Growth Strategies

Etsy Launches Pilot Crowdfunding Program

A lot of sellers on the online crafts marketplace see financing as a big hurdle to growth.
Matthew HellerJune 16, 2015
Etsy Launches Pilot Crowdfunding Program

Etsy on Tuesday launched a pilot program that will allow sellers on the online crafts marketplace to raise money to develop products through crowdfunding campaigns.

The U.S.-only Fund on Etsy will run until August 16 and Etsy, which has 1.4 million active sellers, will take its usual 3.5% of each transaction plus a 20-cent posting fee.

“We’re super passionate about our seller community,” Joe Lallouz, an Etsy product manager, told The Wall Street Journal. “What are the best ways to help them grow and scale? A lot of sellers identified financing as a big hurdle to growth.”

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The WSJ noted that the program is launching “amid a boom in crowdfunding campaigns.” More than 1,250 online platforms worldwide raised $16.2 billion combined last year, up 167% from 2013, according to the research firm Massolution. Crowdfunding for the business and entrepreneurship categories accounted for more than 41% of that amount, or $6.7 billion.

Etsy is also facing increased competition from online retailers eager to increase sales through social media. “It’s only going to get more competitive,” Tom Forte, an e-commerce analyst at investment bank Brean Capital LLC, told the WSJ. “I anticipate that the number [of online sales platforms] will increase over time.”

Some 100 vendors will participate in the Fund on Etsy program and the company is recommending a nine-month delivery window for products created using crowdfunding. Most crowdfunded products are expected to ship within six months, an Etsy spokeswoman said.

In a post on its blog, Etsy said it had developed products to serve sellers’ needs along the business spectrum, including tools to create and manage listings and payments, promote items, track orders, and expand into new channels like wholesale. “Fund on Etsy is intended to address another need — financing and product development — and fits in seamlessly with sellers’ business life cycles,” the company said.

“Over the past few years, crowdfunding has emerged as a viable and friendly alternative to traditional financing channels for many creatives around the world,” it added.