Etsy Nabs $27M to Get Crafty

Etsy, an online craft marketplace based out of Brooklyn, N.Y., may not be familiar to the West Coast tech set, but for the last three years (in the last year especially) middle America’s been using the Flash-heavy site to buy and sell handmade wares. And now that it’s scored $27 million in a round led by Accel Partners and added Jim Breyer, the same guy who fished Facebook out of Boston, to its board, Etsy may finally start to get the attention it deserves in the tech world.

And it deserves some attention. I think Etsy has the ability to emerge as one of the winners from the frenzy surrounding Web 2.0 and social networks. The site is beautiful (which was one of the reasons Caterina Fake, one of the Flickr founders, invested) and it provides much more that a straight-laced online marketplace. Crafty people can go to the site to see workshops streamed live from Etsy headquarters, for example; they can also connect with one another on various forums. It has a passionate user base, and much like the recently funded Automattic, flirts with profitability on a regular basis.

Most of Etsy’s sellers make a decidedly nontechnical product. In fact, the company’s success so far (it has 650,000 users and lists almost 1 million items) is testament to how the current generation of entrepreneurs is using technology to build something that has little to do with tech. It’s like a Web 2.0-inspired eBay or However the challenge will be to convince those same entrepreneurs that technology is still important when it comes to keeping online users happy.

Etsy CEO and co-founder Rob Kalin, who faked his way into MIT and the New School and figured out how to build a web site only after getting hired by his landlord to do so, doesn’t profess to be a business or technical genius, but he’s using this funding to focus on features that will improve the site, such as a better check-out system and search function.

In his blog post announcing the funding, he notes Etsy’s plans to grow internationally as well as deeper into the U.S. market. To do that, Kalin, who has taken in less than $5 million in funding for Etsy since its founding three years ago, recognizes the need for infrastructure:

“Given our current rate of growth — with how many images we store and how much traffic we serve — we estimate that we’ll need to spend $5 million on hardware and hosting in the next two years. This is not only to keep up with what we have now, but to support new features and expansion. “

Having written about Kalin in the past, and discussed his ambiguous feelings about running a business, more than anything I’ll be curious to see if he stays on as CEO. Both the company and the site are very much a function of Kalin’s views on the world, which has so far made Etsy genuine and led to its success. However, with big money and big plans, Kalin’s attitude may not scale.