Continuing my series of interviews with interesting personalities at the World Economic Forum at Davos: Here’s a 6 minute talk with Etsy founder Robert Kalin on the state of his four year old business. Robert Scoble helps with the interview.

28 year old Kalin, who coincidentally looks a lot like Facebook’s Mark Zuckerberg, talks about how he’s grown the person-to-person ecommerce business despite competing directly with eBay. Etsy focuses on hand made items, and has a rabidly passionate community of buyers and sellers (also, 97% of Etsy users are women). Kalin also eats his own dog food – most of his clothing was purchased from the site, he says in the interview.

$100 million worth of goods were sold on Etsy in 2008. The company is generating over $1 million/month in revenue, Kalin told me.

We first covered Etsy in late 2005. Since then the company has raised over $30 million in financing, and counts Jim Breyer as a board member (he’s also on the board of Walmart, Facebook and Marvel).

The full transcript is below:

Michael Arrington: All right. So we have cornered Robert Kalin, the founder of Etsy and Robert Scoble just won’t stop calling me [indechiperable]

Robert Scoble: No, I won’t. [laughs]

Michael: And we are officially in the hallway, which means we can be on record, which is great. I wanted to talk to you a little bit about Etsy, because I’ve been actually writing about the company since I think 2005.

Robert Kalin: Yep, you were the very …

Michael: We never met and you had a lot of success since then.

Robert K: Yeah, you were the very first person to write about it on the blog.

Michael: When was that? When did you launch?

Robert K: I launched in June of 2005.

Michael: How old were you then? 16?

Robert K: I was 20, actually. I age in two year increments. [laughs] I have a portrait in the attic that ages for me.

Michael: So you were 20 years old…

Robert K: No, no, no, I was 25 and I launched it and so I’m 28 now.

Michael: OK and what is Etsy?

Robert K: Etsy, the standard pitch, online marketplace for handmade goods. There’s also pictures and supplies so it’s just basically a P2P marketplace. It’s really about the stories that the items tell that you buy. So…

Michael: Handmade goods. How big is the market for handmade goods?

Robert K: It was about $100 million last year.

Michael: How much of that did you have?

Robert K: I mean, that’s just on Etsy.

Robert S: So, handmade goods period if you think back?

Michael: $100 million worth of goods were sold on Etsy in 2008.

Robert K: A little bit less than that, but yep. So that’s the general size… Again a lot of people…

Michael: What’s the most popular thing that gets bought?

Robert K: My favorite categories are art and music but the most popular stuff on the site, because it’s 97% women– the user base, jewelry is the number one selling category. And behind that there is also a really vibrant P2P side of it.

Michael: Is it all really crappy handmade jewelry?

Robert K: Oh, come on, crappy and handmade are in my mind oxymoronic because any class of goods, the most expensive stuff …

Robert S: I’m learning a great interviewing technique here, just slam the interviewee [laughs]

Robert K: It’s all handmade. Right, like suits. We’re the most expensive suits? Handmade suits.

Michael: So just because it’s handmade jewelry it’s nice?

Robert K: No, anyone… you can’t make these generalizations across the whole market.

Michael: Is it just like braided beads and like is it silver…

Robert K: Oh, no. there is very, very fancy metal smithing going on.

Michael: Huh. Have you ever bought anything on the site?

Robert K: [laughs] Have I ever bought anything on the site?

Michael: You’ve never bought anything on Etsy, have you?

Robert K: I’ve bought most of what I own. I am actually trying to curate my entire life pretty much with handmade stuff. No, I just bought…

Michael: Really?

Robert K: One of the things I was waiting for …

Michael: Is everything you’re wearing bought on Etsy today? Anything you’re wearing?

Robert K: A lot of it is. I mean, the shirt, the undershirt…

Michael: The shirt?

Robert K: The stuff you can’t see, the underwear…

Michael: The jacket?

Robert K: Ah, thrift store.

Michael: OK.

Robert K: But you know, similar aesthetic. No, when I started Etsy I was waiting for a luthier to show up because I wanted to buy a guitar on it. So lo and behold about a year after I started the site, a guy named Armor Guitars, James in Springfield, an hour above national in Tennessee– and actually we have a feature called “Alchemy” where you can specifically request people to make things for you. So I requested that he make me a guitar. I went down and visited him while he was making the guitar. But the scope of what is handmade is huge, I think.

And especially in times like this. We just had record month, after record month, after record month. Even when the economy is doing what it is doing…

Michael: What are you doing now, a million a month you said in gross merchandise sales?

Robert K: Oh no, GMS per month now is…

Michael: I’m sorry, a million a month just in fees.

Robert K: Right, total revenue, because we have three different revenue sources. We don’t disclose the exact amount, but yes.

Michael: What are those revenue sources?

Robert K: There’s 20 cent listing fee, a 3.5% sales fee and then we run our own in-house advertising program called the Showcase. So those three things constitute our total revenue stream.

Michael: OK. And you have raised you said $35 million?

Robert K: Yeah, we had angel money from Caterina and Stewart and actually Joshua Schacter from del.icio.us as well.

Michael: The founders of Flickr and Joshua Schachter.

Robert K: It was kind of like right after they sold their companies, which was really painful to me. I invested in Etsy, and then the first VC round after that was led by Union Square Ventures with Fred Wilson joining the board. And then once… you know, I always wanted to do things in stages. So once we really built a solid business off that I went to kind of the standard [indecipherable], did that whole show out there and ended up going with Accel with Jim Breyer and joining the board.

Michael: So Jim Breyer is also on the board of what? Marvel?

Robert K: Wal-Mart and…

Michael: Wal-Mart and…

Robert K: FaceBook …

Michael: FaceBook. So you’re in good company there.

Robert K: Yeah, I mean, it’s interesting because he speaks in the “we” as so many different companies.

Michael: Does he ever mistakenly call you Mark? There is a resemblance. [laughs]

Robert S: Yeah, I had to look over the table twice. Haha.

Robert K: I think he’s a little bit more of a keen observer than that, so no, he’s never gotten us confused. That’s for sure.

Michael: So what does eBay think about a this whole thing?

Robert K: We have pretty friendly relations with them. Even early on, I’ve been asking them for advice and some of the people say that a lot of the spirit that eBay had early on they see really evident in what Etsy is doing now.

Michael: How many of your 60 employees used to work at eBay?

Robert K: I don’t think any. No, this is the other benefit of being an east coast company is that we’re hiring from a completely different talent pool. We actually did. We had one. A guy who came in as V.P. of Engineering. And he lasted three months and then said he was going back to work at a big company. He tried…

Michael: He couldn’t take your autocratic management style?

Robert K: Couldn’t take the non-autocratic style of getting things done I guess. It’s been interesting to see how the culture shifts as you grow with more people as well.

Michael: What’s the average transaction size on the site?

Robert K: $15 and people buy two things on average at once, so about $30 a checkout.

Michael: They buy two crappy pieces of jewelry at one time?

Robert K: Oh, come on Mr. Arrington.

Michael: No, honestly I haven’t been on the site since I wrote about it the last time and I’m going to go on it in a second.

Robert K: What do you like to buy? What do you value in life? Fine cheeses? Fine suits? Fine wines? Cars? Women?

Michael: I’m not that much of a material guy. I value friendship. Can I buy friendship on the site?

Robert K: Yes, that’s a big part of shopping on Etsy. You get to… [laughter]

[Cross talk]

Robert S: How much of the $15, how much do you get to keep?

Robert K: There’s a 3.5% sales fee on the site. So our goal there is to keep it low, especially below eBay because logically we’re competing with them, so we undersell them in price point. But if you search for jewelry on Etsy now, there’s about ten times as much jewelry on Etsy as there is on eBay. So the volume…

Robert S: My ex-wife was an eBay power seller and she hates eBay. She’s moved her jewelry store, actually she sells jewelry and it’s pretty nice jewelry. She’s moved it off of eBay. There’s a whole trend going on out there in your favor.

Michael: Hey, hey, this is my interview.

Robert S: Why?

Michael: Because I have the camera. [laughter]

Robert S: Well that doesn’t matter. [laughter]

Michael: Robert, thanks very much for your time. I appreciate it, except for that one thing that we’ll cut out and people won’t have any idea what I was just talking about.

Crunch Network: CrunchBase the free database of technology companies, people, and investors

We first covered Brooklyn-based Etsy, which has a cult-like following, back in 2005. Since then the company has raised over $30 million in venture capital. The most recent Comscore stats show nearly 2 million monthly visitors and 83 million page views worldwide.

This is a blow to Yahoo on par with the loss of Bradley Horowitz, Dickerson’s former boss, earlier this year. Dickerson ran Yahoo’s developer platform and oversaw their various internal and external Hack Days.

Dickerson joins the ranks of departed Yahoo execs, which gets larger every week. He wrote a long post on his personal blog about his reasons for leaving, but he doesn’t say the one thing that is on every Yahoo’ers mind: they crave leadership, and they aren’t getting it.

Crunch Network: CrunchBoard because it’s time for you to find a new Job2.0

Today, Henry Blodget & Co. at Silicon Alley Insider try to peg valuations on 25 private Web companies. Facebook is at the top of the list, but it is valued at $9 billion instead of the $15 billion that Microsoft’s investment put on the company. Why? Because everyone knows that the $15 billion is too high, so SAI decided to apply a 25X multiple on Facebook’s 2008 revenue forecast of $350 million. Does that make its valuation correct? Probably not. But in the absence of any true market pricing, anyone can go ahead and make a guess.

The same goes for any of the valuations on the SIA 25 list, which puts Wikipedia’s worth at $7 billion, Craigslist’s at $5 billion, Mozilla’s at $4 billion, LinkedIn’s at $1.3 billion, Ning’s at $560 million, RockYou’s at $325 million, and Spot Runner’s at $250 million. Note that three of the top five (Wikipedia, Craigslist, Mozilla) are essentially not-for-profits sitting on very valuable assets. The valuations for those three are based on what they would be worth if they were run differently with an eye towards maximizing revenues—which, of course, could impact how consumers interact with them, which in turn would impact their valuations.

Another 25 startups make up the contenders list, which includes Federated Media ($245 million), Yelp ($225 million), Meebo ($220 million), Mahalo ($150 million), Digg ($125 million), Etsy ($115 million), Powerset ($80 million), and Twitter ($75 million). A full list that changes dynamically every 20 minutes, based on changes in the Nasdaq, can be found here (although, exactly how the valuations are linked to the Nasdaq is never clearly explained)

Some of these valuations have more merit than others. Some have none whatsoever. For instance, SAI gets at its $125 million valuation for Digg by “splitting the difference” between a $200 million buyout rumor we reported and the $60-to-$80 million that Kara Swisher came up with. Splitting the difference between two rumors is not exactly the height of financial analysis.

But what are you gonna do? At least SAI acknowledges that the list is an imperfect work in progress. Don’t get too caught up in the actual numbers. It is more useful really as a starting point to think about relative valuation between different startups. Is Meebo really worth three times as much as Twitter? Is Ning worth as much as Slide? Let the parlor game begin.

Crunch Network: CrunchGear drool over the sexiest new gadgets and hardware.

Etsy founder Rob Kalin says in a blog post:

This means that we now have the resources to extend Etsy’s reach in this world, to enable so many more people to make a living making things. We want Etsy to exist for hundreds of years. Our goal is for Etsy to be an independent, publicly traded company, focused on all things handmade.

He says that Etsy is “almost break-even” on profits, but he plans on using the money to:

—Buy $5 million worth of hardware and hosting over the next two years.
—Support more currencies and languages other than the U.S. Dollar and English.
—Fix the checkout system (there is none now, every buyer has to pay every seller on an individual basis. There is no Etsy payment system that works across all sellers).
—Fix search.
—Provide a cushion in case of a recession.
—Offer customer service
—Provide competitive wages and take care of his employees.

In other words, Etsy is growing up. And it needs cash to do so. The site reached 1 million unique visitors in the U.S. last month, according to comScore (1.6 million worldwide), doubling from last April.

Update: the word on the street is that etsy was valued at $90 million pre money in this round. wow.

Crunch Network: MobileCrunch Mobile Gadgets and Applications, Delivered Daily.

Etsy does lots of things like ebay – They charge sellers a listing fee and final sale percentage (although at $.10 and 3.5% they are way below what ebay charges), there is an ebay-like feedback system (side note: there is a huge market waiting out there if someone would create an independent third party feedback system with open data and APIs), and they have integrated paypal as a payment option.

Unlike ebay, Etsy has architected the buyer experience from the ground up using web 2.0 priciples.

Tagging

First, Etsy has a very flat taxonomy – top level categories such as Bags & Purses, Toys, etc. Everything underneath these top level tags is based on seller tagging. For instance, look at the “Bags & Purses” category and note the tags (called subcategories) on the right hand side. Click on anyone of these and you go deeper into the taxonomy…although really it is a folksonomy. Further refine items by clicking on additional tags, or on a different set of tags based on materials used to produce the product. The benefit of this folksonomy is that it is user generated and based on popularity. If a new item gets hot fast, the folksonomy will take that into account. It’s a beautiful use of tags and the first launched product I’ve seen that does this.

Flash

Etsy also does some amazing things with flash – the geolocator on the home page is a great way to find sellers by location. You can also use their “shop by color” widget…less useful but an interesting feature. Finally, they have a time machine feature, although I can’t figure out what it does.

Nice product. It looks like more features are coming, too. Check out their blog.