Etsy IPO Form S-1 | Hacker News Reader

Etsy IPO Form S-1

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164 pointscoloneltcb105 comments

"We eat on compostable plates, and employees sign up to deliver our compost by bike to a local farm in Red Hook, Brooklyn" - Page 93

Etsy's hipster cred is off the charts right now

I hate that any increase in efficiency or doing good is cast aside as hipsterism, being different for the sake of being different. Why is it 'hipster', not environmental?

" and employees sign up to deliver our compost by bike to a local farm in Red Hook, Brooklyn"

1. Bike is not an efficient mechanism for delivering compost (in fact, it's probably the least efficient mechanism)

2. Why does it matter that they took it to a local farm and not "the local compost heap"?

IE they specifically mention both in an attempt to make it seem like that's better than "i drove compost to the dump and dropped it at the county compost pile".

That's hipster.

I don't think Kings County/Brooklyn has a municipal compost pile. Nor any active dumps in the city limits.

Also I would guess the "local farm" bit is showing that they are supporting tiny/small businesses which is exactly their target market for sellers.

1. Brooklyn has compost bins at most residences, and elsewhere (or at least it was a pilot program, i haven't visited in a year)

2. There are just amazing number of places to compost in brooklyn.

The local farm bit is just there to make them feel better about themselves. That is, again, hipster.

A non-hipster would just be doing it, without making it seem like it's amazing and that they are doing it in some beautiful unique snowflake way.

I live in Brooklyn and do not have a compost bin at my apartment, do not know anybody with one, and don't know of a single place to bring compost in the borough.

That being said, for the latter point, I haven't tried very hard to find one.

NYC has a pilot program

http://www.nydailynews.com/new-york/brooklyn/city-pilot-comp...

http://www.nytimes.com/2014/05/31/nyregion/composting-in-new...

etc It's been expanding gradually.

As for not knowing a single place, seriously, you aren't looking very hard, since "compost pile brooklyn" shows about 50 easy places

Farmer's markets have them.

You're not getting the point.

To me, when I read this words, it paints a very nice picture. I picture someone volunteering to take out waste, use zero emission transportation, and then help out a local farmer. I like that, a lot.

No, you aren't getting the point.

The question what "how is this hipster and not environmentalist" I am explaining how this is more hipster than environmentalist

What does that have to do with whether you like it?

Because to be truly hipster, you have to be doing it before people like it. ;-)

IPO'ing is so mainstream.

Hipsters are just the "long hairs" of our time. Those who use the term in a derogatory way will be sarcastically mocked by future generations for the rest of their lives. It happens any time there's a cultural leap that allows those left behind to externalize their self-consciousness.

Also "Red Hook" is hipster since it's on the frontier of gentrification.

"the least efficient mechanism"

I would say the opposite with respect to oil consumption which I think is what is generally considered in such a case. What did you have in mind?

So you believe that it is more energy efficient for a ton of compost to be moved by humans than by a single truck making one trip? What about all of the oil it takes to generate the food to feed the humans who move the compost? I don't have time to do the math at the moment but I hope someone else does. That sounds dubious at best.

How much extra food does it take? It's not that strenuous to use a bike, just takes time. Also, if the compost is used to grow food, it doesn't take much oil to feed the biker!

It's employees biking for fun and exercise (and good). Sheesh.

I apologize if you thought I was being rude, if it's all for fun and exercise that's cool. If it's more hipsterism then not so much.

"sandwich artisan"

--Subway

Biking in Brooklyn is far more efficient than driving.

Doing this sort of thing at scale would only be efficient if you were using slave labor or something close to it.

If Etsy lets their employees take a bike-break for a good cause, fine. But I feel much better about giving my compost to a unionized garbageman with a big truck than some hypothetical coolie on a bike.

> Doing this sort of thing at scale would only be efficient if you were using slave labor or something close to it.

Interns?

As long as they aren't engineering interns, my sister cleared 30K in a summer in SV during her internship. I was floored because I felt lucky to even get an internship 10 years ago.

I'm a huge environmentalist, but stuff like that is just hipsterism. The actual environmental impact is negligible. One company's illegal dumping wipes out the effort of all the hipsters in Brooklyn.

Hipster - a person who follows the latest trends and fashions, especially those regarded as being outside the cultural mainstream.

They could have just put it in the compost or recycling bin like the rest us.

They should send it by uber-rickshaw

That depends. Is the bike a fixie?

Fixies are great. Don't knock it until you try it.

Unless, you know, hills....

not many hills in Brooklyn =)

I had to look it up, and the Wikipedia article was really, really good:

http://en.wikipedia.org/wiki/Fixed-gear_bicycle

I'm not really familiar with compostable plates, but unless they eat from large plant leaves, the plates are probably made somehow. And to make them, someone probably uses resources, like energy and raw material. And they have to be shipped to Etsy.

Compare this with porcelain plates which can be re-used and last a long time, but have to be washed, which uses water and some energy.

Taking all of this into account, I cannot say which is more environment friendly.

Kind of like real Christmas tree vs fake Christmas tree, although in reverse. The reusable tree is not more environmentally friendly.

From the environmental point of view, each ceramic plate must be used at least 50 times to have less impact than a single use biodegradable plate...

http://sustainability.tufts.edu/wp-content/uploads/LifeCycle...

You know of many ceramic plates that are used less than 100 times?

Yes, the new one I bought a month ago, then dropped it on my tiled kitchen floor smashing it into its component molecule parts. :)

Well, floorless kitchens are pretty hipster as well

So you know one, but you don't know many. ;-)

That's very few actually, given that people eat on average 365 times a day, and said plates last for decades. They only get replaced when someone drops them or when their owners decide they're too worn and ugly.

Eat...365 times...per day

Yeah that sounds like a bit much. Honestly for me, I max out at 4 a day, I really can't do much more than that even if they're small meals.

I don't get how people do it 365 times a day, but then again I was never much of an eater.

It's all in the hips.

I agree that people on average use their plates way more often than 50 times, but 365 times a "day" might be a bit much, even for the USA^^ SCNR

I've been interested in this argument for some time. Does anyone have any additional sources here?

They may have specific reasons to use disposable plates (no staff to wash them). So, the counter argument could be that at least they're using biodegradable ones.

Reusable porcelain plates. I don't know the environmental impact of (for example) washing machine detergents though.

Most workplaces I've worked at use regular porcelain plates, produces far less waste - not to mention they're much nicer to eat off of than, for example, paper plates.

There are no "farms" in NYC. They ship it do a garden in Red Hook. And let us hope this apparent "farm" doesn't use the polluted soil of that region. I've seen enthusiastic people growing vegetables in open fields in Williamsburg. That is a super fund site!

Farming is hard, thankless work that entails high risk. What they do in Brooklyn is not farming. It is gardening.

> There are no "farms" in NYC.

Yes there is a farm in NYC, it's called Added Value Community Farm located in Red Hook Brooklyn and it grows "12 tons of fresh produce" annually.[0]

> They ship it [t]o a garden in Red Hook.

No, they deliver it via cargo bike to the FARM (see above) in Red Hook.[1]

> And let us hope this apparent "farm" doesn't use the polluted soil of that region.

No, they don't use polluted soil they use compost. "At peak performance, the program processes over 225 tons/year of organic material."[2]

> I've seen enthusiastic people growing vegetables in open fields in Williamsburg. That is a superfund site!

Williamsburg is not Red Hook, we are discussing how Etsy delivers their compost to the farm in Red Hook. I encourage you to come take a look first hand at the farm in Red Hook and see how they actually grow produce.

> Farming is hard, thankless work that entails high risk. What they do in Brooklyn is not farming. It is gardening.

Again, let's talk specifics. Yes there are rooftop gardens in Brooklyn, yes they are gardens, but let's not lose the forest in the trees.

Is there a farm in Brooklyn? YES. Does Etsy deliver compost to it? YES. Do I encourage you to visit the farm and maybe volunteer to see how hard, thankless work it is that empowers youth in the area? YES!

Before you get negative on HN and spew a bunch of unsubstantiated "facts" do a little search to find out that yes it is possible to have an urban FARM that has the data to back up the fact that it is a FARM not a garden.

[0] http://added-value.org/accomplishments

[1] https://blog.etsy.com/news/2012/office-ecology-composting-at...

[2] http://www.added-value.org/composting-initiative

It's a garden built on top of an old playground. Vegetables grown in NYC don't taste good either, unless you enjoy the taste of exhaust pipes and other local air pollutions.

I'll add that what you guys do is awesome and great for the community. But I still refuse to eat food grown in NYC.

The numbers at a glance:

Revenue 2012 $74.6M+ 2013: $125M+ 2014: $195.5M+

Profit: Net loss 2012: (2.3M+) 2013: (0.7M+) 2014: (15.2M+)

$88M cash on hand - so they can afford to run at a loss for a few years while they grow the company. I guess it makes sense to go public and raise more cash while the market is hot.

It looks like there Free Cash Flow in 2014 was about $4MM positive so they aren't really burning cash

How's that possible?

I would expect them to be investing heavily which means low FCF even with positive profits. I also doubt they are decreasing inventory (do they even hold it?)

Maybe the positive cf is just a fluke due to Xmas season? If you sell a lot before the end of the year, and only pay your sellers in Jan, and you have an exponential growth, then the positive cf may mean nothing..

Some growing companies have positive cash flow but negative earnings as long as they are growing.

For example, they may take credit card payments from customers, but pay suppliers on terms. In which case growth causes consistent annual free cash flow higher than earnings.

Amazon is a decent example of this where their earnings suck, but their FCF has been reasonable every year.

I'm not sure about the particulars of how Etsy issues payment to suppliers though.

If you look at their expenses, a huge chunk of their 'loss' is them issuing shares to employees. They're required to count this as a cash expense. You can make the argument that they could be profitable if they stopped granting shares, but in reality, this is part of their employee compensation plan and if they stopped issuing shares, they'd likely have to incur actual cashflow costs in order to keep their employees (eg. higher salaries or cash bonuses). Amazon is in a similar situation.

My financial analysis skills must be weak but how does a company take a loss every year yet also have $88M in the bank?

they raised more than 88 million in the past?

They've taken $97.3M before: https://www.crunchbase.com/organization/etsy

Presumably they had some profitable years prior to 2012 or have maintained limited losses.

Either way, it looks like they're gearing up for some big growth in the next few years. They dipped into the coffers in 2014 and will raise a lot of money from this IPO, so they'll have plenty of cash to burn on fast growth. It should be interesting to watch!

Hrm, that's a bit of a red flag to me. Why bother raising so much money if you're not going to utilize it? Surely growing your business will outpace average annual investment returns. I'm sure the investors have to be annoyed they basically just transferred their assets to Etsy to sit on and not utilize.

And now they're trying to raise an additional $100M via an IPO? It's not like Apple who are literally in the position of "We have so much money we don't know what to do with it."

> I'm sure the investors have to be annoyed they basically just transferred their assets to Etsy to sit on and not utilize.

Considering they all stand to make a bundle through the IPO I'm sure the investors are collectively not-annoyed that Etsy hasn't wasted their money.

Just depends if the money could have been used for further growth, or not.

The only challenge will be timing when the Etsy fad bubble bursts.

I think people said the same thing about Ebay.

Having cash on hand has optionality value (larger universe of possible deals and better batna in each deal negotiation).

> Why bother raising so much money if you're not going to utilize it?

How do you know they aren't going to use it?

Net income includes non-cash expenses (i.e. it doesn't explain change in cash position--that's what Statement of Cash Flows is for). Cash flow can be positive with a loss and vice versa.

Profit/Loss != Cash flow

Hold on ... is that $195.5M in revenue their actual revenue from listing fees? Or is that the total sales revenue from all the sellers?

The former, it seems. (Page F-80)

"Revenue is mainly generated from commissions on sales made by listed sellers and from the sale of advertising on the Company’s website"

Yeah, it's the former. Their 2014 GMS (Gross Merchandise Sales) was closer to $2B.

Interesting nugget in that they're reserving 5% of the IPO price shares for their users:

> At our request, the underwriters have reserved up to 5% of the shares of common stock offered by this prospectus for sale, at the initial public offering price, to individual investors. We call this our IPO Participation Program, or IPP. The purpose of the IPP is to allow our U.S.-based Etsy community and other individual investors to participate in our IPO.

I wonder how they plan to allocate them.

https://etsyipo.morganstanley.com/etsy/index.html#/sps/dspFo...

Interesting. They're capping individual participation for that 5% pool at $2,500. If Bloomberg is right that they're looking to raise around $300M, that 5% pool is $15M. That comes out to 6,000 shareholders in the pool if all the members fully allocate.

I wonder how many individuals participate directly in a typical IPO process. I'd assume that this will be strictly additive, and that banks (including MS) will still do their opaque preferred-client treatment on top of the 5% pool.

[1] http://www.bloomberg.com/news/articles/2015-01-14/etsy-s-ipo...

Looking at the cap table (to the extent it's visible in the S-1) it appears that the big winners are the investors: Breyer, USV, Accel, Tiger Global, and Index add up to 92.3% ownership of the company. [Edit, 65%]

Or am I totally reading that wrong? (Note, I really might be, this isn't my area of expertise. I just scrolled down to "Beneficial Owner".)

Edit: It was pointed out below that I double-counted Accel, making the total closer to 65%. Thanks!

You are double counting Breyer and Accel's shares -- footnotes give the key details.

Breyer personally owns 3%, and is deemed to control Accel's 27%. So collectively, Breyer is considered to control 30% of voting shares.

Read correctly (not adjusting for any preferred or convertible notes that could be in the structure somewhere), the amount held by Breyer, USV, Accel, Tiger Global, and Index should add up to ~65%

Thanks! That sounds a lot more reasonable. I'll amend the original comment.

I recently set up a shop on Etsy to sell my art. There are two types of shops for selling prints: shops that print/ship for you (like nuvango), or shops that just provide a storefront (like etsy). Of the latter, Etsy isn't the cheapest (Square Market was). But Etsy has discoverability and ratings, and that's why I chose Etsy. I think it gives them an advantage over their competition.

On the other hand, you are not going to make a lot of money selling prints anywhere. This website tracks the top shops on Etsy: http://www.craftcount.com

The top shops sell beads, clothes, jewelry. It makes sense: even as a person who makes posters, I have bought more shirts than I have bought posters in my lifetime.

Are those sales the number of orders per shop?

Number of orders. It looks like the bead shops have a lot of orders, but they just sell small quantities for beads as each item, so you can easily buy 30 items and spend just $60.

Hey, I've been building the type that prints and ships it for you. We don't provide discoverability, but in exchange we have extremely low prices ($22 for a 12x12" stretched canvas, no commissions or monthly fees). You can see the link in my profile (amanufactory).

how much to print+ship a 11x14 watercolor piece?

~$10 to print and ~$6 to ship. Our paper print prices aren't finalized yet, but will be coming in less than Society6.

You can also list your original watercolour piece for sale alongside the fulfilled stuff. If you're interested, request an invite and let me know your username. We'll have finalized pricing soon.

is it inkjet/giclee only?

We have stretched museum quality canvas prints (all below competition's pricing), fine art prints, and will be launching other products as well like iphone cases, shower curtains, etc. You just submit artwork.

You can also list your own products alongside the printed stuff, so it's not just inkjet prints.

> stretched museum quality canvas prints

What does that mean? It seems like a contradiction in terms. Stretched-canvas prints were invented for the interior design market. While I won't go so far as to say that a museum has never hung a canvas print, I've never seen it and I'd be surprised to see it done except as a self-conscious thumbing-of-the-nose at the establishment.

It's just a ubiquitous marketing term. What I mean is it's the standard fine art quality marketed by others. Acid free, varnished, thick canvas, "archival" inks.

Thanks for pointing it out, I'll try to keep it on my radar (if you have a not-much-bother newsletter I'd be happy to give you my email so I get some remainder as you move it on). How outrageous would shipping prices go for the rest of the world?

For a gallery wrapped 12"x12":

Shipping to most countries outside of the US is about $14 for economy (ground).

Shipping to Canada is about $21.

And within the contiguous US states, $10.

This is on top of the $22 base price, which brings the total cost to $32 (a few bucks cheaper than Costco).

Feel free to email me at chris@instapainting.com, or request an invite on amanufactory.com, and I'll keep you updated!

Some of the key numbers aren't there. It's not clear how much stock the insiders retain after the IPO. At least there's only one class of stock, though. Google and Facebook have two classes of stock; the insiders hold the class with a majority of the voting rights. (That's rare; the only other big US company set up that way is Ford.)

Isn't the NY Times also set up that way?

They are. But they're not in the Fortune 500, and they're about to fall out of the Fortune 1000.

Not a single mention of any of the four founders. Sad.

What happened to the founders? Is there a back story here?

http://www.forbes.com/pictures/feki45gjlk/rob-kalin-usv-on-f...

Sad.

Haim Schoppik and Chris Maguire: Left Etsy at the same time (https://blog.etsy.com/en/2008/a-fond-farewell/) to create Postling (http://mashable.com/2009/08/11/postling/)

Kalin is still there as CCO. Tarbell also looks like he's still there too?

Robert Kalin lists himself as CCO (compliance officer) on Linkedin. It looks like both Haim Schoppik and Chris Maguire are no longer with the company as of August 2008. It looks like Jared Tarbell is also no longer working at Etsy either.

Seeing as the company has raised 8+ rounds, I would hope they had the sense to cash out at least some of their shares.

CCO in this case means Chief Creative Officer. Since he's not listed in the S-1, isn't a member of the board, and hasn't been quoted as speaking on behalf of Etsy in any articles I could find post-2011, I presume that his LinkedIn profile is just rotting away.

I get the impression that he sees himself in the elder statesman phase of his career, given how he is always listed as "the founder of Etsy".

Pretty sad the founders got fired:

http://www.forbes.com/pictures/feki45gjlk/rob-kalin-usv-on-f...

Were all of them fired or just the CEO?

It sounds like just the CEO

Why sad? Everything I remember reading pointed to him not being a good CEO.

Oh I didn't know that.

Pretty interesting, not a single mention of any of the founders appear on the S-1 form.

http://www.forbes.com/pictures/feki45gjlk/rob-kalin-usv-on-f...

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