Two private equity firms disclosed today they have taken a stake in Etsy totaling 8% and have contacted representatives of the company "to offer to engage in discussions regarding strategic alternatives." They also disclosed their intention to "review their investment in Etsy on a continuing basis."
A possible goal of the investors could be to buy, "fix," and sell Etsy - and obviously try to make money in doing so. Another desired outcome could be to get Etsy to sell itself to a third-party - at an attractive price, of course. (Would this be a good time for eBay to make a play?)
All this attention may be curious given Etsy is "small fry" compared to eBay and Amazon. But Amazon may be partly the reason for all the attention Etsy is getting from hedge fund and private equity firms. As traditional retailers struggle, they become less attractive, while Amazon is doing extremely well, giving them confidence in Etsy's potential.
However, a marketplace only succeeds with online sellers, and it is easy to upset the apple cart.
One thing we've learned in covering ecommerce since 1999: sellers vote with their pocketbooks. If Etsy can get buyers to buy, sellers will likely stay.
The reality is, small sellers don't have a lot of options when it comes to marketplaces, and it's difficult for them to attract shoppers to their standalone stores.
That said, making a play for Etsy represents big money, and the marketplace could end up looking a lot different depending on how the current board or potential new owners go about "fixing" it. That means the Etsy seller of the future could also look very different from today.