When he co-founded Reddit in 2005, Alexis Ohanian was sleeping on a futon he’d gotten for free and furnishing his office with desks and chairs found on the sidewalks of San Francisco. Less than two years later, he sold the company to Condé Nast for more than $10 million.
Ohanian, 35, has learned a lot from his decision to sell Reddit and his business ventures in the years since, he told MarketWatch in a telephone interview. Ohanian now runs a venture-capital firm called Initialized, which has funded startups including bitcoin wallet Coinbase and grocery-delivery app Instacart.
In July, he announced a partnership with the new Folgers SJM, +2.28% upscale coffee brand 1850. He’ll help oversee an entrepreneurship contest in which the winning idea will get $18,500 in funding and a one-on-one mentoring session with Ohanian.
Last year, Ohanian, who is worth an estimated $9 million, married tennis player Serena Williams, whose net worth, from prizes and sponsorship deals, is reportedly more than $150 million. Together they have a baby daughter, Alexis Olympia, who was born nearly a year ago.
Here he details some of the biggest lessons he’s learned from his business and marriage:
MarketWatch: Your Folgers coffee contest is about funding bold ideas — what are the most important components of a bold idea for you?
Alexis Ohanian: It needs to make you feel a little uncomfortable. It needs to seem a little outlandish, but still plausible. It’s a fine line, but these ideas do have to be bold: If you are hearing about these businesses for the first time, it’s going to, in some way, change your view of the world, because it will challenge the belief of how things should be.
MarketWatch: How do you make funding decisions in this instance and in others? Do you look at diversity? Whether women are on the board?
Ohanian: When we built out the team of partners at Initialized, we wanted to have the best people we knew in the business, but when we looked back on the team we realized more than 40% were women, which is a pretty rare thing in the venture-capital space.
We started from a place of looking for best-in-class operators, and many of them are women, which gives us an advantage as a firm. One of the best things we can do to inoculate ourselves against discrimination and avoid as many blind spots as we can is to have a diverse team.
When we do invest in a firm, we think about how we can coach these founders to make good decisions about the teams they are building.
MarketWatch: What are some of the most important lessons you’ve learned?
Ohanian: Managing your burn — the amount of money you’re spending every month — is one of the most important things you can do. We have built specifically in our software tools for startups a way of tracking it, and alerting us when it’s getting dangerous.
It seems like such an obvious thing — don’t run out of money — but at the same time that’s the No. 1 reason startups fail. They get too ambitious with hiring or marketing or even decorating their headquarters.
That is something we look for, as well: a frugality in founders. It is a much better sign when a founder is taking a reduced salary and not spending lavishly on office furniture. If they are, that is red flag for an early-stage company.
You can get a lot of furniture on Craigslist’s “free” section. The futon I slept on for all of my time of starting Reddit was a free Craigslist pickup, and all our office furniture was from there. A couple of pieces were literally found on the street.
‘You can get a lot of furniture on Craigslist’s “free” section. The futon I slept on for all of my time of starting Reddit was a free Craigslist pickup, and all our office furniture was from there. A couple of pieces were literally found on the street.’
MarketWatch: When were you the most broke? What did you learn from that?
Ohanian: When I was founding Reddit. I was lucky because I worked throughout high school and college and I had a little bit of savings, but I was comfortable living like a broke college student. So as a startup founder with Reddit, we didn’t really pay ourselves any money, but we had enough for food and a nice enough apartment.
It was actually really helpful to have come right out of school because our standards were low enough that, as long as we had internet and a roof and pizza in the fridge, we were fine. As long as we had the bare essentials to get by, we were quite happy.
I think I have gotten soft now.
MarketWatch: Where did you learn about finances? Did your parents teach you how to manage money? (Ohanian was born in Brooklyn to a German-immigrant mother and an Armenian-American father whose parents came to the U.S. as refugees.)
Ohanian: They tried. They did a good job given their own backgrounds.
The most important lesson they taught me was around treating a credit card like a debit card: Pay your full balance every month, and never hold a balance.
I didn’t get a basic course on personal finance until college or later. I didn’t really understand or appreciate the value of compounding interest. It’s a concept I wish I would have learned a lot sooner.
There is definitely a need in this country to have personal finance as part of the curriculum. I went to a good public school in Maryland, and I was pretty upset when I realized what I was missing in terms of personal-finance knowledge, and, meanwhile, I’m taking cursive classes.
‘There is definitely a need in this country to have personal finance as part of the curriculum.’
MarketWatch: You have a daughter now. What will you be sure to teach her about finances and her career?
Ohanian: Only spend the money that you have, and the value of compound interest. I also want her to experience hard work at a good, early age like I did.
I want her to know one of the best investments she can make is in herself, whether that is through education or wanting to start a business, or devoting her time and energy to whatever her passion is.
That is what really helps pay dividends, not just literally but also figuratively. That is an investment that’s going to pay off for the rest of her life.
MarketWatch: You and your wife are obviously both hugely successful. At what point in your relationship did you discuss finances?
Ohanian: Before we got married, we had to discuss it. But it is very church-and-state in terms of separation. I get her opinion on a bunch of projects I do, and she gets mine, but there is a mutual respect and understanding of separation between our personal and financial lives.
We actually are both remarkably aligned financially. We agree the things we want to spend money on are people and experiences. A good example of that would be a quality vacation or a trip.
The other day we went to an amusement park in Cincinnati. Those are the things we are going to care about when we are looking back on a life well-lived.
(The interview transcript was edited for style and space.)
Get a daily roundup of the top reads in personal finance delivered to your inbox. Subscribe to MarketWatch’s free Personal Finance Daily newsletter. Sign up here.