These Are the Companies Etsy Could Use Its $267M War Chest to Buy

The Dumbo craft goods company will undoubtedly use its multi-billion dollar valuation to pick up some other brands one day. The question is, which ones and when?

Inside Etsy's office in Dumbo (Image courtesy of Etsy)
Inside Etsy’s office in Dumbo (Photo: Image courtesy of Etsy)

One of Etsy’s stated goals for its recent IPO is to acquire companies that could complement its core business. Etsy’s biggest problem is acquiring more users. It both needs more people making stuff to sell and more people buying stuff. So, the company will dump most of the money it gained on the NASDAQ into marketing. That said, Etsy was already acquiring companies even before it had a $267 million war chest, like Manhattan’s Grand Street and France’s A Little Market last year.

The latter’s business looked a lot like Etsy’s, but in French and in France. The latter was more like artisinal tech.

And this is the list:

  • Hatch: This one would be a real value add for Etsy. The company makes it easy for people to buy different versions of roughly the same product from one page. So if a craft maker has made a cool hat, the Hatch user interface makes it possible to easily switch out the color of the hat band or change the species of the bird whose feather is tucked into it. It’s easy to see how this functionality could get built into Etsy across the board or it could become a special new category within Etsy itself.

    Read our interview with Hatch founder and CEO, Anastasia Leng, and her vision for an IPO future for the company

  • MadeClose: Hot topic in ecommerce: narrative. Buyers, these founders say, value a product more if they know the story behind it. If you need more to say about your shoes at parties, these companies are here to help.
  • littleBits: Hang with us on this one: the company makes tiny electronic components that can be pieced together to make complete devices. a) Grand Streets acquisition showed that electronics are definitely on the table for Etsy and b) Etsy needs to reach people who like to make stuff (in order to convince them to make stuff for sale and to sell it on their site). This is a company that is getting people into making early.
  • Mouth: Neighbors in Dumbo, Mouth has basically followed the Etsy playbook, but with two important differences. One, it’s chasing artisanal foods (apricot & pepper jam?). Two, it buys stuff up itself wholesale and then manages the orders in house. That’s a big shift from how Etsy does things, but there could be something about the food business that requires it. Incorporating a handmade foods company into the Etsy brands isn’t much of a stretch and could open up a new market that probably wouldn’t rattle the faithful.
  • Quirky: Financially, this would be a stretch; there’s no way Etsy could do it out of its cash on hand (eight rounds in, the company has raised $185 million, according to CrunchBase). Quirky, in some ways, is the next level up from Grand Street’s vision: empowering inventors to come up with products with designs ready for mass manufacture. It also has a large, built in community of the hacker minded.

Etsy’s IPO also indicates that services to its top sellers has been a key growth area for the business. It wouldn’t be surprising if it were to acquire some sort of small business lending startup to finance expansion, but the more likely scenario would be for the company to explore partnerships.

That said, Etsy did build a Square-like mobile payments system, which it launched late last year, so its sellers could accept credit card payments through Etsy in real life. The next step for Square was to go into small business loans. Etsy could see growth potential there, both in profit from the loans and profit as its top sellers expand, despite recent bugs in mobile payments.

As Etsy gets bigger, it will likely break into more channels. What you know of as Etsy might have little to do with the ecommerce verticals that ultimately come out of the site going forward. In a way, it already has: Grand Street and A Little Market still function under their own identities.

IPO documents indicate that while it reserves the option to use funds raised for acquisitions, it has no immediate targets. Etsy had no comment for this story. These Are the Companies Etsy Could Use Its $267M War Chest to Buy