Etsy’s Surging IPO Shows Losing Your Indie Cred Pays Off

WIREDEtsy began its life as a publicly traded company today, entering a new and apparently lucrative era for the online marketplace that once crafted an identity as an artisanal alternative to mainstream marketplaces.

Shares opened at $31, a huge 94 percent surge from its initial public offering price. With stock now trading at over $34 a share, that values the company at close to $4 billion. The company raised $267 million in total.

For many of Etsy’s 1.4 million sellers and 19.8 million buyers, today’s IPO success is likely bittersweet. It represents the culmination of a protracted period of hand-wringing and sometimes bitterness among Etsy’s community of crafters and artists as the company made moves into the mainstream. In the fall of 2013, in a bid to increase revenues, Etsy changed its terms of service to let sellers offer goods outsourced to massive manufacturing partners rather than made by their own hands. This offended some of the site’s early users, who saw the deed as Etsy selling its soul. Some even moved their operations off the site.

But the decision paid off, boosting revenue from $125 million in 2013 to $195 million in 2014. And judging from today’s successful IPO, investors like that trajectory. Yes, $4 billion is still a far cry compared to the valuations of its bigger competitors: eBay ($69 billion), Amazon ($178 billion), and Alibaba ($210 billion). By those comparisons, you might even still call Etsy “niche.”

Still, going corporate could create strain as Etsy tries to negotiate the expectations tied to its original brand identity while satisfying its obligation to all its new shareholders. Signs of that tension appeared even before the IPO. In an unconventional move, the company allotted five percent of its shares to its sellers and other smaller investors, giving them the opportunity to buy as much as $2,500 in stock before the company’s public debut. That reportedly frustrated some institutional investors because it shrunk the pool of shares available to them.

But it’s hard to imagine anyone being too upset now, at least not anyone with Etsy shares. The company is now among that elite club that have pulled off red-hot internet IPOs, the kind of exit more typically expected of buzzy startups like Slack (which, just this morning, raised a $160 million round at a $2.8 billion valuation). It’s especially surprising considering how long Etsy took to get to this point. Instead of rushing to market, its journey into the mainstream took ten years—handcrafted piece by handcrafted piece.

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