Crafting a Business

Rob Kalin turned the idea of an online craft fair for "the little guy" into a business that rakes in millions of dollars every year.

Rob Kalin learned the secret to success while he was still in his crib. As a toddler, the Boston-born teacher’s son dragged around a stuffed bunny rabbit that had been lovingly stitched together by one of his mother’s students. True, one of the ears was sewn on backward, but that just added to its magic. “It always had an aura,” Kalin remembers of his first handmade craft.

Kalin’s appreciation for the simple and the simply eccentric inspired him to create Etsy, an online crafts fair that may well be the largest market for handmade goods in the world. Last year, 350,000 quilters, woodworkers, and other artisans sold their one-of-a-kind merchandise on the four-year-old site. “People ask you what you want to be when you grow up,” muses the 29-year-old Brooklynite. “I’ve always stood up for the little guy.”

These “little guys” sell everything from hand-knit sleeves for Macbooks ($32) to myrtle-wood electric guitars ($3,200). And in an age of chain stores and strip malls, it seems there’s still a big market for the unique: custom-made rainbow tutus, hand-painted porcelain tea sets, bookcases crafted from canoes. More than three million consumers in 150 countries purchased about $87.5 million worth of merchandise on Etsy last year. That’s up from just $26 million in 2007. Kalin says Etsy has already sold $100 million worth of goods this year.
Emily Worden, the founder of Elemental Threads, a custom handbag and jewelry company in Cambridge, Massachusetts, signed up with Etsy when she started her company two years ago, and it’s now central to her business strategy. She pays Etsy a 20-cent standard fee for each item she lists on the site, plus a 3.5 percent commission on everything sold. Etsy allows her to track the number of times customers click on a particular item to view it. “We can see that our bracelets are a popularly viewed item and which colors and sizes get the most views,” she says. “That guides us in evolving our product lines.”

Championing the cause of the solitary artisan comes naturally to Kalin, a boyishly ambitious nonconformist who wouldn’t look out of place at the local skate park. Kalin’s father was a carpenter and taught him early on how to use his hands. Indeed, in high school, Kalin was so hands-on with photography that he cut classes to shoot and develop photos 18 hours a day. He graduated with a D-minus average but won admission to a studio program at Boston’s Museum of Fine Arts. When Kalin learned that graduate students in his program were allowed to take design classes at nearby MIT, he put his creative skills to work—and handcrafted a fake graduate ID so he could attend.

Eventually, Kalin ended up at New York University, studying classics and working as a carpenter. One night, his Brooklyn landlord challenged him to build a website for his restaurant, Acme Bar and Grill. “I didn’t know anything about websites, but I learned HTML, and I built the basic site in four weeks,” Kalin recalls.

Kalin recognized a need for Etsy after working on another crafts site that provided “advice and a lot of hand-holding” for artisans but no marketplace for their goods. Teaming up with friend Jared Tarbell and fellow NYU students Chris Maguire and Haim Schoppik, he dashed off a fan letter to Stewart Butterfield and Caterina Fake, the cofounders of Flickr. The two had sold their highly popular photo-sharing website to Yahoo! and, it turned out, were impressed enough by Kalin’s letter to take a look at his start-up. They invited the Etsy team to San Francisco for a month in 2006, mentored Kalin, and helped him raise $615,000 in financing.
Today, Etsy’s staff has ballooned to 70 employees, and the company reportedly grosses more than $12 million a year. In January 2008, Kalin sold approximately 20 percent of the company for $27 million. Investors now value the firm at $100 million.

Etsy’s value to vendors extends beyond what can be measured in dollars. For many, it’s a way to stay connected to the crafts community. Chuck Domitrovich, a jewelry maker from Seattle, networks on the site with local artisans who work in the same medium, trading tips on technical issues like enameling. He has also connected with brick-and-mortar retail outlets through Etsy.

Heather Dehaas of Leila & Ben, a Canadian company that sells handmade sewing and crochet patterns for children’s clothes, says she stays in touch with customers through the site. “The conversation feature allows people to contact us for any help they may need while working on their projects,” she says. “Etsy gives people the option for a more personal experience.”
Of course, Etsy has its detractors too. When the site began to take off, “we were in over our heads,” Kalin says. Some Etsy merchants and shoppers complained about buggy technology, poor customer service, and unreasonable treatment of sellers. Rival sites with names like iCraft and ArtFire have sprung up to pick off the disgruntled. Last year, Kalin hired help: Maria Thomas, former head of digital media at National Public Radio, as chief executive officer along with Chad Dickerson, a former Yahoo! executive, as chief technology officer. Kalin recently stepped away from the day-to-day operation of Etsy. He is still a major shareholder and is chairman of the board.

Now it’s on to the next project for the peripatetic Kalin. His new venture is a business incubator called Parachutes. It’s a 9,000-square-foot warehouse space where Kalin has gathered nine of his favorite Etsy sellers to help them grow their tiny crafts operations into bona fide small businesses.

In his own corner of the warehouse, Kalin is turning IKEA kitchen countertops into stereo speakers and reclaimed wood into desks.
He has also started sewing some of his own clothes. “I have to make something physical at least once a month,” says the cyberspace entrepreneur, “or I go crazy.”

Getting Ahead with Rob Kalin

What’s the origin of the name?
I wanted a nonsense word because I wanted to build the brand from scratch. I was watching Fellini’s 8½ and writing down what I was hearing. In Italian, you say etsi a lot. It means “oh, yes.” And in Latin, it means “and if.”

What’s the best piece of business advice you’ve ever gotten?

If you’re headed down the wrong road, turn around. It was from Caterina Fake [the cofounder of Flickr]. Early on, we were looking to hire a CEO and had made an informal commitment to someone, but it didn’t feel right to me. Caterina said, “If you don’t feel that it’s right, be honest. Don’t do it and then tell yourself it will be better in six months.” There’s a lot that goes into making a successful business that you can’t quantify, like your gut and your hunches. I didn’t hire the person.

What’s the mission behind your new venture?
The focus is education and community. When you’re one independent craftsperson working alone, making $15,000 to $20,000 a year, there’s a glass ceiling. You’re always reinventing the wheel with all this stuff like accounting, taxes, shipping, and insurance. What if an accountant comes in and teaches them all about bookkeeping, or we help find apprentices for them, or arrange for a textiles factory to bring their end bolts here? You need centralization to make that work. We’re building a system to teach people how to start a really small business. There is a lightness in starting something new.

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