Reddit Inc., the discussion forum known for its “ask me anything” online town halls with celebrities and politicians, was valued at $ 3 billion after a new financing round that brought in Chinese internet giant Tencent Holdings Ltd. TCEHY -0.31% as an investor, according to a person familiar with the deal.
Reddit raised $ 300 million in the latest fundraising and plans to use the cash to turn its freewheeling platform into more of an advertising powerhouse. Tencent accounts for half of the fresh financing for the San Francisco-based company, according to the person familiar with the deal terms.
The investment by Tencent comes at a time when Chinese tech companies’ deepening involvement in U.S. startups is drawing ever more scrutiny, including plans from President Trump to be announced later this week that would limit some Chinese companies from investing in U.S. tech firms.
Also, on the surface, Tencent’s investment appears to make for an odd marriage. Reddit, home to anonymous superfan communities dedicated to videogames, politics, TV shows and wildly diverse hobbies, has gained a reputation as a rowdy platform where the quirky and unpopular are welcome. It is currently banned in China, where the government tightly controls the internet.
A Reddit spokeswoman declined to comment on talks leading up to the deal, including concerns about accepting funds from a Chinese company. A Tencent representative declined to comment.
Tencent, one of China’s most influential companies, is no stranger to U.S. tech investments. It is the biggest shareholder in Snapchat’s parent company and holds a large stake in Epic Games, creator of “Fortnite.”
In an interview with CNBC on Monday, Reddit CEO Steve Huffman noted that Tencent is an investor in several videogame companies. “And videogames are one category that’s really popular on Reddit.”
That hasn’t stopped Reddit users from showing their displeasure, with jabs at Chinese censorship. Some posted pictures of Winnie the Pooh, whose image disappeared from the internet in China after too many comparisons were made to the portly President Xi Jinping.
Reddit’s content policy historically allowed communities with extreme and abusive content to flourish. Since 2015, the company has toughened its approach. It installed an antiharassment policy that banned communities with names like “fatpeoplehate,” and, in 2017, it purged forums frequented by Nazis and white supremacists for violating a new policy that prohibited content that glorifies and incites violence.
The company’s executives have said they want to reshape the site into a more advertiser friendly destination.
Tencent’s investment was previously reported by TechCrunch.
Reddit was started in 2006 and for much of its existence, its executives made the community more of a priority than the business. While the site has 330 million monthly active users, the company remains private. A spokeswoman declined to comment on whether it was profitable.
Reddit launched its first app in 2016, a decade after the company was founded, and only seriously started to attract and retain big advertisers after co-founder Mr. Huffman returned as CEO to right the ship in 2015.
Mr. Huffman told CNBC the new funding round will be used to further advance its advertising ambitions, hoping to take some of the spending away from Facebook Inc. and Alphabet Inc.’s Google, which command most of the online ad market.
Write to Yoree Koh at yoree.koh@wsj.com and Shan Li at shan.li@wsj.com
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