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Billion Dollar Unicorns: The Market Awaits Etsy’s IPO

Posted on Monday, Feb 2nd 2015

The market is eagerly awaiting the IPO of another unique Billion Dollar Unicorn club member – Etsy. Over the past decade, Etsy has become the go-to place for one-of-a-kind artisan products. By establishing their presence in a niche space, they have managed to create a successful business model that not only earns high revenues, but is also profitable.

Etsy’s Offerings

Etsy was founded in 2005 in DUMBO, Brooklyn. The idea was born when Rob Kalin, a co-founder of Etsy, realized that he could not find a viable online marketplace to sell his handmade wooden computers. He joined hands with Chris Maguire and Haim Shoppik to start Etsy from his Brooklyn apartment. After two and a half months of site development, Etsy was launched to sell handmade and vintage products on a site that gave the feel of being at a crafts fair.

Etsy prides itself in following strict rules to define things that can be sold on their site. For instance, a product is qualified as vintage only if it is at least 20 years old. Similarly, handmade products cannot be resold and products produced using outside manufacturers have to be manufactured at facilities that follow ethical policies.

Last year, Etsy also expanded into the wholesale space by allowing sellers to sell goods to retailers such as Nordstrom and West Elm. The wholesale offering requires sellers to register with the segment by submitting a $100 sign-up fee and then begin supplying these retailers with their unique products.

Today, Etsy has grown to over 43.9 million members purchasing from 1.2 million active shops that have listed over 26 million products. In a recent survey, Etsy found that 18% of their sellers use Etsy to sell their goods full time. 74% of their sellers treat Etsy shops as regular businesses and a majority of them rely on Etsy for income.

Etsy’s Financials

Etsy earns revenues by charging sellers a $0.20 listing fee for each item listed and a 3.5% fee for sales completed on their website. They also have additional revenue sources which include seller services such as advertising, payment processing, and discounted shipping labels.

Etsy’s detailed financials are not disclosed, but considering that they ended 2013 with $1.35 billion in gross merchandise sales, that translates to $47.5 million in transaction revenues. And that number does not include revenues earned through additional sources. Considering that both transaction revenues and other kinds of revenues have grown further in 2014, the company must have a top line number approaching $150-200 million at this point. Etsy has mentioned that they have been profitable since 2009.

Etsy has been venture funded so far with $97.3 million in funding from investors including Glynn Capital Management, Index Ventures, Union Square Ventures, Accel Partners, Acton Capital Partners, Hubert Burda Media, Manatt Venture Fund, Caterina Fake, Stewart Butterfield, Joshua Schachter, Albert Wenger, Spencer Ain, Judson Ain, and Sean Meenan. Their last round of funding was held in May 2014 when they raised $5.6 million at an undisclosed valuation.

Analysts believe that Etsy will be looking to go public soon and are waiting for a prospectus to be filed this quarter. They are expected to raise $300 million through an IPO that should value them at $2 billion. That is significant growth over the $300 million that they were valued at back in 2010.

More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. Unicorns will also be discussed with some special guests during our 1M/1M Roundtable programs over the next few weeks. To be a part of the conversation, please register here. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.

This segment is a part in the series : Billion Dollar Unicorns


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