Etsy: Rob Kalin

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Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. I'm Guy Raz, and on the show today, how Rob Kalin followed his passion for making things by creating Etsy, one of the biggest and best known online marketplaces in the world. Let me tell you a little bit about what Rob Kalin, the founder of Etsy, is up to these days. He left the company more than a decade ago, and today he lives and works in a small town in upstate New York in the Catskills. Rob rebuilt his entire house from the ground up. He even built the furniture for it. It's actually beautiful stuff. Super spare and minimalist wooden tables and chairs. He started another business not too long ago making handcrafted high-fidelity speakers. Don't bother looking for them at Best Buy. They are custom-made and very expensive. Someone is actually selling a pair of them online for close to $50,000. Soon Rob plans to launch yet another business, a learning tool for kids that blends technology with old school hands-on toys. Now, the point of all this is to explain, if it's not already clear, is that Rob is very much a maker. He is exactly the kind of person he had in mind when he created Etsy. Back in 2005, when the website went live, Rob and his co-founders wanted to create a marketplace for makers who could sell their stuff and be part of a community. Today, Etsy is one of the biggest online marketplaces in the world. Close to 100 million active buyers and about two and a half billion dollars in annual revenue. But a lot of that growth actually happened after Rob left the company. Like many of the stories we've told here on the show, founders, even the most creative and passionate and visionary founders, aren't always the best leaders. Or they might be great leaders at first, but not necessarily the right people to grow and scale a company. And that's okay. There's nothing wrong with that. But this is exactly the challenge Rob faced back in 2011. He didn't exactly leave Etsy to sail off into the sunset. Rob was fired suddenly and without warning. And for Rob, it was a huge personal blow. He was 31 and Etsy was his life's work. For a few years, he brooded over what happened, but eventually Rob recovered and settled into a life as a maker. It didn't hurt that Etsy's growth and Rob's stake in the company also made him a wealthy man. So, this is a story of triumph and loss, wild success and failure and everything in between. But we'll get to all of that. What you need to know for now is that Rob Kalin grew up in the 80s and 90s just outside Boston. His mom was a teacher and his dad was an architect. Rob describes himself as the kind of kid who had trouble sitting still. And as he got older, school got a lot harder to the point where he just decided to leave.

So, you would just you just wouldn't I mean, and and I mean, didn't that catch up with you? I mean, didn't eventually like your grades start to suffer and your parents start to sort of ask you what what's going on?

So you did manage to graduate from high school I think and fair to say kind of barely.

I guess you spent a little bit of time at art school in Boston after high school, but you eventually made your way down to New York.

And what kind of construction work were you doing in New York?

When you were in New York, you also kind of went back to school. Well, not kind of, you did. I think you took some classes at the New School and like Greek and Latin and then you transferred to NYU at the Gallatin School there and you studied classics there as well, which seems like kind of a departure from what you were doing with photography and the arts. So after you graduated, what kinds of things were you thinking about doing?

And did you know how to make a website?

What was what was Get Crafty? Get Crafty was

And this was not a commercial website. It was just like a community board for people to like I guess post photos of what they were working like the crafts that they were working on.

And when you say Chris, you're talking about Chris Maguire, the guy you met at NYU, who would go on to found Etsy with you.

Yeah. By the way, what kind of furniture were you making?

Were your desks, I mean, really good? Were you good at woodworking?

And this is like 2005.

And by the way, the name that you picked for this website, Etsy, where did that come from?

And you'd heard this, you thought that you had heard somebody say Etsy and affirm?

So you said you were thinking about a global brand. So I mean it sounds like from the get-go you had ambitions about this. It wasn't just let me just build this thing and sell my woodworking stuff. It was more like let's see what we can do. Let's see how big we can make this.

When we come back in just a moment, how Rob and his partners launch Etsy, move from an apartment into an office, which they soon discover is not an easy place to pull an all-nighter. Stay with us. I'm Guy Raz and you're listening to How I Built This.

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Hey, welcome back to How I Built This. I'm Guy Raz. So, it's 2005 and Rob, his friend Chris Maguire, and another guy from college, Haim Schopp, decide to devote their full attention to building the website that will become Etsy.

Yeah. Tell me, how much did you need to raise or did you raise initially?

But at that time help me understand what you needed the money for. I mean, presumably at the time it was just more expensive to build a website and to get servers. Was that why you needed to raise? I mean today if you were going to start a business you would just you and some friends would just go start building a website and you wouldn't need much money to do it. But in 2005 I guess you needed the money to actually buy the services that you needed to make the site.

All right. So, so the three of you, Chris, you and Haim are basically starting to build out this site. And before you even launched it and went live, what was your business model going to be like? When you went to Spencer, the guy whose bar you built and who was your investor, and he was like, 'Okay, how are you going to make money?' How did you explain it to him even before you went live?

And when people asked you, well, how is this different from eBay? Your answer was, well, this is not eBay at all. We're not selling everything. We're only selling handmade items, things that people make.

All right. I guess from what I read, it took you guys just two and a half months to build this website and you launched it in June of 2005, etsy.com. And then what happened? Like you hit the go button, you know, it's out there in the world, but this is still early days on the internet. And what happened? Did anything happen? Did people start to find it immediately or not really?

So, basically, people started to discover it from blogs and from other places. And what were the kinds of things that people started to sell on it initially?

Yeah. But other sites at the time were doing that kind of thing too. So, how did you distinguish yourself from like eBay or other places that sold the same types of things?

I guess like pretty soon after you launched it, you started to think about obviously this was going to take more money if it was going to become something bigger. And I guess you got in touch with the founders of Flickr, Katarina Fake and Stuart Butterfield, who were married at the time, and you wrote to them because you liked Flickr and you sort of asked for their advice. What tell me the story.

And you were, I mean, I guess the attraction at that point was that you had people set up accounts and they had storefronts and the more accounts they set up the more essentially users you had. And you mentioned that in year one they sold like a million dollars worth of things on Etsy, right? So the artists sold about a million dollars worth of products. Is that right? Is that your memory?

And a million dollars in sales was great but you guys only got 3 or 4% of that. So your revenue was still fairly small but obviously you were showing a trajectory of significant growth.

Other piece of how much we'd already captured and when you're talking with these institutional investors, you know, this was in some ways the best piece of business advice I ever got from Shawn. It's a little bit crass in his Brooklyn way, but he's like, 'You're the drug dealer, they're the drug addict.' He's like, you have what they want and maybe you'll let them invest. And obviously, right, that's very haughty and got a lot of swagger to it, but it was definitely helpful to feel like there was some kind of safety net there in the beginning. So all right. So you, I guess, on a trip, or maybe this first trip to San Francisco, going back to that trip when you met with Katarina and Stuart, they introduced you to some potential investors. And because the idea was, from what I read, you wanted to raise about a quarter of a million dollars at that point.

So when you, I mean when you guys were really, you know, now in the thick of it, you know, you launched in the middle of 2005 and you're growing organically. How, I mean, tell me a little bit about what do you remember about just the work environment? Did first of all, did you guys initially you were doing this out of your apartment, but at what point did you actually get like an office to work out of together?

Um, and I may have missed this, so let me ask about this. You were traveling a lot in the first year of Etsy's launch. Why, where were you going? What were you doing?

How were you, I mean, when you would go to craft fairs outside the US, how were you accommodating those sellers? I mean, were you able to, because today it's easier obviously to, just the infrastructure there or Shopify or whatever you want to use, but how did you have like somebody in, I don't know, Germany selling pottery sell to somebody in the US and then also accept dollars? How did you guys make that happen? Was that, I must have been really hard.

Um, and I'm also curious in those early days, in that sort of first year and a half, and it was really a, presumably even once you opened Etsy Labs, it was still a pretty small team. How were you dealing with when things went wrong? Because I have to assume that there were probably more than a few examples of people getting things they didn't like or not being happy with the product or not feeling like they got their money's worth, and they would complain to you guys about it. How did you guys handle that?

Yeah. This is when the internet was still innocent. [laughter]

Or more. Yeah. Yeah, because it probably was really earnest community of makers, right? And so you probably didn't have to worry too much about people just being jerks because that would come later. And so in terms of curating, I mean, did you guys have any standards for what was allowed? Like, you know, did you have rules about what you could and could not sell? Obviously it had to be initially I think it had to be handmade, but I mean could people sell, you know, for example, like handmade glass tubes to smoke pot out of? Did you have any rules?

I know that that pretty, early in the early days, some of your co-founders left. But how did you guys, I mean, how did just the sort of interpersonal relationships, you know, how did you guys get along? Because it's stressful, right, building something together, especially when there you start to get investors behind you. How was the relationship?

When we come back in just a moment, Rob confronts a new normal that he did not see coming. He gets fired. Stay with us. I'm Guy Raz and you're listening to How I Built This.

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Hey, welcome back to How I Built This. I'm Guy Raz. So, it's 2008 and Rob is starting to realize that as the CEO of Etsy, he's kind of in over his head. So, he eventually decides he needs to bring on someone else to help grow and focus the business. You know, again, I'm at this point 28 and I don't know how to interview someone for this level of job. And so I started interviewing someone with more experience for a COO role and ended up hiring Maria Thomas from NPR.

and I started interviewing someone with more experience for a COO role and ended up hiring Maria Thomas from NPR.

Right. Yeah. I should mention, I haven't seen Maria Thomas in at least a decade, but I knew her a little bit when both of us worked at National Public Radio. She had been the head of digital media there. And so she came on initially COO and then essentially became CEO. But you said that it wasn't the right fit. Why? I mean, you wanted a professional to come in and make this company stronger. So, first of all, what was it about her? Clearly, you had felt that she was the right fit for an operational role. So you must have liked her. You must have thought that you got along.

I mean, from what I understand, what I've read about the company, I mean during that period, it was a tough period because this was the recession, it was a financial crisis, but remarkably, Etsy actually really benefited from people not going to traditional retailers and looking at Etsy for maybe ways to save money. So actually it turned out to be a pretty good time from a financial perspective and a growth perspective for Etsy.

And that really started under Maria where she was like, we need to focus on the end buyer, the person going to the website.

No, I mean, it sounds like there was a tension came from... I mean, you're the founder, and then you brought in a professional COO who becomes a CEO, but you're still there. And in some ways, I think you would even admit this, it almost never works out because when a CEO is brought in and the founder still has power, it creates a lot of conflict. I mean, usually it works out when the founder leaves and a new CEO is brought in, but when they're both there because the people in the company don't know who to go to. I'm sure half the people, maybe lots of people in the company were going to you and they were like, 'Hey, I'm not really happy with this decision that our new CEO is taking.' And you were like, 'Yeah, well, let me see what I can do.' Is that fair? Was that happening?

So she eventually steps down and you are brought back in to become CEO in 2010. And did you feel like, you know, often times that could have been a great opportunity for you to watch a professional run the company and to learn things and maybe gain more experience and come back in with a sort of renewed vigor. So when you came back in 2010, back to running the company, did you feel like, okay, I got this?

You were basically 30 years old when you were brought back, but you had started the company five years earlier. There was a lot of you in the trenches with a lot of people. And I imagine it was probably people were excited. But there were also, and I'm sure you remember this well, while you were CEO, there was an article that came out in I think Inc. magazine. It was critical and it had some quotes in there that were a little bit, shall I say, unfortunate. You said, 'I speak to people in the business world and technology world, but I don't admire them.' You were quoted saying, 'I think trying to maximize shareholder value is ridiculous.' Even if you did believe those things and felt that way, sometimes you want to not say that.

I hope this is not like piling on, and I'm not, but this is important because we're talking about now more than 10 years ago and what you've learned from it and obviously how you've grown. We'll get to today. But you know, one of the things in the article, and again I'm sure there are people who could say things about anybody, anybody listening, me, anybody, but somebody in the article said working at Etsy was like being in an abusive relationship. In that same article, you were kind of described as being erratic, and you'd have 20, 30 ideas a day and change course, and you weren't a great manager. Do you think that some of it, maybe a lot of it, was unfair, but was there some of it that was accurate?

So, all right. So, you're working on your leadership and this article comes out, which obviously wasn't a great article, in Inc. And I guess a couple months later, you were fired by Etsy's board. And this came as a real shock to you. You did not see it coming at all. Tell me about that. I mean, is that the case? Did you not have any inkling or indication that that was on the horizon?

But Rob, at the time, didn't anyone sit you down and clearly explain to you why you were being fired? I mean, this is 12 years ago now, and I don't know, maybe you've had a chance to get more insight into it by now, but looking back, did you have any idea or were you pretty much in the dark?

So you were out, and I imagine it obviously came as a shock to you, and I imagine it was also just emotionally very challenging because it's like a death.

You left presumably still with a significant amount of equity in Etsy, right? I have to imagine.

So, I guess in our conversations before this interview, you mentioned that you're working on something at the intersection of technology and humanity. You mentioned it's still a secret. Is it still a secret? Can you talk about this? Because it sounds like this is your really your biggest endeavor in a big way since you left Etsy.

I don't know what do you make of it when you look at it today?

When you think about the journey you've taken and what it's enabled you to do despite the, you know, very traumatic exit, how much of your success and where you are today do you attribute to your work and your intelligence and how much do you think has to do with the luck that broke your way?

That's Rob Kalin, co-founder of Etsy.

By the way, when you guys were at Etsy, what was like the weirdest thing that you saw somebody put on there, and you were like, I don't know if we should allow this thing to go on sale at the site?

I don't even want to imagine what somebody needs that for. Wow. Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show. And as always, it's free. This episode was produced by Carrie Thompson with music composed by Ramin Arablouei. It was edited by Neva Grant with research help from Sam Paulson. Our production staff also includes JC Howard, Casey Herman, John Isabella, Chris Messina, Carla Estes, and Malia Aguello. Our engineers are Gilly Moon and Patrick Murray. I'm Guy Raz and you've been listening to How I Built This.