Etsy, Kickstarter and the Problem with DIY: It Doesn’t Scale

Recent Etsy purchase: Snake-eye eye patch.

The Wall Street Journal has a story today about Etsy–“Etsy Knits Together a Marketplace”–and that company’s recent $300 million valuation, which is 10 times the sales Etsy says it did last year. “Some skeptics also fear the company’s growth could be hampered by its ironclad rule that sellers can use the site only to offer good they have made themselves,” tech reporter Spencer Ante writes, and proceeds to not quote any of these “skeptics,” giving Betabeat the impression that “skeptics” really refers to “Spencer Ante.”

The number of items listed for sale on Etsy was up 40 percent from 2009 to 2010, but is down four percent for the first half of 2011, he says. There’s only so many people in the world who want to crochet eyepatches and hand-cut paper dolls, and they can only produce so many of those things a week. Also, Etsy may have reached market saturation among DIY-ster at least in the U.S. Even if it hasn’t, the exclusion of mass produced goods will cap its growth at some point far below that of other marketplaces like eBay and Amazon. 

Etsy and its enterprising CEO Rob Kalin who, the Journal reminds us, makes his own underwear, seem to be sticking to their DIY roots. At 200 employees, each new hire still gets a handmade desk and the whole crew eats a locally-produced lunch together twice a week. But just as locally-produced team lunch gets tougher as Etsy gets to be hundreds of employees, it becomes tougher to keep growing Etsy without breaking the rule that all goods sold must be handmade.

Kickstarter has a similar problem. Each Kickstarter campaign is a unique and beautiful snowflake, the pet project of some hard-scrabble zinester or student filmmaker or Brooklyn comedy festival, and the start-up is still sorting through these projects by hand before approving them for a campaign (that won’t scale) as corporations try to muscle their way in on the Kickstarter movement.

Scaling is easy when you’re dealing with iPhones and app downloads, but much tougher when you there is indie integrity at stake. Even Craigslist, one of the most efficient sites in the world and still largely populated by individuals, has sections where bigger business has infiltrated (ahem, New York real estate).

Etsy is still growing abroad, but what happens once it maxes out? There’s no plan for an IPO, the company told the WSJ, so maybe Etsy won’t be subject to the year-over-year growth pressures that public companies to madness–except its investors include Accel (Facebook), Union Square Ventures (Twitter) and Index Ventures (Skype), and we’re just not sure how cool they’ll be with a lower return stretched out over the next 20 years. Etsy, Kickstarter and the Problem with DIY: It Doesn’t Scale