Yep. The rising interest rates is an enormous part of it, and it’s not really getting discussed that much. Basically, the 2010s were a period of historically extreme low interest rates. When you can borrow for cheap as you could during the 2010s, you could easily fund growth via borrowed capital. Money was flowing everywhere. Tech companies in particular could get funding from places like Silicon Valley Bank, so profitability was a secondary concern, with growth as the primary concern. No need to be profitable if you can fund your day-to-day operations with cheaply borrowed money.

In the current environment, things are very different. Cost of capital is much higher now, so borrowing to fund the day-to-day isn’t as feasible anymore. Those rising interest rates ultimately led to Silicon Valley Bank’s collapse in March: They held a lot of long term US Treasuries on their balance sheet, so they were forced to show huge unrealized losses with rising interest rates because of mark-to-market accounting. That collapse cut off a huge source of funding for Reddit and other tech companies.

The result is predictable: Reddit needs to turn to profitability, and they have to do it fast. It absolutely sucks for long time users, but they no longer have access to the same funding source that kept the place afloat in the 2010s.

Reddit isn’t unique in this. Other tech companies show a similar pivot to profitability after funding growth with cheap money in the low interest rate environment of the 2010s. Uber is a good example: Borrow money for cheap to fund operations at a loss for a few years, and all of a sudden, you’ve gained huge market share because you’ve undercut the cost that taxis charge. After that money dries up though, you have to raise costs to pivot to profitability. Today, Ubers are often more expensive than the Yellow Cab you may hail from the street, but people are so used to using Uber that they don’t compare prices anymore.