One of the defining ironies of the social networking IPOs over the last decade is that the financial returns have been concentrated among so few when the value has been created by so many.
But current Reddit CEO Yishan Wong wants to change that.
When Wong served as an early director at Facebook for five years, crypto-currencies were around, but they weren’t as widely accepted or understood as they are today. He and Y Combinator head Sam Altman, who just personally led a $50 million round in the company announced today, want to use them as a tool to distribute shares in the company back to the millions of Reddit users, or Redditors, that log in every day. They’ve set aside 10 percent of the round announced today for that purpose.
“Everybody who has ever run the company has always wanted to give some ownership back to the community somehow,” Wong said.
He went on, “We have a crazy plan and what we’re going to do is create a crypto-currency that is backed by those shares. Then we’re going to distribute the currency to the community through some reasonably fair way that reflects the contributions of community. That is one of the more complex subproblems we have to figure out.”
Distributing crypto-currency backed shares will not be solely tied to Reddit karma, or the reputation scoring system that measures how Redditors contribute back to the community.
“You can game ‘karma’ and we don’t actually want to create an incentive for that,” he said. “That’s why there’s no financial aspect tied to karma and that’s why it’s a crypto-currency kind of thing.”
He also added that Dogecoin was not specifically an inspiration. The Shiba Inu-inspired crypto-currency was originally popularized on certain subreddit forums and has been used to tip contributors.
“The fact is that there are a lot of crypto-currencies. They’re viable as a thing as we have a technology to create a crypto-currency that is exchangeable for shares of Reddit,” he said.
Wong couldn’t share too many details about how the process will work out because they haven’t defined every aspect about it. The company’s new $50 million Series B round explicitly asks that 10 percent of the shares go back to the community. Altman is investing in the company through his fund Hydrazine Capital. Other participants include Sequoia Capital, Andreessen Horowitz, Peter Thiel, Ron Conway, Paul Buchheit, Jared Leto, Jessica Livingston, Kevin and Julia Hartz, Mariam Naficy, Josh Kushner, Calvin Broadus Jr. or Snoop Lion.
“I’m prepared for the inevitable complexities,” he said. “We’ll try and do this in the best way that we can, but I’m familiar with the fact that people will say it’s unfair and there will be lots of acrimony.”
He said he and Altman talked through the plan, and could not find anything illegal about it.
“It’s very complex and no one has ever done this before, but we believe it aligns with a lot of the things that Reddit stands for,” Wong said.