Etsy dips toes into crowdfunding

Etsy is trying out a Kickstarter-like crowdfunding service that, if successful, could help the company grow its business by expanding the number and type of items available for sale on its site.

Fund on Etsy, announced Tuesday, comes as Etsy faces pressure to deliver returns to shareholders as a publicly traded company. Etsy’s stock began trading on the NASDAQ exchange in April, but the company has yet to report a profit.

The company grew its revenue by 56 percent last year to US$196 million, but it lost more than $15 million. In this year’s first quarter, it grew its revenue 44 percent year-on-year to more than $58 million, but it had a net loss of nearly $37 million.

Etsy, a peer-to-peer online marketplace for handmade or vintage items, art and supplies, collects fees on products sold and on services like promoted placement of items.

Etsy pre-selected dozens of sellers that will use the crowdfunding service to raise money for their projects. One participating seller is trying to raise $10,000 to create a new line of leather and canvas bags; another wants $4,500 to produce a line of hand-marbled wooden plates.

The test of the crowdfunding service will run through mid-August. Anyone can fund a project, but products can only be shipped within the U.S., and only sellers Etsy picks can launch campaigns.

Backers will only be charged if the campaign reaches its goal. But Etsy says it’s not liable for any loss or damage that backers may suffer, such as not receiving their expected return on investment from the merchant.

“By funding a campaign, you are entering into a direct agreement with the seller,” Etsy says on its website.

Etsy’s site already provides tools to help sellers manage their listings and payments, and promote their items. But Etsy is positioning the crowdfunding service as a way to help sellers earlier in the cycle in areas like financing and product development.

If Etsy expands it beyond the pilot phase, the service could boost the site’s product inventory. But it could also backfire if it erodes Etsy’s feel as a place for unique homespun items and makes it a site dominated by mass produced goods.