A passion for your users brings good karma: Alexis Ohanian, co-founder of reddit.com

Investors love flexible founders, but imagine founders flexible enough to completely drop their original startup ideas! Meet Alexis Ohanian of Reddit. Alexis told StartupStories the true and inspiring story of how Reddit was, from the very beginning, a labor of love for their users.

Fresh out of college (UVA), Alexis co-founded Reddit along with Steve Huffman, with less than a combined $100K from Y! Combinator and an angel investor, grew to over 70,000 daily visitors and sold to Conde Nast for an undisclosed amount (hinted on the web to be closer to $5 to $20 million) in just 18 months.

Alexis says it’s luck, but admits that he and Steve were a great team. This is a story of how flexibility and great attitude of founders led to success.

How did you get started? How did you raise money?

Steve and I attended UVA together and were friends ever since our first year. Steve was always coming up with clever technological solutions to everyday inconveniences or problems. In our junior year, he mentioned an idea he’d dreamt up while filling his car at a gas station. It was a way to let people order food from their cellphones. I thought it sounded like a great idea for a startup and my parents did, too. They weren’t the most objective, though, so it wasn’t until I proposed it to Prof. Mark White (and he too thought it could work) that I thought we really had something.

Then it was just a matter of convincing Steve not to take a great startup job he had lined up. Steve was a huge fan of Paul Graham, who happened to be giving a talk in Harvard during our spring break called “How to Start a Startup”. So instead of going to a beach, we went to Boston and attended Paul’s talk.

Shortly thereafter, he announced that he was starting Y Combinator — a new type of venture firm — and when we followed up, he suggested that we apply for it.

We did, and were invited to interview with all four partners.

We were rejected.

As we were returning back to Virginia by train, Paul Graham called, explained that they’d had a change of heart, and that they’d invest in us — as long as we had a different idea. We got off at the next station in CT, returned to Boston.

We sat down with Paul and came up with what would become Reddit: a way to help people find out what’s new and interesting online. We were given a check for $12,000 (6K per founder) and told we’d have the summer to use it to build a front page of the web.

How did you define success?

Success for us was basically not failing (how’s that for a self-help book title?). If the site continued to grow, we were succeeding and could keep the dream going a little longer.

What contributed most to your success–Luck or probability? My probability professor would have insisted that it was probability, since luck doesn’t really exist. But luck has so many fewer syllables, so I’ll say it was luck.

I imagine you were looking for something a bit more concrete, so I should also mention that the relationship Steve and I had probably helped. We’d had been friends for years, but had never actually worked together (History and Comp. Sci majors don’t get too many chances for collaboration). We have complementary personalities…a sort of yin and yang thing going for us.

Even when things got intense, we discussed and had differing opinions, but knew that we had a common goal. We’d always had arm-wrestling as a backup method for settling arguments, but fortunately for Steve, it never came to that.

What were some of the most flexible decisions you made? We changed our original idea to what became Reddit. We certainly didn’t expect that. We’d also made plans to move back to Virginia after the summer ended (by “made plans” I mean we’d already signed a lease on an apartment in Charlottesville) but Paul [Graham] berated us for it… told us we’d be doomed if we didn’t live in either Boston or SF. Boston was decidedly closer to Virginia than SF, so we stayed. But we needed a place to live and Chris Slowe had 2 free bedrooms. He had also been a Summer Founder, but now he was back in school, finishing his PhD. It wasn’t long until we were asking him to help us out with reddit.

Paul wanted to give Aaron Swartz, another YC founder, a birthday gift in November. More than anything else, Aaron wanted co-founder so Paul suggested the “merger”. Merger is probably a bit hyperbolic for what actually happened, Aaron basically moved in with us and we made him a co-founder.

What was your first big “Aha!” moment?

When we launched reddit, for the first 2 months, we generated almost all the activity on the site – from the submissions to the voting – because we didn’t have any users at first (after all, what good is a user-driven site without users?)

One day we realized that we could just lurk, that we didn’t have to submit links, that reddit was alive. Reddit had become its own living thing and that was a beautiful thing. It became clear that users appreciated that we were building a site to accommodate them, not get in their way or annoy them.

Likewise, we tried to use every feedback email or blog entry (good or bad) about reddit as a chance to connect in some small way. The Internet can do a remarkable job of dehumanizing us – we can hide behind a username – but we’re all still humans (except for that dog – no one knows he’s a dog on the Internet).

I think most people, especially online, are quick to see through false sincerity. It’s an advantage I think most startups have, since users are much more likely to sympathize with Mary’s personal apology for a server failure than a form letter from Jane at XYZ corp.

How was your relationship with your investors? What was it’s impact on you?

For the most part, YC was very hands off. Early on, our top user happened to be one of the YC investors (his name rhymes with Tall Graham) so we were getting lots of feedback on the site. All in all, they were a great resource for advice.

During the acquisition talks, we made all the decisions, they only asked for an occasional update. The one refrain we heard quite often was from Paul, who reminded us in nearly every conversation: “Deals fall through!” To drive the point home, I printed out a large photo of PG himself with his foreboding caption and hung it in the bathroom.

I think we may pass that on (not unlike an Olympic torch) to our friends from kiko (now working on a new startup that promises to revolutionize the way people use the web).

What type of learning was there along the way?

 Y Combinator organized weekly dinners where they brought in a speaker who spoke informally about a variety of topics. There was a great startup support structure, not to mention a large supply of food with a diverse blend of ingredients our bodies were not used to receiving (read: vegetables).

Remember we lived and worked on a total of $12K in an apartment with hardly any trips outside. When Steve and I did try to get some R&R, we usually went to Azeroth. It was at those dinners that we not only got to socialize with a bunch of bright startup founders, but also meet serial entrepreneurs, lawyers, VCs, and other folks two kids just out of college would have never been able to sit down with. Furthermore, they were quite approachable and a number of dinners went well into the night.

Who helped or inspired you the most along the way?

 I’d never have imagined shaking the hand of the man who built GMail (the one website I visit more often than reddit) but sure enough, I had the chance to meet Paul Buchheit. Needless to say, I was floored.

The most helpful speaker was probably Mark, a partner at Goodwin Procter. I also would never have imagined myself as happy to meet a lawyer, but he really impressed us during his presentation. He seemed to have a soft spot for reddit (we think it was the alien) and when we were looking for counsel during acquisition talks, we knew exactly who to go to.

Did you worry about raising more money? How much did you raise?

We certainly did as the end of summer approached, but once we received the angel funding, our Spartan lifestyle meant it’d last for quite some time. We actually began generating revenue, and by April we had enough to be ‘profitable’ (although not much of a feat considering how cheap we were).

Did you have real revenue? What was your business model?

 At first, we just focused on building the site and the reddit user base. Federated Media (John Battelle’s company) approached us to manage ads on our site, which was far better than the Google ads we’d been running. We’d made the decision to keep the front page ad-free. We hoped our users would appreciate a front page with nothing but content as the first thing they saw.

Then Kourosh Karimkhany, bizdev for Conde Nast, approached us to build a site called lipstick.com, for them. It would be built upon the Reddit engine, but for a very different segment of users – celebrity gossip fiends. We received a setup fee and monthly hosting fees for it and were pleasantly surprised that there really was a business model for us here. If it’d work here, perhaps we could do the same for more companies…

Tell us about how the acquisition with Conde Nast came about?

We got the chance to work with several people from Conde Net in the process of building lipstick and one day talks began to focus on creating a closer relationship. Our biggest concern was what it would mean for Reddit users and for our own team. We liked everyone we met and everything we heard, so talks went from there.

A couple months of lawyers and legalese later, we’d had enough conference calls and email exchanges to get some documents everyone liked. The biggest obstacle was getting all of our lawyers on the phone at the same time.

Would you launch a startup again?

Has Steve got another great idea? Hehe. Sure, but I’m just getting used to have health and dental insurance again. Besides, there’s a lot more we’re planning on doing with reddit…

I’ve got more aliens to draw.

What would you tell an aspiring startup entrepreneur?

First, don’t listen to any advice from a 23 year old.

Second, “Do it!”.

Third, there’s some kinda karma out there. Be good to people — your users in particular — and I think it’ll pay off.

Join the discussion about this StartupStory!

  1. 1 su Nov 30th, 2006 at 12:37 pm

    The key lessons from this article are so different from all the stories of Reddit on the web.

    They are:

    The founders had very great flexible attitude.
    They were very focused on their users.
    They did not care about their business model (not sure I think its a good lesson).
    They had great investors or a great relationship with investors.

  2. 2 HP Dec 5th, 2006 at 6:58 pm

    Really Enjoyed the interview. I liked that Alexis did say that luck is apart of the equation for success. Their experience with Y! Combinator seems vastly different than the approach of most Investors within this industry.

    I would have loved to hear how they would sustain the start-up if the business model did not appear from an outside source. I also would have love to know if/how they are dealing with scaling their business. Did Alexis and Steve do the hiring themselves, did Y! Combinator help them?

    Overall, very good but I’d want some more pointed questions about the process and the feelings of the founders while they were on this journey.

    - HP

  3. 3 Sam_e Dec 6th, 2006 at 10:05 pm

    Nice interview. Alexis deserves the success he’s had with reddit and with the CN acquisition. I’d like to know, where are the ads on the reddit site that were mentioned in the interview?

  4. 4 Prakash Dec 7th, 2006 at 2:20 am

    I really liked the simple, honest and straitforward thoughts of Alexis.

  5. 5 mynameishere Dec 7th, 2006 at 7:43 am

    I also am working on a product that promises to revolutionize the way people use the web. I can’t go into details. (Hint: It utilizes a calendar.)

  6. 6 KH Dec 7th, 2006 at 4:07 pm

    Well done guys - keep providng us with good interviews like this and I’ll be a regular visitor.

    Oh and well done Alexis. The humility and humanity of the reddit team never fails to impress.


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    Well done Alexis. The simlicity of Reddit overwhekmes me.

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  1. 1 » Reddit Case Study: How personality impacts product success - Startup Review Blog Pingback on Apr 29th, 2007 at 4:50 pm

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