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Etsy, an online marketplace for handmade and vintage goods, announced yesterday a pilot program, called Fund on Etsy, to crowdfund new products. From June 16 to August 16, a select number of sellers can use the site to raise capital for the manufacture of their new products as part of a pilot program.
This new crowdfunding program comes at a time when the site is in dire need of a new revenue stream. Despite a strong IPO debut in April, shares have dropped almost every day from $35.74 on the first day of trading to $16.08 today. Etsy announced they will take a 3.5 percent of each transaction along with a 20 cent posting fee.
Establishing a rewards-based crowdfunding platform, rather than equity-based, seems to be a good fit for a peer-to-peer marketplace like Etsy as most sellers on the site may not be far enough along in their businesses to seek out actual investors. Still, this new program, if successful, will allow sellers to not only sell their wares directly to their customers, but will allow them to address issues that stem from undercapitalization. One of the major challenges sellers on the site often report is limited access to capital which naturally prohibits quantity of manufactured goods.
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