Etsy IPO reveals a $2 billion e-commerce company
March 5, 2015 11:37 AM
Artists and artisans marketplace Etsy Inc. has filed for an initial public offering. And Etsy’s filing Wednesday with the U.S. Securities and Exchange Commission reveals a portrait of an e-commerce company with fast-growing revenue, an expanding base of buyers and sellers, and a diversified business model.
Etsy, No. 130 in the Internet Retailer 2014 Top 500 Guide has yet to say how many shares of stock it expects to sell and at what price, but initial proceeds could raise as much as $100 million in new working capital, the company says. Etsy will use the funds for working capital and general corporate purposes, including “continued investments in the growth of our business,” Etsy says. Specifically, proceeds will be used to build Etsy’s brand though increased marketing, partially fund development of a new corporate headquarters, for possible acquisitions and $300,000 to fund Etsy.org, a Delaware non-profit organization Etsy formed in January “to educate women and other entrepreneurial groups on how to build a lasting business,” the company says.
Etsy, an online marketplace for homemade goods launched in 2005, is growing sales but is unprofitable, according to the company’s IPO filing. Specific numbers include:
- Gross merchandise sales increased 43% to $1.93 billion in 2014 from $1.35 billion in 2013.
- Net revenue increased 58.0% to $122.0 million from $77.2 million.
- Marketplace revenue increased 38.5% $108.7 million from $78.5 million.
- Service revenue grew year over year 92.8% to $82.5 million from $42.8 million.
- Net loss was $15.2 million in 2014 compared with $796,000 in 2013.
- Marketing spending increased 121.8% to $39.7 million from $17.9 million in 2013 and represented 32.5% of net revenue.
- Spending on product development increased 33.1% to $36.6 million from $27.5 million and represented 30% of net revenue.
- Spending for general and administrative expenses increased 66.9% to $51.9 million from $31.1 million and represented 42.5% of net revenue.
Etsy’s business is diversified, attracting more buyers and sellers and becoming increasingly mobile, according to the IPO filing. In 2014 mobile sales accounted for 31.6%, or $609.9 million, compared with 29.5%, or $398.3 million, of total sales. Based on those metrics, mobile commerce for Etsy grew 53.1% year over year. While not breaking out specific numbers, mobile traffic accounted for 53.2% of all traffic in 2014 compared with 41.3% in 2013. “We launched our first mobile app in 2011, and we continue to enhance our mobile offering,” Etsy says in its IPO filing.
The number of buyers and sellers on Etsy continues to increase, as do the company’s efforts to diversify services to sellers, according to the IPO. The number of active sellers increased 30.8% to 1.4 million in 2014 from 1.07 million in 2013, while the number of active buyers grew year over year 16.5% to 19.8 million from 17.0 million
Etsy, which says 89% of its sellers are female, also is getting more business from overseas. In 2014 international sales accounted for 30.9%, or $596.4 million, of gross merchandise sales, compared with 28.4%, or $383.4 million in 2013.
Etsy expects to sell on Nasdaq and used Goldman Sachs, Morgan Stanley and Allen & Co. as underwriters. Etsy’s latest addition to its marketplace occurred in August with the launch of a wholesale e-commerce site. Etsy charges wholesalers a one-time fee of $100 to start selling on Etsy.com/wholesale, plus a per-transaction fee of 3.5%.