Here's Why Etsy Is Worth Almost $700 Million

Etsy seller snapcraftyEtsy seller snapcrafty is swamped with orders

Photo: Etsy Blog

Etsy, the online marketplace for small sellers of handmade goods, just raised $40 million.That new funding values Etsy at $688 million, according to Justin Byers at VC Experts.

In its last round of funding, $20 million in August 2010, Etsy was worth just under $300 million.

So Etsy has more than doubled its valuation in 21 months.

How did it do that?

  • It got a great CEO. The vogue is for founder-run companies. But Chad Dickerson, who moved from his job as Etsy’s chief technology officer to replace founder Rob Kalin as CEO last July, is the exception: He’s not a finance or sales type focused on next quarter’s results. He’s a visionary focused on the product and company culture. Most famously, he developed the idea of “Hack Days” at Yahoo, a free-form coding spree that’s become popular at Facebook and other Silicon Valley companies as a way to spur innovation.
  • It’s beating the market. According to ChannelAdvisor CEO Scot Wingo, a longtime observer of online marketplaces, the e-commerce market as a whole is growing at 18 per cent. eBay’s growth is stuck there. Amazon.com is growing at 34 per cent. Etsy’s much smaller, but it grew gross merchandise sales—the volume its sellers moved through its marketplace—by 67 per cent last year. In December, that rate ticked up to 70 per cent, the first time the company saw a month-over-month improvement in growth. (Normally, you’d expect the percentage growth rate drops as sales grow.)
  • It’s tapping into the cultural zeitgeist. People want more authentic experiences when they shop. E-commerce can be impersonal—think of the long list of sellers you see on Amazon.com, all competing on price. While Etsy’s focus on handmade goods has limited the market it can address, it’s picked a booming market. Etsy’s also making hay with eBay’s loss of focus on the small sellers who powered eBay’s early growth. “eBay has alienated a lot of the super-long-tail inventory that they used to be known for,” said ChannelAdvisor’s Wingo told us. “Etsy has quickly become the marketplace for those types of goods.” That’s because of its favourable economics for artisans (it charges 3.5 per cent of a sale, plus listing fees—that’s far lower than eBay’s 9 per cent charge) and a concentrated audience of buyers seeking out their wares.

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