Is Etsy Crafty Enough for an IPO?

Etsy, the online marketplace for crafts and vintage items, is hoping to raise $300 million in what could be the biggest IPO to come out of New York since 1999.

An early look at Etsy's ticker symbol.

Photographer: Mark Ovaska/Bloomberg

Bloomberg News reported yesterday that Etsy, the online marketplace for crafts and vintage items, may be getting ready to do an initial public offering. The site that started as masking tape on the floor of a Brooklyn apartment now has about 26 million items for sale, and it is hoping to raise $300 million in what could be the biggest IPO to come out of New York since 1999.

It's only a coincidence that this comes soon after Instacart, the online shopping service, announced it has raised more than $200 million in venture funding. But both represent a rising trend in recent years: the success of companies that enable the freelance economy. Like Uber, AirBnB and a host of others, these companies allow people to do what used to be full-time work as part-time gigs, or to strike out on their own instead of working for an established company.

There are a lot of great things about this trend: It gives more choice to consumers while enabling people in need of cash to easily pick up extra work. They're not all the same, of course: Uber and AirBnB face serious regulatory risks, while I doubt that American cities are going to form crafting commissions to crack down on wedding accessory wildcatters. But there's one risk that they all face: Can these freelancers make enough money?

I talked about this last week in regards to Uber and Lyft: It's not clear to me that drivers are doing much better than they could elsewhere, once you account for the cost of gas, as well as the wear and tear on their cars. You see this problem a lot with small businesses: Unfamiliar with basic accounting, gung-ho entrepreneurs frequently end up selling their product at a loss because they're not keeping track of all their costs, including the cost of their time. After a while, these things shake out, and the people who are losing money get out of the business. But before that happens, you can see a bit of a bubble, where products are oversupplied at too low a price and consumers flock to snap up the resulting bargains.

And indeed, Slate reports that Instacart's team of freelance personal shoppers are already complaining that they are not reimbursed enough to cover the cost of driving around picking the stuff up. Eventually, it may have to pay more -- and it remains to be seen whether consumers will be willing to use the service at the resulting higher prices.

The other problem these sorts of services may have to contend with is the economic recovery. Right now, there are a lot of stranded workers out there, for whom even a small amount of money, earned in a basically dignified way, is preferable to vegging out in front of "Law and Order" reruns. It may not be a coincidence that the rise of these "be your own boss" services occurred in the aftermath of the worst recession in 70 years. As the economy improves, many of those people will be able to get full-time jobs (we hope). Will small-volume Etsy sales, or driving a car, be able to compete?

For Etsy sellers, I'd guess the answer is "yes"; aside from complaints about dubious resellers, most reports about Etsy businesses paint the core demographic as housewives and avid crafters who are picking up a little bit of money on the side. Those are relatively stable groups. Still, Etsy might see some attrition if better jobs present themselves, or the spouse's income improves to the point where the family no longer needs the extra cash. So go ahead and buy that handcrafted Irish lace ring-bearer pillow -- but you might want to wait a few years to buy the stock.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

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