Reddit Placates "Volatile Users" With Promise to Share Its New $50 M.
If female celebrities break into a cold sweat over Reddit users, just image how investors feel after throwing down $50 million in the hopes of profiting off the crowd-sourced site. But lead investor Sam Altman and CEO Yishan Wong appear to have come up with a plan to appease "the often volatile Reddit community."
According to Recode, Altman and his cohort plan to distribute 10 percent of the equity they just purchased to Reddit users . . . somehow. Wong, a CEO best known for back-tracking on his promises, added a comment to the funding announcement where he dangled the possibility of a cryptocurrency just for Redditors, adding a caveat so big it had to be capslocked:
"CAVEAT: KEEP IN MIND THAT THIS PLAN COULD TOTALLY FAIL," Wong wrote. "We are thinking about creating a cryptocurrency and making it exchangeable (backed) by those shares of reddit, and then distributing the currency to the community. The investors have explicitly agreed to this in their investment terms."
Altman, who invested personally, is the president of Y Combinator, the startup accelerator that incubated Reddit. Other Reddit investors are a mishmash of Silicon Valley bigwigs (Andreessen Horowitz and Sequoia), as well as a couple of actually famous people (Jared Leto and Snoop Dogg) aiming to be the next Ashton Kutcher. Recode reports:
Though Altman is not providing the majority of the $50 million, he is leading the round and setting its terms. Other investors include Andreessen Horowitz and Sequoia. Other individuals include Peter Thiel, Ron Conway, Paul Buchheit, Jared Leto, Jessica Livingston, Kevin and Julia Hartz, Mariam Naficy, Josh Kushner, Calvin Broadus Jr. aka Snoop Dogg and Wong.
Like other recent Y Combinator initiatives, the Robin Hood stock plan sounds half-baked, but that didn't stop Altman from evangelizing about "the community":
How exactly that's going to be managed hasn't yet been figured out (or, more importantly, approved by bankers and lawyers), but Altman said Reddit will likely be based on "the block chain," aka the public accounting system for bitcoin.
[...] "These community sites, the community has always generated the value and rarely gotten it for themselves," Altman told Re/code.
The logistics don't get any clearer in Altman's post about his investment:
First, it's always bothered me that users create so much of the value of sites like reddit but don't own any of it. So, the Series B Investors are giving 10% of our shares in this round to the people in the reddit community, and I hope we increase community ownership over time. We have some creative thoughts about the mechanics of this, but it'll take us awhile to sort through all the issues. If it works as we hope, it's going to be really cool and hopefully a new way to think about community ownership.
Wong also aligned himself with the community in his blog post. The CEO who raised $50 million is not "rich," he assured users:
An investment like this doesn't mean we're rich or successful. A couple days after we closed the financing, Sam came to our office and handed me a genuine 100 trillion dollar Zimbabwean note, as a reminder to us of the difference between money and value. Money can become worthless very quickly, value is something that is built over time through hard work.
We have been entrusted with capital by patient, long-term investors who support our views on difficult issues. We believe in free speech, self-governing communities, and the power of voting. We find that this freedom yields more good than bad, and we have chosen investors based on this belief.
That bit about freedom of speech is really what both parties are worried about. How can Reddit maintain its laissez-faire stance on questionable content when celebrity leaks or underage photos will now be linked to the top venture capital firms in the Valley (and Jared Leto). What kind of brands would advertise in r/TheFappening?
Before this financial windfall, Reddit bowed down to its users:
After seeing social media sites come and go at the mercy of users who feel they own the place (exhibit A: Reddit's original competitor Digg) Reddit has been largely deferential to its community. It has changed its design very little over the years, and made only modest attempts to bring in money. In very recent memory, the company took a week to formulate a stance on whether to ban forums that were aggressively posting links to a trove of private nude photos of stolen from the iPhones of starlets like Jennifer Lawrence.
It remains to be seen whether cryptocurrency will buy off the all-powerful community. Altman already expressed distaste for the way Reddit handled the photo hack:
"Honestly in that specific case, I disagreed with how they handled it. I thought they were slow and not very clear in their reaction. but I believe their heart is in the right place."
That's a hazy enough statement to keep the crowd sourcing, at least for now.