Sean Rad, the CEO of Tinder, couldn’t believe all the headlines. Match Group, Tinder’s parent company, had just announced its plan for an IPO, yet many articles made it sound like Tinder itself was going public, rather than Match Group. Some even included a photograph of a beaming Rad. Friends and family immediately started congratulating him by email and text message. “People think Tinder went public and I’m a billionaire,” Rad tells me. “Add it to the long list of shit that’s misunderstood about me.”
The reality is that Match Group, a portfolio of dating companies that includes Match.com and OkCupid, is the majority shareholder of Tinder. It’s true that the popular app is the crown jewel in Match Group’s roster, a fast-growing service that gives it a strong footing in mobile and with millennials. But as Rad insists repeatedly during the time we spent together for our recent profile of him and his company, Tinder’s future is very much still unwritten. Employees, he says, have stock in Tinder, not in Match Group; Tinder itself has its own board and cap table. “[The Match Group IPO] doesn’t really impact us,” Rad explains. “Just like Match Group can IPO out of [parent company] IAC, Tinder can IPO out of Match Group.”
What’s telling about Rad’s description of Tinder’s relationship with Match Group is not only the lengths he goes to characterize Tinder as “very independent,” but also the credit he feels Tinder is owed for Match Group’s success. “There would probably not be [a Match Group] IPO, were it not for Tinder,” he says. “It’s cool that we’ve been able to build something so great, that by association another company can go public.” At the same time, Rad continues, “what it means for us financially is nothing.” He calls Tinder the “stalking horse” of Match Group, and indicates it has a “different plan toward liquidity that’s better than just the Match Group IPO, so we don’t care about it much . . . we have every avenue of liquidity open to us: We can sell the company; we can IPO.”
Rad still refers to Tinder as a “startup.” Rosette Pambakian, Tinder’s VP of communications, tells me, “We are so misunderstood. People are like, ‘Tinder is not a startup. It’s owned by IAC.’ Nobody understands.” Rad compares Tinder’s relationship to IAC, which spun off Match Group but retains a controlling interest in the company, to the traditional relationship between a startup and venture capital firm. “IAC is just like one big VC. They’re a holding company. They have multiple investments. One of the segments of their investments is dating and social, and [they just spun that part off],” Rad says. He likens it to Facebook and Yuri Milner’s investment group, previously called Digital Sky Technologies (or DST), which became a major investor in Mark Zuckerberg’s social network in 2009. “DST owns a huge piece of Facebook, and DST went public,” Rad says. “[It’s a] similar type [of relationship].”
The difference is that Milner’s group owned roughly 5% of Facebook, whereas IAC’s Match Group owns a majority stake in Tinder. Milner was never on the board at Facebook, whereas Tinder’s board includes Greg Blatt, the CEO of Match Group and Tinder’s executive chairman, as well as Sam Yagan, the former Match Group CEO who still serves as a senior executive at the parent company. So when Rad stresses to me that Tinder is a “separate company, a separate org,” I have to remind him that Tinder’s fate and thus Rad’s is still ultimately in Match Group’s hands. It was Tinder’s board of directors, after all, that temporarily ousted Rad from his CEO role once they determined he wasn’t fit to lead the company, and that his haphazard approach was reflecting poorly on IAC and Match Group (read more about this controversial decision in our feature on the company). Though Rad talks up the potential for a Tinder IPO or even a potential acquisition, when pressed, he acknowledges it “depends on what the board chooses . . . they would have a big say.”
When I ask Blatt about this subject, he tells me, “Sean has equity in Tinder. His ability to realize value is through the performance of Tinder . . . that’s the way we incentivize the employees there. There are no plans to spin it out. The way the arrangements work is that they get guaranteed liquidity through a number of mechanisms regardless, but there’s certainly the possibility of doing [spinning Tinder out] if it reached that scale and that sort of level of independence in the same way that Match [has done], meaning Match had an equity system that provided employees liquidity at Match’s valuation over time. There came a point where IAC decided to take Match out on its own, and that day could come for Tinder as well. But it doesn’t need to in order for the people at Tinder to realize their value.”
Blatt and Yagan praise this arrangement during our interviews. Just as IAC helped Match Group, they contend, Match Group helps Tinder by leveraging its reach in the online dating category, as well as its industry expertise and resources. Yagan calls it a “pretty optimum” structure.
But it raises a question: If the arrangement is so optimum, why does Rad keep trying to distance Tinder from Match Group? It’s widely understood he wanted to take the company independent when it was under the yoke of IAC. To Yagan, who cofounded OkCupid and sold it to IAC before becoming absorbed into Match Group, he understands what Rad is going through more than most. Tinder, like OkCupid, is a massive success, but because it is chained to a controlling entity, it’s perceived as more of a subsidiary than a startup. Tinder is arguably a unicorn by some estimates, but it’s not really a unicorn. “Because it was within IAC, there wasn’t these valuations of $6 billion! $8 billion! $30 billion! And a new round of financing every six months and blah blah blah—all the things you’d get with a Snapchat, a Pinterest, or a Facebook,” Yagan explains.
“I think there is something about [Sean] being oh-so-close to it,” he continues. “If you play the lotto, you don’t expect to win. But if you get five out of six numbers, all of a sudden you’re like, ‘Holy Fuck! I almost fucking won the lottery.’ It makes you feel like you had your hands on the ball and you dropped it. There is always going to be that [feeling of], ‘What could have been?’”