Social-media company says it expects to secure additional financial commitments from new and existing investors.
Reddit Inc. is securing a roughly 50% boost six months after concluding a funding round that doubled its valuation, owing to money managers looking for investments and its participation in the Wall Street trading frenzy.
On Thursday, Reddit announced that it had secured $410 million from Fidelity Investments Inc., valuing the company at over $10 billion. The company expects to gain more financial commitments from new and existing investors, bringing the total raised to $700 million, according to the company. The company announced in February that it had raised $500 million in late-stage capital at a valuation of $6.5 billion.
As huge money-management firms and others pump massive amounts of investment into Silicon Valley, looking for substantial returns at a time when interest rates are low, bumper financing rounds with big swings in valuation are becoming fairly commonplace for many entrepreneurs. The sports retailer Fanatics Inc. recently stated that its value has tripled in a year to $18 billion. Earlier this year, Clubhouse, a startup audio-chat social network, was valued at $1 billion. According to sources acquainted with the situation, it quadrupled that sum in around three months.
Fidelity, a longtime investor in Reddit who is leading the latest investment round, urged the firm to raise more money, according to Reddit Chief Executive Steve Huffman. He added that Reddit is trying to build on the momentum it garnered after the WallStreetBets forum highlighted the company as individual investors rallied around buying stocks like GameStop Corp. According to Mr. Huffman, the episode attracted millions of new users as well as new advertisers, who account for the majority of the company's revenue.
For the first time, Reddit had $100 million in advertising income in the most recent quarter, nearly tripling the previous year's amount, albeit it remains unprofitable. And its ad revenue figure still makes it a modest participant in an industry dominated by behemoths. Facebook Inc. generated $28.6 billion in ad sales in the most recent quarter, and Google’s parent company, Alphabet Inc., made more than $50 billion from ads in the same period.
Mr. Huffman stated that the additional funds will be used to support Reddit's development into new areas as well as product enhancements such as increased video capabilities and faster website performance. Users can currently share videos on Reddit, but the business wants to expand that function, which companies like TikTok, a short-video app, have shown has broad consumer appeal. Reddit purchased video-sharing software Dubsmash for an undisclosed sum at the end of last year to extend its footprint in the user-generated video.
Mr. Huffman noted that Reddit, based in San Francisco, is still hiring after more than doubling its headcount in the last 18 months.
Mr. Huffman added that the company's recent success in raising funds isn't deterring it from going public in the future. “While it is fashionable for businesses to remain secret for extended periods of time, that is not our goal,” he stated. “There is a lot of work between here and there and a lot of things we need to accomplish to go out successfully.”