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One of the more unusual phenomena during the era of low interest rates in the tech industry was the shift in focus from building functional businesses to treating companies primarily as investment opportunities. This trend of prioritizing exits, whether through IPOs or acquisitions, has led to some interesting developments, including the recent actions of Reddit CEO Steve Huffman.
Prior to the Reddit protests, Huffman was already facing some challenges. Investor Fidelity, which led Reddit’s 2021 funding round and valued the company at $10 billion, decreased that valuation by 41%, resulting in significant losses for the company. This raised doubts about Reddit’s ability to go public at a desirable valuation, which was originally planned for a $15 billion valuation at the end of 2021. Unfortunately, due to changes in the IPO market and the Federal Reserve’s decision to increase interest rates, Reddit missed its window of opportunity.
It’s important to understand the investors behind Reddit, as they play a role in shaping the decisions made by Huffman. These investors include Fidelity, Sequoia, Tencent, Coatue, Y Combinator, and Andreessen Horowitz. Just like the tech industry, venture capitalists are also feeling pressure and often pass that pressure on to the startups they invest in.
Huffman is one of Reddit’s co-founders and returned to the company after a user revolt against interim CEO Ellen Pao in 2015. Pao faced backlash for banning certain subreddits and firing a key liaison between Reddit’s moderators and the company. The user protests led to Pao’s resignation, with over 200,000 signatures on an online petition calling for her to step down. In the announcement of Huffman’s return as CEO, co-founder Alexis Ohanian admitted to being responsible for the decisions that led to Pao bearing the brunt of the backlash.
The 2015 revolt highlighted Reddit’s commitment to fostering user-led communities. However, recent events have raised questions about Huffman’s understanding of the importance of community within the platform. While community-led moderation has its advantages in terms of user knowledge and cost-effectiveness, there are limits to its effectiveness, as demonstrated by both the 2015 revolt and the recent protests against API changes. Moderators who are part of a harassment campaign are unlikely to stop it, and unpaid community members may not always align with the company’s objectives.
Huffman’s response to protests and dissent has also been questionable. In the past, he was caught editing comments critical of him and suggested that Pao lacked the expertise to handle such matters. Additionally, his individualist ethos, as evidenced by his preparedness for a collapse of government and societal structures, does not align with the collaborative and cooperative mindset needed during disasters.
Furthermore, Reddit’s handling of recent protests and its crackdown on moderators have raised concerns. Huffman compared the protesting moderators to the “landed gentry,” positioning himself as the king in this metaphor. By emphasizing the power of moderators, Huffman has highlighted a risk factor for potential investors. Additionally, Reddit’s decision to shut down third-party apps has raised questions about the company’s financial situation and its motives for the upcoming IPO.
The layoffs and changes to the API also seem counterintuitive, as they harm Reddit’s ability to nurture its community at a time when it faces competition from Discord, a rising platform for private group chat communities. These actions may appeal to investors looking for cost-cutting measures, but they may not be beneficial for the long-term success of the company.
Overall, Huffman’s recent actions and decisions raise concerns about his understanding of community-building and the direction of Reddit. The challenges and controversies surrounding the company may impact its IPO prospects and investor interest. It remains to be seen how Reddit will address these issues and adapt to the changing landscape of the tech industry.
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Deepak Sen is a tech enthusiast who covers the latest technological innovations, from AI to consumer gadgets. His articles provide readers with a glimpse into the ever-evolving world of technology.
