(2017-05-02) Etsy Dickerson Out Layoffs

Longtime Etsy CEO Chad Dickerson is out. The Etsy board is replacing him with board director Josh Silverman starting May 3.

Under Dickerson’s leadership, Etsy had not only grown quickly, it had also won a reputation as an ethical company, becoming a certified B Corporation in 2012.

Some 2,000 companies are B Corps—including Patagonia, Warby Parker, and Kickstarter—but almost all are privately held. Today there are just a handful of public B Corps; Etsy is one of only two traded on a major U.S. exchang

Public-market B Corps are rare because investors hate them. As part of the certification, a company must reject the shareholder valuation model and, eventually, reincorporate as a “public-benefit corporation.”

Late last year the company’s struggles caught the attention of Seth Wunder, a tech investor and hedge fund manager

*How, Wunder asked, was Etsy not making more money?

The answer, as he saw it, was that the company had been careless with its spending—Etsy’s general and administrative expenses amounted to 24 percent of total revenue. (EBay and MercadoLibre.com, the Latin American online marketplace, each spend about 10 percent of revenue on such expenses.)*

In early May, just hours before Etsy was slated to report earnings, Wunder went public

Hours later, Etsy announced that it was laying off 80 employees—about 8 percent of its staff—and that Dickerson had been fired by the board.

“When I think about Chad’s legacy, the fact that we’re even here talking about this is crazy,” says a longtime staffer. Etsy, the person explains, was barely a business in its early years and remained so outrageously idealistic that it seemed unlikely to succeed even as it matured.

An Etsy spokeswoman declined to make Silverman available for an interview. Black-and-White Capital declined to comment for this story, but a person familiar with the fund predicts it will continue to push for changes if Etsy doesn’t cut operating expenses further and if gross merchandise sales growth continues to slow.

Etsy moved here in early 2016, having spent about $40 million on a build-out

And yet, says Charlie O’Donnell, a venture capitalist who was at Union Square Ventures when it led the first investment in Etsy, this idealism is one of the company’s most important attributes. He credits it with allowing Etsy to recruit talented engineers away from Google and Facebook and helping it attract a distinctive crowd of buyers and sellers.

Dickerson, and many of Etsy’s longtime investors, saw these flourishes as integral to the company’s appeal—the composting ritual was described in detail in its IPO filing.

A lot of sellers really couldn’t care less about Etsy’s values,” says Jason Malinak

Many Etsy employees believe this in their bones, but there are other schools of thought, especially among Etsy’s sellers, who regard the perks and the rhetoric as a distraction from the actual business of selling stuff.

And then there are the perks

Dickerson, who’d been a senior executive at Yahoo before replacing Kalin as CEO in 2011, attempted a less purist approach, cutting the policy down to 900 words and allowing some manufactured goods starting in 2013.

“Etsy emerged right when this ethos was really peaking,” says Chirag Chotalia, a venture capitalist at DFJ who’s backed several social-minded retail startups, including the Honest Co. and Casper Sleep Inc., both of which are B Corps.

These changes increased revenue—Etsy brought in $365 million last year, on more than $2.8 billion in gross merchandise sales—but exacerbated tensions with sellers, who complained that the growth made it hard for truly distinctive merchandise to stand out

Etsy, in her view, moved “away from the concept of a world marketplace and toward a worldwide Michaels craft store.” From the point of view of an Etsy seller, the comparison to Michaels, the big-box chain that sells discount framing and made-in-China crafts supplies, is damning. But on Wall Street, the Michaels Cos. is worth twice as much as Etsy. Michaels is also just the sort of company that might emerge as a “strategic alternative” for Etsy’s business.

Kalin designed Etsy for sellers like himself, but also, as he often said, to create a sort of industrial counterrevolution, in which factory-made goods would be replaced by handmade ones, and traditional stores by person-to-person commerce.