The popular online forum recently conducted a round of Series B financing and was able to raise US $50 million on a US $500 million valuation. This single round was one of the largest in history and was led by people like Sam Altman, CEO of Y Combinator. Altman led the group and was joined by Andreesen Horowitz of Sequoia Capital, Peter Thiel, Ron Conway, Snoop Dog, and Reddit CEO Yishan Wong.
The bigger news for the cryptoworld however, is that the company wants to give something back to its users and supporters according to the company’s blog post. In this spirit, they plan to take a portion of the funds raised and redistribute it out to these groups. While most of the funding will go to staff expansion and new product development, community management and better moderation tools, at least 10% will be redirected to investors and community members. Interestingly enough, Reddit was formed in 2004 by Alexis Ohanian and Steve Huffman, with Y Combinator.
Reddit CEO Wong said on the blog:
“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.
“Nothing like this has ever been done before. Basically we have to nail down how to do each step correctly (it is technically, legally, and financially complex), though in our brief consultation with an ex-SEC lawyer, he stated he could find nothing illegal about this plan. Nevertheless, there is something like 30 different things we have to pull off to make this work, so we’re going to try.
“(Also, I know this totally contradicts what I said over here but that was before Sam proposed this plan to me, and the idea of being able to distribute ownership of reddit back to the community – a long-held dream of many of us, frankly – is important enough to try and do this)
Again, we want to emphasize that this plan is in its earliest stages right now and could totally fail (if it does, we will find another way to get the shares to the community somehow), but we are going to try it because… well, because we are Reddit and we do these kinds of things.”
This is certainly an innovative way to sell shares in a company but then, Reddit has always been cutting edge. Presumably, each share will be divided into smaller pieces with each piece being equivalent to a “Redditcoin” and each member will receive a share based on their Reddit contributions.
But Reddit could not have pulled this off without cooperation from its investors, who will be agreeing to allocate a portion of their profits to the idea. When asked about this Sam Altman said:
“I’m willing to be very patient. I don’t have any particular timeframe in mind. I believe that the community is very valuable and that the value will continue to increase. Up to the company if they want to share cash flow details, but they run the company efficiently.”
Once the equity is divided up, the shares can be retained or spent as Redditcoins. While the project is still in its earlier phases it certainly looks positive and we may see other companies that are not necessarily connected with Bitcoin following the same plan.