Hello folks 👋,

First of all, I would like to welcome the 3,789 new members to our little family 👨🏽‍🍼 since our last update (about a month back). First1000 is now over 18,000 members strong 💃.

Today, I'm teaming up with Jason Yoong (Head of Voice of Customer Voice Program @ Amazon and author of Curious Expeditions ) to tackle the Reddit Case Study.

Reddit's history is rich; it is both the first YC company to launch and the first significant acquisition for a YC company. As I am writing this, I realized this is the 10th case study we do on a company that started in the dorm room (we previously covered Snapchat, Tinder, Stitch Fix, Doordash, DoNotPay, Morning Brew, Snackpass, Superpowered, Stripe).

What is interesting about this one, unlike all the other student-founded companies we covered, Reddit did not piggyback off the concentrated social circles on university campuses for their launch…for how they acquired their first customer and more….let’s jump right in

The founding story

In 2003, University of Virginia gaming roomies Alexis Ohanian (History Major) and Steve Huffman (CS major) were starstruck with the entrepreneurial dream. Their make-the-world-a-better-place idea at the time was a food-ordering app named mmm😋(MyMobileMenu).

Alexis and Steve spent a year doing "market research," creating databases of restaurants in Virginia, traveling to entrepreneurship events all over the world, registering a company, opening a bank account...basically everything they could do except actually launching the thing.

During their senior year, Steve's girlfriend told him that Paul Graham(PG) was coming to Boston to give a talk about startups during their spring break.

Steve knew PG through his book On Lisp, but Alexis had no clue who Paul Graham was. Steve decided it would be worth their time to travel all the way to Boston to get his book signed and maybe learn a thing or two about how to get mmm off the ground. They packed up, traveled all the way to Boston and after Paul was done with his talk..they approached him with a Hail-Mary

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 - Alexis Ohanian recounting the founding story

Getting into YC 

This coffee chat would change the lives of Alexis and Steve and make them millionaires in their early twenties. They spent the time pitching mmm(not to be confused with mmhmm) and how they were going to make waiting in line a thing of the past. PG got excited. Two hours into their conversation, Paul invited them to interview for the new startup incubator's first-ever batch he was building called YCombinator. 

The actual pitch went well, but did not gain enough of a traction with the investors to secure them a spot in the first-ever YC batch.

Then, out of nowhere, a day after their rejection and on their way back to Virginia...Paul called up the young founders to reverse his decision.

"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." - Alexis Ohanian

Fun Fact: Alexis drew the first Snoo (Reddit's mascot) during his senior year in college (University of Virginia), even before the company's idea. He used Illustrator and the touchpad on his laptop to draw Snoo.

The launch that the founders did not know about.

After spending a year researching their food delivery concept, YC and PG gave the Reddit team about 2 weeks to launch "the homepage of the internet." 

To take a step back, at the time, this was not an entirely green field; the competition was steep. Digg (which had a similar ambition) announced a "large" series A of $2.8m (yup, that was considered "large" back then) just as Steve and Alexis were getting started on Reddit. To add salt to injury, Digg was founded by a minor tech celebrity Kevin Rose. The deadline and pressure from YC stemmed from this competitive pressure and perhaps arguably the fact that they wanted to have some demonstrable wins from their first ever batch.

At the end of the two weeks, Paul sent the cofounders a scathing email saying

You guys hadn't launched yet because you are incompetent in which case you are hosed or you re just worried about being perfect in which case you are still hosed because you would still need to launch it anyway and need to deal with the fact that it is not perfect - Alexis Recaps in a youtube interview

Steve took the email personally and replied saying he had managed to get the fundamentals to work... and just a few weeks after, PG forced their hand to launch when he referenced Reddit in his famous What I did this summer essay, where he unleashed YC into the world.

Just like that, Reddit was launched (without the founders knowledge or blessing), traffic was spiking …but Steve as you can imagine….was not too happy about how it all went down.

I didn't know he was going to do that," Steve says. "The Slashdot comments were panning Reddit. This one guy wrote a blog post about how sh*tty Reddit was. It was a frustrating day.

With that unplanned launch, just a day in, Reddit got over their first 1000 user mark.

Deep Dive 🧐: Launching before you're ready.

In the Silicon Valley gospel, Reed Hoffman pinned the "If You're Not Embarrassed By The First Version Of Your Product, You've Launched Too Late." But taking every one-size-fits-all startup advice to heart can be dangerous...look no further than Reddit.

Reddit launching a semi-baked product meant that the founders would spend the following months in disarray. They got hammered by the tech bloggers circle( drawing unfavorable comparisons to Digg). They had no fundamental mechanics to retain or engage that first cohort of users. All of which translated into Reddit losing every customer they gained from the launch. They went from 0 customers to 1000+ back to 0 in 48 hours.

Launching too early might work well when you are testing out a new consumer behavior (as with Airbnb), a new business model(as with Spotify), or where first to market would be a massive competitive advantage to your business (as with Linkedin). In many other cases, specifically when entering a crowded/established space with already established consumer habits...the bar of expectations your initial product needs to meet is high.

For instance, if you are building a new Fitness app or a competitor to a startup that had more firepower (i.e. 💰), a more established team, and a famous founder (as was the case with Reddit)...take your time building the right product, with the right experience for customers, one that can outshine your competition 😁. Sometimes, the right thing to make is an MVP you're proud of, not embarrassed!

The disappointing road to 2k.

Q: You know what's worse than a launch you, the founders, did not know about?

A: What comes next.

With no plan in mind on how to acquire users, a barely functioning website that requires powerful network effects, and a competitor breathing down your neck, the next few months were rough...to say the least. 

The best mechanic the founders could come up with- to Bruteforce Reddit to the critical mass- was to create fake users…..lots and lots of fake users.

Every day, Alexis and Ohanian would use the admin view they created on the website, allowing them to quickly attach a new fake user to any new post they create. They posted dozens and dozens of new links everyday to make the website seem more legit than it was. 

On a superficial level, the hundreds of fake users lent Reddit credibility that they needed, but on a deeper level, it did two critical things:

1- It set the tone for the website. In many instances of building a company, looking for the unintended use cases of your product can be a powerful signal for future feature and product development. But on a pseudonymous community-first website, you can see how that can be problematic. Having the founder DNA firmly embedded throughout the early history of posts set the culture, the unhidden rules, and the expectation of what Reddit is very clearly and powerfully. 

Showing new users how they ought to use the platform is arguably a lot more effective than telling them through FAQs, guidelines, tutorials..etc. (who reads those anyway 🤷‍♂️)

2- Made people feel they were part of something real. With hundreds of (fake) users each having a distinct digital presence, user #003 would feel they were part of something so much bigger than they were; no one wants to be a part of a ghost town, but some, I would suspect, would love to be a part of a vibrant emerging community on the internet. 

Fun Fact: Some of these suspected fake users are  rabble, Meegan & lampshade

Deep Dive 🧐: Establishing Trust

One important aspect here that we barely touched upon is Trust. Trust is a critical ingredient in the success of any company...big or small.   

But the way we think of Trust is frequently flawed; when we think of Trust, we often think about how we can establish Trust, yet what we fail to realize is that we are wired to be trusting as human beings skepticism by nature.

Clinical psychologist Doris Brothers succinctly put it, "Trust rarely occupies the foreground of conscious awareness. We are no more likely to ask ourselves how trusting we are at any given moment than to inquire if gravity is still keeping the planets in orbit."  

Re-building Trust is a more appropriate phenomenon for what we see many emerging companies do. Users come in with a default trusting instinct. In many ways, those companies quickly erode that Trust by things like slow loading time, aggressive marketing copy, opaque pricing, and asking for private information such as emails, phone numbers, social security numbers..etc. and then attempt to rebuild this eroded Trust via social-proof, case studies..etc 

What Reddit did, in the early days, was to work exceptionally diligently not to lose that initial user trust. They did that by doing two things:

- Having no censorship. Reddit was an actual public square where no arbiter of truth can control what can or can not be posted on the website (obviously, they had to walk back on that in the years to come, and user-moderation became a heavy part of how the company operates). 
- Not collecting any identifiable information for new users. No emails, no phone numbers, IP address..etc. If you opt-in to create a Reddit account, then all you needed was a username and password. That's it. 

This small yet meaningful effort in not losing that initial Trust combined with meeting customer expectations of being a "homepage of the internet" (through these fake, highly curated posts) gave Reddit an earnest shot of building something truly spectacular.

This is it for today,

See you next Sunday 😉,