Interviews
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Fundraising, Rejections, and Dressing for Napa Valley With Steve Huffman

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By all accounts, Steve Huffman, co-founder and CEO of Reddit, should be enjoying an early retirement. Having navigated the once-obscure website into internet blockbuster in 2006, Steve found himself in the midst of a multimillion-dollar acquisition deal with Condé Nast in the company’s first 12 months. He exited the company in 2009 and got himself a pilot license.

Despite genuine concerns from those closest to him that he was running into a burning building, Steve returned to Reddit in 2015 as its CEO, leading it on an incredible growth trajectory with a promising future in the last three and a half years.

During a recent fireside chat with Atrium, Steve outlined candid tips from his experience running—and re-joining—successful startups throughout the past decade.

 

Tip #1: Raising money doesn’t get easier.

Ask Steve about fundraising and he’ll flat-out tell you he is not good at it, having been rejected by every VC in Silicon Valley at least twice. Despite these self-admitted rejections and a healthy dose of humility, it’s clear that he’s found success in fundraising—his last two rounds at Reddit alone have totaled $550 million.

His biggest piece of advice for founders about fundraising? Don’t expect it to get easier.

His experience, however, has taught him that if you continue to stick with it, you’ll eventually find the right connections. He likens the chemistry needed with the right investors to what you look for when interviewing and hiring your company’s executives—someone who shares your vision.

Steve believes you can tell pretty quickly if the relationship with a potential investor is going to work or not. If the relationship doesn’t seem like it’s going to work with an investor, don’t let them yank you around too much and remember that fundraising is never really easy…well, until it is.

Steve shared that after one particularly brutal and drawn-out series of funding, he lamented his frustrations to Atrium founder and friend Justin Kan over dinner. As a result, Justin recommended that he bypass traditional VCs and try to go straight to LLPs. Brushing the advice off as “yes, sensible, but ‘totally a Justin thing to say,’” Steve was pleasantly surprised a few days later when Justin set up a Saturday morning meeting with an interested individual.

Standing plans in Napa Valley that day meant that Steve had dressed the part “with a sweater draped around my neck and shoes with no socks.” The connection he felt with the investor was immediate, effortless, and mutual. By the time he caught up to his friends a few hours later in Napa, the deal was done.

Bottom line? Your deals are going to look like deals fast. And non-deals, well, they never look like deals—focus on finding the right chemistry.

 

Tip #2: Don’t sell a winner.

It’s never easy to know when is the right time to sell a company. Sometimes you sell too early and sometimes you sell too late. Steve’s done both. At 22 years old, Steve didn’t truly appreciate how special Reddit really was at the time.

In the very beginning, there were four people working at Reddit with Steve effectively being the only full-time employee. He describes the early days as dysfunctional, lacking a real vision for the company, and that the team suffered a bit from “imposter syndrome,” having limped into Y Combinator.

Yet, even though they had no idea what they were doing, they were onto something—the company was growing but they didn’t know why. Feeling like they won the lottery, they sold Reddit to Condé Nast in 2006, and he and his co-founder, Alexis Ohanian, stayed on under contract until 2009. Looking back and knowing what he knows now about the importance of product-market fit, he wouldn’t have sold the company when he did.

His experience at Hipmunk, a company he co-founded to help ease the pains of travel planning, tells a different story. Hipmunk quickly grew into a reputable company with a good product and happy customers. Yet they had to continuously fight hard against its flatline growth.

He compares this to Reddit, where their users were in revolt, there was a revolving door of CEOs, company morale hit rock bottom, and bad press was published daily but, incredibly, the company still continued to grow.

What does Steve see as the difference between the two companies? Product-market fit.

 

If you find yourself saying, ‘This thing is growing, but I don't know why’ -- that’s called product-market fit. Click To Tweet

 

Steve shared that had he understood back then that the product-market fit at Hipmunk would always work against them, he would have sold the company two years in rather than raising more money, which only made an acquisition that much harder and hurt angel investors and employees more in the end.

 

Tip #3: You have to feel your mission in your bones.

After leaving Reddit back in 2009, Steve knew that he wanted to work with Adam Goldstein, an American author and founder of GoldfishSoft, in some sort of capacity. As a travel enthusiast, Adam pitched Steve the idea of founding an easy-to-use, online travel company.

While he wasn’t nearly as enthusiastic about the travel industry as Adam was, Steve ended up agreeing in part because he was genuinely excited to work with him. But also joked that Adam was persuasive – known as the North American debate champion. His wavering enthusiasm aside, he took great pride in building out the product at Hipmunk, but just didn’t wholeheartedly have passion for the company mission—at least not all the way to his bones.

This was in stark contrast to Reddit, where he defied every single odd to run back into a company in disarray. While he left Hipmunk surrounded by a spirit of goodwill and well-wishes, he walked into Reddit to find employees who were reluctant to trust him and a broken culture.

His advice to founders: Wholeheartedly believe in what your business is doing. If you do, all of the difficult times you will go through—bad fundraising rounds, negative press, people quitting—won’t really matter because you can get yourself through it.

But if you don’t believe in your mission—in your bones—it’s just going to be that much harder to rise above.

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Cassie Pallesen is Atrium's Head of Corporate Marketing. Before Atrium, Cassie built and led Anaplan's global content team as well as held marketing roles at Autodesk and Bluewolf (an IBM company). Cassie is a well-rounded marketer with experience in website & content strategy, marketing communications, product marketing, demand generation, and content development.

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