Reddit, created by Steve Huffman and Alexis Ohanian, was one of the first start-ups out of the Y Combinator program to be acquired, making Ohanian a 23-year-old multimillionaire. Here's how he did it.
In 2005, Alexis Ohanian and Steve Huffman co-founded Reddit, one of the first start-ups launched from the Y Combinator program. A year later, the social-news site was acquired by Condé Nast—and Ohanian was a 23-year-old multimillionaire. Others might have kicked back, but not Ohanian: Over the past five years, he has launched a social enterprise (Breadpig), helped found a travel-search site (Hipmunk), and founded an investment firm (Das Kapital Capital) that has stakes in 25 start-ups. Meantime, he has also proved a savvy political activist, taking the lead in organizing opposition to the Stop Online Piracy Act and the Protect Intellectual Property Act, the recent controversial efforts by Congress to regulate content on the Internet. He told his story to Christine Lagorio.
I went to high school in Ellicott City, Maryland, and I felt pretty ambivalent about the whole thing. It just took time away from my doing things on the Internet—like creating clans in Quake II or starting a Web design nonprofit. In school, I was just a kid. Online, I had authority. My parents were cool with it, although I guess they didn't know I was e-mailing total strangers.
I was terrified that no one played video games in college. But when I arrived at my dorm at the University of Virginia, Steve [Huffman, Reddit co-founder] was playing Gran Turismo 2, and I was like, "Hey, what's up?" We lived together all four years of college, then almost five years after.
My junior year, I went to an LSAT-prep course. I flipped over my test and thought, You bastards. I walked out and went to Waffle House. That's where I had what I call The Waffle House Epiphany: I didn't want to be a lawyer. I wanted to make a dent in the universe.
That summer, I went to Singapore for a "technopreneurship" summit. I pitched this business Steve had dreamed up—MyMobileMenu, which was mobile food ordering. When I got home, I opened a bank account, filed the business, and spent a year researching the competition. I was talking to business owners in Charlottesville, Virginia—we thought we'd begin locally—when I got an e-mail from Steve saying that Paul Graham was speaking up in Boston during our spring break.
I didn't know who Paul Graham was, but after the talk I said, "Hey, Dr. Graham," and told him it would be worth the cost of buying him a drink if he'd listen to us talk about our start-up. He said, "You came all the way up from Virginia? Sure." He ended up inviting us to an interview for Y Combinator, which no one had heard of at the time. The night of the interview, Paul called me and said, "I'm sorry, we're not accepting you." That sucked. Really sucked. So we got drunk. Really drunk.
The next morning, on the train back to Virginia, hung over, somewhere in the middle of Connecticut, I get a call from Paul. He says, "I'm sorry, we made a mistake. We don't like your idea, but we like you guys." We got off the train, and I was able to sweet-talk the Amtrak lady into not charging us to turn around. In our conversation, Paul said, "You guys need to build the front page of the Internet." That was all Paul, and that became Reddit.
We built Reddit in three weeks. It was just Web links and text submitted by users, with Interesting or Uninteresting buttons that you could click on underneath. Simple: That's all it was. After a contentious debate, we added Comments. We knew our business was in our user base, that that was the most important part.
Just a month into making Reddit, I got a phone call. It was the mother of my then-girlfriend, in tears, saying, "There's been an accident." My girlfriend had fallen from a fifth-floor balcony in Germany and was in a coma. (She got out of the hospital a few months later.) Then I got a phone call from my dad, saying, "We are at the hospital—your mom had a seizure, and doctors discovered a brain tumor." It was terminal brain cancer. Waking up every morning with a company is a lot of pressure. But when you're aware of what other people are waking up with, it's a whole lot easier.
The acquisition by Condé Nast basically started with a Halloween party, where we met a reporter who introduced me to a freelancer for Wired who told her boss about us. That editor's husband was the biz-dev guy at Condé Nast. He worked on a licensing deal with us, and everything worked great. So we started talking money. Founders are supposed to be not at all interested in selling. But there is a price at which a founder can't help being interested.
Paul was thrilled. We were one of the first start-ups to launch in Y Combinator, and now we were the first significant acquisition. People ask how much it was for, but I haven't even told my girlfriend. I tell her, "You can Google it, and you'll find it was between $10 million and $20 million."
We had been working on Reddit for just 16 months. I was like, "This is absurd." My mom, who has since passed away, was really sick then. To be able to call her the morning after the money was in the bank and tell her my work was not in vain—and, moreover, that her support was not in vain—meant the world to me.
"I want to stay hungry. I really believe my resources are best used to help projects that make the world suck less."
I've tithed since the day we sold Reddit, because I believe wealth is a means to an end, and wealth has never made me happy, only comfortable. And I want to stay hungry. I really believe my resources are best used to help projects that make the world suck less.
I left Reddit three years after the acquisition. I peaced out for a few months to do a Kiva fellowship in Armenia. I'd always been impressed with what Paul Newman had done with Newman's Own—he's really the OG of social enterprise. So, in that model of selling things and giving extra profits to charities, like Newman's Own, Breadpig was born. Today you can buy, say, a geek comic book, and that helps fund the Khan Academy or Donors Choose.
Last year, the Stop Online Piracy Act was bubbling up on Reddit. I started hearing people around the Internet saying, "Holy shit. This could actually pass." The bill was very clearly written by lobbyists, not technologists, and would have made starting a site like Reddit impossible. It was like a loaded gun pointed at every user-generated website.
We took a trip to D.C. We went around to senators and representatives and told them our stories. I was invited on MSNBC, then it was other TV shows for two days straight. I was called to testify before Congress. This was a watershed moment for the Net, and I was getting messages from people telling me to dress better—specifically, in a blue suit and a red tie. I stole a red tie from my dad, but I didn't end up testifying. I didn't need to: SOPA was so thoroughly thumped that the House committee didn't meet. At a time when all the talk is jobs, jobs, jobs, no representative wants to be the one who throttles innovation.
Can I make more of an impact inside or outside of politics? I think outside. Like, when I see business models disrupted from the outside, I am delighted. I see progress—progress! As an investor, I can be helpful there. The best part of being an angel investor is seeing these kids coming up with companies that get way more traffic than Reddit had when we sold it. I think, Are you kidding me? They're just kids, and they've done so much.
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