• by Thom Forbes  @tforbes, April 16, 2015

Etsy, which has crafted an authentic brand out of its homespun ethos and given artisans of the maker movement a cookie-cutter path to distribution and, sometimes, sustainability or more, priced its IPO yesterday at $16 a share, adding up to a market valuation of $1.8 billion. It raised $267 million by selling 16.7 million shares yesterday, the AP reports, and will begin trading publicly this morning under the Nasdaq ticker symbol ETSY. 

“Hearkening to its roots as an online marketplace for the masses, the company made an effort to sell shares in its IPO to a large swath of smaller investors,” writes Corrie Driebusch in the Wall Street Journal, by setting up a program that gives them the opportunity to buy as much as $2,500 in Etsy stock.

But it also “concentrated shares among a smaller number of institutional investors than is typical in IPOs, frustrating some fund managers, according to people familiar with the process,” Driebusch reports. 

One thing it has yet to figure out is how to make a profit. But, points out NPR’s Aarti Shahani, revenues last year grew 56% from the year before to $195 million. 

Triton Research’s Rett Wallace tells Shahani that he “expects the company will be more profitable than many of the Internet companies that are based on a so-called freemium model.” He does, however, “worry that the marketplace for handmade goods isn't big enough, and Etsy will have to figure out new lines of business to make real money.”

The company was founded in 2005 in Brooklyn — “the epicenter of the do-it-yourself (DIY) movement,” claims the BBC’s Kim Gittleson, and “has capitalized on a generational shift, where younger consumers value knowing where and how their purchases are made — and are willing to spend more for that knowledge.”

It also has a presence in Hudson, N.Y., a former factory town and whaling port two hours north of NYC that is “full of creative types.” 

“We believe that business has a higher social purpose beyond simply profit,” CEO Chad Dickerson wrote in a 2012 blog post cited by Gittleson that revealed the company had received its certification as a do-good B Corp.

“The biggest question facing Etsy is how the e-commerce company can ramp up in size while maintaining its identity as a place where customers can find unique goods that are not mass produced,” writes Matt Egan for CNNMoney. “Losing that niche identity could do real harm to Etsy's business, which has thrived thanks in part to its fiercely loyal base of buyers and sellers.”

“Investors need to assess ‘the confidence that this company can scale without going to the dark side of full commercialism,’” Kathleen Smith, a principal at Renaissance Capital and author of IPOs for Everyone, tells Egan.

Indeed, “the fallout from a decision to allow large manufacturers to sell their products on the boutique site remains to be seen and poses risks for investors going forward,” writes Tom Risen for U.S. News & World Report. It has resulted in “increased examples of sellers violating Etsy’s rules against trademark violation and false advertising, including vendors marketing knockoff goods resold from manufacturers based in China.”

“Etsy has sacrificed part of its soul, part of what the company used to be, and may pay a price for that,” says Wedbush stock analyst Gil Luria.

Bloomberg’s Katie Benner is pessimistic that Etsy will be able to fully live up to its credo of not letting “greed get in the way of doing good” now that it’s part of “the Wall Street machine — bankers, analysts and big institutional investors who only care about the stock price going higher.”

But, even as a person who “[loves] that Etsy gives a platform to someone who can crochet these shorts and sell them to men who love pants made of yarn,” she points out that “Etsy has been sensitive to fears that people who outsource production could squeeze out smaller sellers who can't compete on volume and price. The company has been careful to vet vendors who use outside help, approving less than 50% of applicants to sell wares on the platform.”

When we see two men on the same street in Williamsburg wearing neon psychedelic pants, we’ll know Etsy has truly sold out.