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Comment by xienze | Hacker News Reader

Sometimes I don't understand this world.

"Though Etsy has become a significant business, with sales jumping 56 percent last year from the previous year to $195.6 million, it still booked a loss of $15 million."

How in the hell do you spend $210 million dollars running a marketplace website?

"Etsy shares opened Thursday morning at $31 a share, almost twice their initial public offering price"

Why in the hell are people snapping up these shares when the company admitted they may NEVER make a profit? What is going on with the tech industry?

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There's a breakdown of their spending in their S-1 filing [1], under Consolidated Statements of Operations.

According to this, they could be profitable if they wanted to be, but they are using their profits and re-investing in growth.

E.g. they more than doubled their spending on marketing from $17.8m to $39.6m from 2013 to 2014.

[1]: http://www.sec.gov/Archives/edgar/data/1370637/0001193125150...

> According to this, they could be profitable if they wanted to be, but they are using their profits and re-investing in growth

Which is one of the things that differentiates a startup from a lifestyle business. It's the whole point of taking funding and trying to accelerate growth.

For Lifestyle businesses growth is also a priority. But margins like -715.90%(!!!) (Hortonworks) or -54.87% (New Relic) shows massive immaturity as a business. Post-IPO businesses in such early-stage has a big threat to the tech industry. If they fail (there is a big chance to bankrupt within a year without funding, according to their financial metrics), they make more hard to float for other companies later.

>How in the hell do you spend $210 million dollars running a marketplace website?

Salaries. They have a few hundred employees, who are from the sounds of it pretty well paid (they're located in NYC, too).

Perhaps I should rephrase the question. WHY do you need hundreds of employees to run a marketplace website?

And if it's truly only a couple hundred they are EXTREMELY well paid.

Etsy has over 150 engineers, all living and working in NYC; of course they are 'EXTREMELY' well paid.

Engineers, UX, support staff. There's an entirely separate office in Hudson, NY for security and telephone support for buyers/sellers. Plus rent in Brooklyn isn't cheap (they likely have a fantastic deal for their early office space but DUMBO is an overleased market at this point and they are fitting out new space in "DUMBO Heights").

All the jurisdictions Etsy operates in require various forms of compliance, which you could waste engineer time on or hire dedicated employees to handle. And by going public they've likely had to hire 15-20 people to support their CFO and run compliance.

"DUMBO Heights"?? I thought we were supposed to call that RAMBO (Right Above the Manhattan Bridge Overpass).

Real estate naming. Go figure.

Yeah, that's the regrettable name the real estate developers came up with. I suspect BQE Heights didn't have the same melodious ring.

For the non-NYC people: "DUMBO Heights" is a cluster of buildings just South of DUMBO, Brooklyn on the other side of the Brooklyn–Queens Expressway (BQE) which were owned by the Watchtower / Jehovah's Witnesses until I believe 2012.

See http://dumboheights.com/ (warning: real estate developer site).

* edited: directions in DUMBO are easy to confuse. What you think is north-south is east-west and vice/versa.

Presumably, sales != revenue -- they're making a much smaller % of sales as commission.

As for the price:earnings ratio being a negative number -- etsy's sexy, more profitable businesses may not be.

"Why in the hell are people snapping up these shares when the company admitted they may NEVER make a profit? What is going on with the tech industry?"

I wouldn't necessarily care if they make a profit. I would care that there's a greater fool coming behind me that I could sell the shares to.

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