Recently, MaRS hosted an intimate sit-down with the CEO of Etsy, Chad Dickerson (@chaddickerson) called “Makers & Marketplaces”. This one-on-one discussion was facilitated by Salim Teja (@salimteja), Managing Director of MaRS’ ICT group. Chad shared his story about joining Etsy, and gave some thoughts on the evolution of digital commerce and brick & mortar retail. This was a great opportunity for entrepreneurs, merchants and tech professionals to gain insight into the company, and learn the successes and challenges of an industry leader on innovation at the front lines.
Below is a summary of the fireside chat between Chad and Salim.
Makers & Marketplaces:
a chat with Chad Dickerson, CEO of Etsy
To start off, can you share with us your life before Etsy, what is your background?
Going way way back, Chad graduated from college with an English Lit degree. His early career was spent in media. His first two jobs were for newspapers, one in North Carolina and another in Georgia. He went on to work for CNN, in the early days. Next, Chad hopped to the West coast in 1998, he said he “felt the call of Silcon Valley”. During that move, he also made a change in his career, for the first time he jumped out of the media all together and went to Yahoo. Chad spent 3 years at Yahoo from 2005 – 2008, running an incubator within the company. It was essentially a startup within a large company. He realized that if he wanted to do a real startup, that he would need to leave. He left after having a call with the Founder of Etsy. He then moved to NYC after 10 years of being in the Bay area. He immediately fell in love with Etsy, and now 6 years later, he is here. But looking back, it was a big risk at the time.
When you joined Etsy as their CTO, the company was going through hyper-growth. What was life like?
It was a year after he started with Etsy that he was speaking with friends in San Fran, he felt he made a career ending mistake. He thought that Etsy was very difficult. From the outside it looked up, up and up. But every startup has to figure out how to grow and scale, and is usually very messy on the inside. Chad enjoys meeting with other CEOs, he goes out for drinks, and asks what’s wrong with their company and then will share the challenges he is facing. Every startup is a mess. Part of being successful is just accepting that it’s messy, and just getting on with it.
“Every startup is a mess. Part of being successful is just accepting that it’s messy, and just getting on with it.”
– Chad Dickerson, CEO of Etsy
In 2011, you became the CEO of Etsy. Was being the CTO before good preparation?
Yes, and no. Yes, in the sense that he had been at the company for 3 years, he knew the board of directors, knew how different teams interacted. But looking back, no, being the CTO did not prepare him for becoming CEO. You can read all about becoming a parent, but you never know until you do it. It’s been really great, but he had no idea what being a CEO would be like. How would he describe it? Well, the difference is when you’re not the CEO, you’re usually not happy with everything “I wish the CEO would do this”… but when you’re the CEO you start to realize you don’t have that same psychology/mentality anymore. You have total responsibility. That’s really profound.
Did you have a lot of external support to grow into the role?
Chad had a relationship with the Board of Directors, and had their support. They’re a unique kind of boss, they have a lot of power over a CEO, but don’t have a lot of say in the day-to-day business activities. He spoke with Fred Wilson on their board, he told him early on, that he was a first time CEO, Chad said “there are a lot of things I’m not going to know how to do, and I’m going to ask a lot of questions”. So admitting he didn’t know everything at the beginning was helpful to him, and his career as a CEO.
Etsy has gone through a tremendous amount of growth. What is the scale of Etsy?
When he joined Etsy in 2008, they ended the year with $80M US in total sales on the site. Last year they ended with $1.35Billion US. They are about 600 employees now. They started with 40 when he began. Now, Etsy has over a million sellers worldwide. They’ve grown more than 20x since he’s been there. No matter how the company goes, or how strong your business is 20x growth is a big challenge
How do you manage the day-to-day business vs keeping an eye on innovation. What’s coming next? How do you deal with that?
You have to manage your time really well and he found that he isolates his time, and thinks about longer term things. Just before he came here, he had to do a quick phone call with their bank on a very minute matter, a tactical matter but important. There are always things happening, and you have to carve out time. You have to get up early. That’s the only time in the morning when other people aren’t awake. He does most of his thinking during the early morning. A quick note, in Peter Drucker’s book, The Practice of Management, he quotes a study of Swedish CEOs in 1952, they studied them and the CEOs who got more done are the ones who got up early. Even in 1952 a CEO couldn’t work without being interrupted for more than 20 min. So you have to do your thinking without being bothered or distracted.
What surprised you about the maker market?
It touches a lot of people. You see a converge of online platforms like Etsy, Kickstarter, helping people to make things. People are connected to markets, and have access to technology that people couldn’t predict 5 years ago (ie. 3D printing). Many places around the world, the economy has been rough. So there has been a need to make supplemental income. So when you combine maker tools and supplemental income, it’s recipe for explosive growth.
Are you seeing a trend globally?
It amazes him when he travels globally – the need to create is a very universal human need. In all the markets people are making different things, cultures are different, but making something and selling it to someone else, is one of the oldest things in human history. It’s a big strength.
How would you describe Etsy?
Etsy is definitely a marketplace, but different from traditional eCommerce. Furthermore, Etsy is a brand, with over a million sellers, and therefore a million micro-brands. When you’re running a marketplace you want the Etsy brand to be strong, but also the micro ones to make the marketplace strong. They have a million people excited about being on Etsy. You always have to balance the brand and micro brands.
Quotes on business philosophy mention that many eCommerce companies rely on metrics to guide their business. What is yours?
Chad doesn’t have to work hard to hear their sellers. They reach out to him. The good news about Etsy is that sellers are vocal. The executive team of Etsy often make important decisions by talking to their sellers. Example: they recently did a wholesale deal for Nordstrom, a department store in US, if you look at them a year and a half ago – Nordstrom and Esty aren’t obvious brands that compliment each other. The executive team at Etsy had arguments on whether or not it was a good brand fit or not. One night, they had an event where they were meeting sellers in NYC, and asked them directly for their opinion, and the overwhelming majority said yes they would sell through Nordstrom if the opportunity presented itself. So in that situation he was getting enthusiasm from sellers, and they helped to make an important decision for the business.
Will there be more partnerships with brick and mortar retailers in the future?
Absolutely. They just started rolling out Etsy Wholesale. Many marketplaces and eCommerce sites are building offline retail. Etsy sellers have been selling offline informally for many years. Now they’ve built a platform to connect with retail buyers. The way they think about it is, instead of building their own stores, they’re letting a thousands flowers bloom. So all those boutiques can now buy merchandise from Etsy sellers!
How would you describe the NYC tech scene and the region in general? There’s also a lot of talk about other regions like NYC (ie. Boston, TO) that are building the same eco system, and are enabling high growth companies to take flight. What are your thoughts?
It’s really exciting. Comparing it to Silicon Valley, one of the reason Chad went out to California, everywhere and everyone is a designer, product manager or engineer. He then left the San Fran because then everyone was that something. It was getting homogenous. So when he looks at NYC, it’s an enticing ecosystem. It’s very strong (foursquare, Kickstarter etc all began there), it’s a diverse community. The types of platforms they build are for real people and not for alpha geeks. It’s an exciting ecosystem but also still feels like an underdog which makes it enticing. A city of 8 million people, it still feels like there’s a lot of desire to improve, and the community is really small.
Etsy is over 500 people now, and you’ve grown rapidly. How is the corporate culture?
Etsy has a really out spoken culture. One of the first things they notice is how many reply all emails there are. People like to talk and comment on things. They’re super creative. They’re doing a hack week, and not just engineers are doing projects. A few weeks ago they did their 3rd annual talent show. Just unbelievable – everything from juggling real knives, amazing musicians, had people do standup comedy. It’s a creative company. It’s a company and in its creativity, it actually cares about crafts. People are really devoted and compassionate about the company. It’s an open culture. When he started, he would describe Etsy to people and say there was no order, and it was archaic. So over the years he’s kept the spirit in the chaos but wrapped it in a success business.
What are your thoughts on Canada and the market here. What you want to build here?
Canada seems like it has a really great startup culture. When he was walking around MaRS he was seeing Etsy, Songza, Indiegogo, etc. Canada is making a good start. It feels a lot like NYC, a big tech culture that is also a part of a large city. And that’s the way it should be. When people ask him about NYC tech culture and what makes it special, he says it’s because they’re not like Silicon Valley. Toronto is creating its own culture which is the right thing to do.
We’re seeing the rise of social values becoming important. Can you speak more towards becoming a B Corp?
Being a B corp you can use the power of business for social good. So it’s people and profit. How Etsy thinks about this is, the internet connects people all over the world, and you can use that network to create good with communities with people that you couldn’t before with traditional business. Etsy has always been a community based business, so in that sense they needed to codify the community.
Wanted to touch on some comments regarding a very focused view that Etsy took about increasing the number of your women developers. A 500% increase in the number of your women developers is a huge increase and speaks to your values. How has this impacted the business?
In 2012, and early 2013, they really began asking themselves how do they get more women in engineering at Etsy. More women in engineering is a good thing and is especially important to Etsy. 88% of customers are women. Forgetting all the gender issues around it, a large male population building the platform that is targeted towards women, doesnt make sense. So they asked themselves how do they attack the problem? People would say it would take years etc…
What they did was starting to talk to Hacker School, its’ a new breed of training programs, and they offered scholarships to women to go through the hacker school in NYC and they insisted that 50% those people in the class had to be women. So it’s very simple, a significant group of women went through that class and they ended up hiring them. So that’s how they dealt with the systemic issue. At Etsy they still don’t have a large enough population of women on the team, but it was a great quick way to attract more without having to start with early education in children.
How did you build critical mass on the buyer side for Etsy?
With all marketplaces they all have to deal with the two sides: supply an demand. Etsy got lucky because two sides of the marketplace were really the same person. Sellers were also buyers in the early days. So that made things much easier to get off the ground. If you think of Etsy taking traditional craft fairs and putting it online, those sellers will step out from their shop and go buy things. They focused on sellers early, but sellers were also buyers! That obviously doesnt help other marketplaces but it worked for Etsy!
Etsy has obviously influenced culture and made a shift. With so many young startups that are looking at Etsy’s success and trying to replicate the model. What does Etsy see as the future of innovation? How do we stay ahead of the market. What will differentiate them in the future?
The seller base that Chad mentioned earlier, the micro-brands, he thinks that as Etsy grows, continuing to emphasize the stories of the “people aspect” of the marketplace. You’ve seen other marketplaces develop (ie. ebay) they were very “people focused” in the beginning. Then it became all about large retailers and it lost the human face. Right now Etsy has about 1 million sellers, and no matter if it’s 10, 20, 30 million sellers, as long as they continue to focus on the human element, it will differentiate them. They’re not trying to compete with Amazon. They want it to be the people powered marketplace!
Etsy recently purchased Grand Street. What was the reason for thinking that path, and going down electronics?
When you take a step back and look at the marketplace, there have always been electronics. When they saw Grand Street, they were just across the river from them, and they liked the team, lots of creative things happening with the electronics category. They were finding ways to build things, and creative things. Stay tuned. More to come with them and Etsy!
How do you think about profitability and sustainability model for Etsy?
Profitability is important to them. They’ve been profitable since 2009. The 3.5% is just one revenue stream for Etsy. They have a payment system, onsite ads, shipping services, and listing fees. All of the pricing on the site is very reasonable for sellers. But there is other revenue coming from other places. The way they think about it, when they talk about sustainability and B corp, being sustainable is important. It’s counter intuitive for internet companies. They look at it as losing money. They’re building a platform they want to last forever. So finding ways to keep sustainable for years to come. Etsy has been around for 9 years, and the majority of those years they’ve been profitable.
Focusing on interacting with the community, venders and with the buyers. Could you speak to some of the challenges over the last few years, through the conflict to make a personal platform, but then dealing with massive companies in China selling items on the site. That large explosion of product, and how sellers reacted and then how Etsy reacted, to keep focused on the end goal?
Etsy updated their policies in October. It’s important to note that they didn’t open Etsy to giant faceless Chinese factories. Some of their critics say that you find things on Etsy that are mass-produced. They have a team that’s always cleaning those out. It’s usually less than 1% on the site. When they updated their policies, their sellers that started in 2005, were building successful businesses and were getting confused by policies. They had something called partial production where they said you can partially produce something and sell it as long as it comes from you, but it was confusing. They didn’t have so much of a problem with outsourcing to Chinese factories. They were enforcing the rules so tightly that they had to shutdown a mother preventing her working with her grandma across state. So they updated their policies to say that “whatever you make, comes from you. You have to take responsibility through the entire process. The last part is transparency, you have to be open and honest about how things are made and sold”. In a two sided marketplace with lots of different people with diverse needs, you have massive buyers and massive sellers, you can’t always make decisions that make everyone happy. So they always ask themselves when they make a decision, will this make lives better for the vast majority of sellers on Etsy? Sometimes it doesn’t always work out for everybody, but they try to make it the best they can for the greater good. You can’t make everyone happy all the time, as the community grows.
Entrepreneurs look up to Etsy and seen how you’ve scaled and incorporate social into the business. What is your advice to persevere? How can entrepreneurs be successful?
One of the things that has been helpful for him has been his executive coach. Everyone needs a mentor. One of the things he’s learned from his coach is that Chad had a mentality that once he does something it will get so much easier. What he learned is that it’s never easier. It sounds defeatist, but it’s not. Better to recognize that it will be difficult, that will help you to preserve. Don’t think that if you do one thing it will get easier. Just engage and embrace the struggle and always know that it will be there. It will make you stronger.
“Engage and embrace the struggle and always know that it will be there. It will make you stronger.”
– Chad Dickerson, CEO of Etsy