Rob Kalin, the 27-year-old founder of online craft market Etsy Inc., is living proof that you no longer have to be a techie to be a technology entrepreneur.
Along with the falling cost of launching an Internet company, the need for sophisticated technical know-how has also diminished, especially for an e-commerce business such as Brooklyn, N.Y.-based Etsy. That has opened the door for Kalin, a former classics major in college and ex-carpenter, to launch an acclaimed startup that effectively translates the traditional craft fair to the Internet in the form of an eBay-style auction site.
Etsy has won critical kudos for its striking visual design and intuitive feel. The result is a charming blend of low tech and high that has attracted not only devoted buyers and sellers of handmade goods, but also investors from both coasts. Since launching in 2005, Etsy has raised almost $5 million in three rounds of funding. The startup's backers include investors noted for betting on Web 2.0 companies, which typically incorporate multimedia and aspects of social networking. They include Silicon Alley's Union Square Ventures and the founders of Flickr and del.icio.us, the photo-sharing and "social bookmarking" Web sites acquired by Yahoo! Inc. in 2005 for $30 million each.
Kalin first came to the attention of Flickr founders Caterina Fake and Stewart Butterfield when he sent them an e-mail he describes as a "love letter" praising the design and functionality of the photo site and inviting them to look at Etsy, elements of which he had modeled after Flickr. "I've always been an artist and crafter and maker myself, so I felt an instant bond with the site," Fake says of Etsy. Although she routinely gets e-mails from entrepreneurs seeking advice and funding, Kalin stood out.
"Etsy was a great site in dozens of respects--well designed and built--and it had a good sense of community," Fake says. "It was built by smart, interesting people and was in a great space. No one was doing e-commerce or marketplaces in the whole Web 2.0 thing."
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As for Kalin, Fake says he was "smart and bold and irreverent--and just cocky enough to be able to pull it off."
In June 2006, Kalin accepted $615,000 from the Flickr founder and other angel investors. In the process, he turned down funding offers from venture capital firms seeking a 20% stake in the company at a pre-money valuation of $3 million, as well as to recruit an experienced CEO. "I realized we didn't need that much money," he says. "It ruffled some egos, but I think I made the right call."
Kalin's first experience dealing with venture capitalists left a sour taste. After Etsy attracted some press coverage, he began getting phone calls around the clock from would-be investors.
Feeling under siege, he went so far as to report one especially persistent venture firm to the Federal Trade Commission for violating its "Do not call" rules, although the move was largely symbolic.
When Union Square Ventures partner and del.icio.us investor Fred Wilson came calling, he had to overcome some prejudice on Kalin's side. "I don't think that Rob's views about VCs are that unique," says Wilson, noting that many of his best deals are the ones that require the most persuasion.
"The stories about VCs taking over companies, cramming down founders and generally doing bad things are out there, and many entrepreneurs are nervous about VCs as a result," Wilson says.
Wilson wasn't deterred by Kalin's reluctance to bring VCs into the fold. Nor was he put off by aspects of Kalin's unorthodox background that might have turned off more conservative investors. Kalin made several attempts to graduate from various colleges, ultimately earning a degree from New York University, and is known for bluffing his way into jobs. He got his first Web design job without admitting he had no experience. (The Web site he created for Manhattan pub Acme Bar and Grill is still up today.)
Indeed, in contrast to the many entrepreneurs who have their pitch down pat, Kalin comes across as a bit of a flake. For example, he offers various explanations for the origins of Etsy's name (which rhymes with "Betsy"), usually including a reference to filmmaker Federico Fellini, but leaves one wondering if it was actually just a domain name he could grab. "Rob is not a scam artist," Wilson says. "He's a maverick and an idealist, and he's out to change the world." The admiration is mutual.
"Fred was different," Kalin says. "We clicked, and I felt we could be good partners." It didn't hurt that Wilson was willing to take an uncommonly minuscule stake in Etsy. "I told Fred, 'You get, like, 1% and that's it.' And Fred took it just to get his foot in the door."
The bond was strong enough to yield a $1 million investment in November 2006, led by Union Square Ventures. Since then, Wilson has increased his investment, leading a $3.25 million round in July of this year.
Etsy now has 47 employees and half a million registered members. The company is still burning cash, generating sales of roughly $300,000 a month and expenses of $375,000. Crafts on the site range from screen-printed T-shirts to handmade toys and furniture. Typically, there are 11,000 goods on the site at any point in time, with 8,000 of those items producing sales.
Part of Etsy's appeal is its clean design. Kalin originally hired professional designers to develop the site. Unhappy with the results, however, he scrapped the design and did the job himself.
One person he did turn to was Jared Tarbell, a well-known software programmer with a specialty in Flash software, which is commonly used for online animation. Initially, the programmer was skeptical about the concept behind Etsy. "Rob asked if I wanted to work on a marketplace for handmade goods, and I remember thinking it was the stupidest idea I'd ever heard," Tarbell says.
But he changed his mind after being impressed with what he saw when the site launched. Tarbell added a number of visually arresting elements to Etsy, such as letting people shop for goods by color, allowing them to see the newest items for sale and enabling site users to participate in company presentations.
Today, with Etsy growing, Kalin is gradually moving from the role of entrepreneur to that of manager, and it remains to be seen whether he will be content with the transition. He occasionally bristles at the constraints of the business world, recently taking a last-minute vacation without bothering to check his schedule and cancel his appointments.
Still, Etsy vice president of communications Matthew Stinchcomb, a former roommate of Kalin's, maintains that Kalin is cut out for executive life. "He has a great brain and a good head for business," Stinchcomb says. "He just hates that part of it."
Wilson and Fake, too, express faith in Kalin and Etsy, adding that professional credentials are no substitute for vision in building a tech company.
"At Flickr, we never hired the engineer who had the Sysadmin certificate or the computer science degree," says Fake, admitting that she, too, once fudged her Web design experience to land a gig. "We hired the person who was the art major who built servers for himself and his friends over the weekends and built Web sites in his spare time whenever he could just because he loved it."
A description tailor-made for Kalin.