Earlier today AllThingsD’s Peter Kafka offered up a new spin on rumors roiling that Reddit is trying to raise a round of outside funding.
This past Sunday, TechCrunch reported that Reddit is in the process of raising venture capital at a $400 million valuation. Thanks to a banner year that included an AMA from President Obama, 37 billion pageviews and 400 million unique visitors, TechCrunch said Reddit could now command double the valuation it had in early 2011 before its owners Conde Nast spun it out as a standalone operation. Reddit is still fully owned by Advance Publications, the parent company of Conde Nast.
However, Mr. Kafka’s sources say Reddit is raising an angel round from “certain influential investors” at a mere $1 million. According to ATD’s report, Reddit still has $18 million in the bank and “doesn’t need” the money. CEO Yishan Wong’s goal is “buy-in, and input, from Silicon Valley’s elite investors.” Says Mr. Kafka:
And any angel who does put money in is likely more interested in something other than a financial return. If Reddit figures out a scalable business model, it could well be worth much more than $400 million. But it’s also unlikely to be the ginormous home run that a small investor can get if they bet correctly on a bona fide startup, when their (relatively) modest contribution can buy them a real stake.
It’s a good thing investors needn’t be interested in financial return because a source with knowledge of the deal told Betabeat that “angel round means no board seat and no influence, which suits Conde Nast.” The source also said: “The terms are outrageous; any angel investor would get tiny, tiny percentages. So Reddit gets cash without giving up anything at all.”
Based on those terms, the source said, “I would be shocked if an ‘elite’ investor bites with these terms. Besides, this is Conde Nast and Reddit. They can talk with whoever they want. They got an AMA with Obama, for god’s sake.” Rather than access to Valley elite, “It’s about getting money at very, very good terms.”
But while Reddit has the clout and traffic, revenue is still reliant on just self-serve ads and “Reddit Gold” membership. “I suppose it’s bit like investing in a restaurant,” said the source. “The investor gets absolutely nothing in return for his money other than a guaranteed booth and a visit from the celebrity chef when he’s on a date he wants to impress.”