ROBERT SIEGEL, HOST:
Etsy is the online crafts marketplace where you can buy everything from glow-in-the-dark toe rings to handmade coffee tables, and tomorrow it's going public. Etsy says it will retain its homespun approach despite the demands of Wall Street. NPR's Aarti Shahani takes a look at the clash of cultures and whether Etsy's do-it-yourselfers are keeping the faith.
AARTI SHAHANI, BYLINE: So I can't actually get inside, but I am standing in front of Etsy headquarters in DUMBO - that's down under the Manhattan Bridge overpass. You can kind of hear the trains passing overhead. This is one of these neighborhoods they call up-and-coming, much like the company we're covering. Etsy employees are streaming out of the building like this woman who's wearing a black sweatshirt with the word Etsy stenciled in script.
Can you do an interview with me?
UNIDENTIFIED WOMAN: No, I cannot.
SHAHANI: Of course not. The company is in a legally binding quiet period, but the filing to securities regulators tells us some stuff about at Etsy's intent. Lots of technology companies these days choose to stay private. Etsy says it needs more money for marketing. It's been largely word-of-mouth to date - also for buying smaller companies, possibly competitors, for building better mobile apps and moving into bigger digs.
CHELSEA BERRY: I just had heard rumors about them taking over, like, an entire building and, yeah.
SHAHANI: That's neighbor, Chelsea Berry. It's got an unusual strategy, setting aside 5 percent of shares for its own members, the buyers and sellers on the site, and courting big investors who will hold on to the stock, not just flip it. Now, the business media has mocked this IPO, calling it artisanal. But don't be fooled. Etsy is serious business.
RETT WALLACE: One of the things that we really like about Etsy - we have a very high score on this company - is that the intrinsic model that they use is a very attractive model financially.
SHAHANI: Rett Wallace with Triton Research analyzes private companies. And by intrinsic model, he means Etsy doesn't have to buy products like a traditional retailer. The website is a platform that connects vendors and customers without requiring Etsy to hold onto inventory that could lose value or collect dust.
WALLACE: Their loss-making potential is significantly reduced.
SHAHANI: And while Etsy is not turning a profit just yet, its revenue is growing. In 2014, it was $195 million, up 56 percent from the prior year. Wallace expects the company will be more profitable than many of the Internet companies that are based on a so-called freemium model.
WALLACE: None of Etsy's users expect that they will be able to get goods on the Etsy marketplace without paying for them.
SHAHANI: Wallace does worry that the marketplace for handmade goods isn't big enough, and Etsy will have to figure out new lines of business to make real money. The people who sell on Etsy have a different concern.
GIDEON RETTICH: A company going public means that they're going to have to show constant growth or risk, you know, share prices going down.
SHAHANI: Seller Gideon Rettich, who makes furniture.
RETTICH: That's something that happened with eBay that I saw when they went public.
SHAHANI: The Etsy message boards are full of back-and-forth with this eBay comparison, some sellers saying eBay got greedy, taking a bigger and bigger cut, slapping on new fees, others pointing out eBay did grow, attracting more buyers. Etsy seller Elena Siff makes one-of-a-kind books using things like a cheese grater. And she says she's buying stock.
ELENA SIFF: Oh yes. I will buy stock. Yes. I want to support what I'm part of. I feel like I'm in the Etsy family. I've been there for a long time.
SHAHANI: It's a loyalty purchase. She's not sure it'll be a good investment. Aarti Shahani, NPR News, New York.
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