that you have to have you have to have common sense you have to use good judgment and you have to think about like is this product good is this a place people want to be what is the difference between where we are and where we want to be and you have to be willing to change things to get there um that's the biggest one it's just common sense and being practical um another big change for reddit was we weren't running as a business um we were really idealistic and i think in many ways the idealism has been very good but we're also um idealistic about not being a business which is not a great way to run a sustainable business and so we had to figure out okay what is our business model ended up being ads and how are we going to do this in a way that fits with, you know, what we want this platform to be, fits with our values and so forth.

19:23And then there was some kind of similar minded things, which is like the company just wasn't, they were so afraid to make changes and to ship. And that wrapped up in some of that idealism was also like not working very hard, you know, and it's just like, look, we have to work really, really hard. We're in a competitive space. What we do is really important. We want to be successful. I think what Reddit provides people, the sense of community and belonging is really important. And if we don't work really hard and work really smart and make this thing successful, both from a user's point of view and business point of view, then we don't get to do this.

20:00And we'll never achieve our mission. And all of these high-minded things we love about Reddit, the way it enriches people's lives and provides people a glimpse of into humanity you wouldn't otherwise see, and now it's just as a knowledge source, they won't exist if we don't build the foundation. Do you think this is still a problem today in tech? I say that because I kind of think it might be where tech companies are too idealistic. They don't think of themselves as businesses. They think their mission is something larger than that. And it detracts from the ability to grow as a company because people are too interested in the idealism versus essentially the revenue in the bottom line.

20:41Is that something that you notice in Silicon Valley today still? There are shades of that. I think there's nothing wrong. And I don't think they're really in conflict of having a big mission. For us, it's to empower communities and make their knowledge accessible to everyone. There's nothing wrong with having a big, inspiring mission. Not only nothing wrong, it's, in my opinion, required. Right. That doesn't come at the expense of building a business. Building a business is required to achieve the mission. To do anything at world scale, you need world scale resources. And so you can't fundraise your way to doing something world scale indefinitely.

21:22Right. Like, you know, maybe there's some AI companies proving to the contrary in the short term. But at some point, you have to be self-sustaining. Yes. The other thing that I've seen, though, in the Bay Area broadly is this. It's almost an entitlement of, you know, I work at these companies, but I don't have to work very hard. And I'm here for myself.

21:52and almost sometimes taking, I think, taking ideas from other successful companies and perverting them. So here's one that I used to see a lot is Apple had this philosophy of like, it's done when it's done, right? Externally, I don't know about internally. I've never worked at Apple. Externally, they wouldn't have deadlines. designs that would build these beautiful artisanal, you know, best in the world products and ship them when they're ready. Great. Right. And they had hit after hit, after hit, after hit. But then I would hear this from engineers who are like, I'm like, when is this going to be done?

22:34And they'll say, well, it'll be done when it's ready. Okay. But like, when is it going to be done? Well, it'll be done when it's ready. But then the version I get isn't this artisanal world-class product it's like late and shitty um and i'm so i'm like you're not apple like i don't know what apple's doing over there but we're not apple you're not apple i'm not apple like so um and so i remember having versions of that you know that conversation um and i did this as an engineer too i was like well don't rush me i'm the artist you know it'll be done when it's done now it's more like okay yeah what can we do in a week exactly let's get this thing get this thing rolling and so that's part of honestly i think not just the company's maturation but but my maturation along with it and our team's maturation, you know, over that story as well.

23:17But I've just seen so many startups with that mentality over the years. We'll be right back.

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24:08We're back with First Time Founders. Let's talk about the IPO. So Reddit went public in March of last year. The issuance price was$34 a share. It's now sitting at around$100 a share. So it's been a pretty good year for you. It was this morning. It was this morning. Things are changing. Last I checked, you're at around$100. What have been some of the main learnings about going public? What are the biggest differences between running a private company versus now today running a public company? The biggest differences are really obvious. We have a public share price. We have certain requirements that we have to live up to in terms of disclosures and transparency and so forth.

25:01And we have now a massive shareholder base versus having just a handful of private institutional investors. Now, because of all of those requirements, we are a better business for sure. I think the public company quarterly rhythm of saying what you're going to do, doing it, hitting your numbers, closing the quarter, doing the audit, no fuck ups, doing the board meeting, the earnings call. And then for us, we do some extra stuff. We basically do a whole other earning cycle with our user base. that rhythm and talking to our investors and talking to our retail investors our user investors has without a doubt made us a substantially better company it just raises the bar and i think we're we make better decisions now we communicate uh you know we articulate our strategy better we work harder and i don't know whether it's the sense of duty to our shareholders to our user shareholders the fear of failure the desire to succeed it's actually all of these things um but they've all i think created an environment where we're doing the best work that we've done and then as i've said almost every day for the last 10 years since i returned to reddit we can be so much better we can be so much better and i think we have a duty to our users to our employees to our shareholders to be as good as we can be yeah um and so yeah there are there are aspects of it that can be more challenging you know like turbulent market times like today um for those who are listening on the podcast uh on the audio the tariffs just went into effect today's liberation day where we're liberating Americans from their wealth.

27:09But, you know, but honestly, I'd rather have the up-to-date mark than when we're a private company, you don't really know your valuation and you have no liquidity and you can't use it. So I think, yes, there's some burdens that come along with it, but I think the environment and the requirements and the high standards have been really good for us. You mentioned you do this second earnings call. I find this so interesting. I'm obsessed with this. You have this very strange approach to investor relations, which I love. You do your regular earnings call, but then after the regular earnings call, you go on to Reddit and you do a second earnings call, which is basically an AMA, like an Ask Me Anything.

27:57and you'll take questions from all the users of Reddit and they'll ask you everything about the company, which to me is the way that we should be doing investor relations today. I find the regular earnings call is boring. It's uninteresting. I don't care. The analyst questions are uninteresting to me. I think what you're doing is engaging with the user base in a very different way. Why did you decide to do that? And just take us through your approach to investor relations more generally. Let me just zoom out for a second and talk about Reddit. Reddit is a user-powered platform. Our users have created everything that's interesting about Reddit.

28:33We technically, we built a very simple platform for creating communities, submitting posts, and ranking those posts through voting. And having conversations in the form of comments. what our users have done is created you know thousands of communities for every topic imaginable whatever you're into whatever you're going through and i think it's truly special it's the most human place on the internet and our users feel rightly so a deep sense of ownership over what they've created in Reddit. Their communities are their home online and sometimes much more than that. And so I wanted that sense of ownership to be actual ownership.

29:24And so one of the reasons we went public is I thought being public actually fits the spirit of Reddit. Transparency and public ownership. Those are really important concepts to Reddit. And so we wanted our users to be or have the opportunity to be owners, shareholders. So throughout the entire IPO process, from including our user base in the IPO, as in we made it accessible to every user of the platform to buy Reddit stock at the IPO price. Not the first trade price, but the price that we sold stock to, to the bankers and professional investors, We also sold to our users. So that means every user who took advantage of that got to enjoy the pop, which is not usually the case in an IPO.

30:20Usually retail comes in after the pop, which is why the pop feels so unfair. So we said we want to bring them in at the pop, and we want to give them as much information as we can the same way we would to the professional investors so that they can make smart decisions there or make the best decisions for themselves. So we did that in the IPO process and we continue to do it every quarter now. So we do our earnings. We do our investor callbacks. And then we go onto the platform and we solicit questions from the community every earnings. And then we answer as many of those questions as we can. So I, our CFO Drew, and our COO Jen, we try to do it in one take.

31:03We'll do a 30-minute to an hour one take. We'll just rip through as many user questions as we can and giving them the most fulsome answer that we can their questions I do think yes are a little more interesting than what we get on the earnings calls I think both are valuable though. So you get a lot of the kind of technical quarter to quarter You know, what's your revenue? What's your traffic? What's the next quarter gonna look like calls on the earnings calls and then from our users? So like why'd you fuck up this feature and like what are you doing next and like blah blah blah? It's like super interesting stuff.

31:36And I really enjoy doing it. I love talking about Reddit. And we're seeing traction in that community pick up. So we've been doing it a year. And we'll just keep doing that. I think it's the right thing to do. And it's a lot of fun. We had a listener question about the subject from user Occam's Racer. They say, what lessons did you learn from including Reddit members in the IPO? And would you do it again? Sounds like the answer is yes. Easy answer is would we do it again? Yes. My only regret is I wanted to get more users in the stock. And one of the parts of the IPO process, and I don't know the right way to fix this.

32:20I'll just tell you our experience. was there's like one thing you can't say in an IPO process as a part of management of a company is you can't sell the stock. You can't be out there pitching. And so our only communication with the user base was basically through our prospectus, which is like a 200-page document describing everything there is about Reddit.

32:43But I wish there was a way for us to have communicated more on their level of like why we think this is important, why they should be in the stock, why we think this is an awesome opportunity to invest at the IPO. Even explaining the dynamics of like how the pricing works and how the pop works. You know, you can't do that just legally, but I wish we could have done more because I think a lot of people, I think a lot more users would have invested and would have done very well if we could have been more successful in that. And you're very limited in what you can say from my communications from comms.

33:23Like you really can't talk to the press during that time as either. And so you're kind of at the mercy of what like the press or investor press thinks of you. And they were really hard on us, right? They were framing Reddit as a terrible business. And so it scared a lot of people out of participating. And that was just a bummer because we knew the business was doing great. We tried to make that as clear as we could in the prospectus. We knew we were going to price it low because we wanted the price to go up, which happened. but you definitely can't say that. So it's just like, I have some sadness around that.