At the Brooklyn headquarters of online marketplace Etsy, which proclaims itself "your place to buy and sell all things handmade," there isn't an Aeron chair in sight. Instead, in keeping with the site's artisanal ethos, nearly everything is made or scavenged by a staff member. The computers are assembled from spare parts; the office half-pipe (for skateboarding) and stage (for bands) are built from salvaged wood. Except for the odd Ikea item, most of the furniture was found on the street.
With its casual offices, user-generated content, and snowballing word of mouth, Etsy fits the mold for a second-wave dot-com success story almost perfectly. Armed with $1 million in funding, the 35-person, two-year-old Etsy boasts more than 300,000 registered members. Some 50,000 are sellers, moving more than $12 million in goods and netting the company just over $1 million.
Etsy is the brainchild of 27-year-old co-founder Rob Kalin, who went to six colleges in five years before graduating from New York University. While working as a designer for getcrafty.com in 2005, he noticed the community site was conspicuously lacking an e-commerce component. Kalin and two friends set about building their own, hoping to create not just a cozier version of eBay (EBAY) for artisans but a company they would want to work for. That means employees are grouped into teams based on functions and everyone gets decent health insurance. Even though Kalin's grandfather, a veteran of IBM (IBM) and General Electric (GE), peppered him with questions about target audiences and market share, Kalin skipped the business plan. "There's so much you can't plan for, so instead of trying to fudge the numbers," he decided, "we'll just launch it and see."
"DON'T BE GREEDY"
Kalin isn't completely winging it. He has learned tons from the dot-commers before him. Although Etsy items are sold, not auctioned, its business model is similar to eBay's: Etsy collects a 20 cents listing fee and a 3.5% commission on each item sold. Etsy also sells slots in a showcase of featured items for $7 a day.
Kalin has stacked Etsy's board with high-profile Web startup veterans Caterina Fake, co-founder of Flickr, and Albert Wenger, former president of del.icio.us, both of which were acquired by Yahoo! (YHOO) Kalin says much of what he has taken away from them boils down to "don't be greedy." His board has advised him not to spend money he doesn't have, not to take in more investment than he needs, and to keep in mind that the Etsy community has high expectations.
So Kalin has turned down offers to sell banner ads. Meanwhile, he stages virtual town hall meetings and is tweaking the site to give sellers more visibility and keep them happy. "I now sell much better on Etsy than I do on eBay," says Kimberly Smith, who started selling hand-printed baby duds on Etsy two years ago. "People go to Etsy looking for something handmade, something unique," she says, while eBay attracts brand-name bargain-hunters.
Kalin chooses site improvements carefully, not wanting to alter Etsy's homegrown feel. A new payment system will allow buyers to purchase from multiple sellers in one transaction. Since Etsy sellers already hail from 84 different countries, adding currency conversion and foreign-language support is in the works for 2008. German publisher Hubert Burda Media has signed on as a partner and investor, and Kalin's team is scouting for offices in Berlin and London.
Kalin also hopes to expand Etsy's offline ventures. Etsy runs workshops open to local crafters and would like to provide support services, such as business advice and small loans. "The big goal is to enable people around the world to make a living making things," Kalin says, and that includes the man himself.
By Kerry Miller