Josh Silverman of Etsy: “Every job I’ve had was a job no one wanted” | Evolving Ecommerce Ep.2

Hans Tung  02:41

I understand you and Glenn were classmates at Stanford. So I’m gonna have some questions for you guys toward the end of the show.

What Etsy offers for consumers are quite unique, with many unique creative and vintage items that’s not easy to find in other places, not even on eBay, so this nature made many people skeptical. But besides the market, how big could this be, or it’s very niche? You work at eBay and Skype before it’s even as active, so you know what big time looks like. What about the company (Etsy) made you join as a board member in 2016, and then as a CEO in 2017?

Josh Silverman 03:29

What inspired me about Etsy is the purpose that it fulfills for its customers, which I think is really unique and powerful. And I’d say, I’ve had the good fortune or the privilege to be able to come into a couple of companies now and try to unlock value. I try to start with is, what role do we play in the universe? Why is it different than everyone else knows as meaningful?

When I joined Skype, the mission of Skype was the whole world can talk for free. So it’s about free phone calls, and telco was kind of going to be free anyway. That felt like not a very exciting or very inspirational mission. But when you go and you talk to Skype customers, what they said was, I serve in the military, and I had to move eight time zones away from my family, but I still got to talk with my kids, all of these very emotional moving stories and what my team and I came to was, it’s about being together when you can’t be in the same room. And that turns out to be a really powerful mission as the world is traveling more and becoming more and more disconnected.

So with that mission in mind, we really pivoted Skype to be about video instead of audio, that unlocked the whole next chapter for Skype. So with that kind of mindset, when I joined Etsy, it was about handmade. And I don’t think there’s a market for handmade, I don’t think anybody wakes up in the morning and says, I want to buy something handmade and anything will do. They have a mission in mind, I want to buy a gift from my partner, I want to buy something from my living room to spruce it up. And where Etsy stands out is the opportunity to make things special, which otherwise are commoditized. So what we came to for the mission of Etsy was keeping commerce human, we sum up everything that he does in three words, “keeping commerce human”. And I think in a world that’s becoming more disposable, more commoditized, you can buy almost anything you want, it’ll arrive really fast, it’ll be super cheap, and you’ll have forgotten about it two seconds after you use it, and then it’ll be in a landfill. And that’s where we’re going more and more, we’re buying more and more stuff from fewer and fewer places that’s ever more disposable. And the notion that I can buy something that’s made just for me, and that brings me joy, that injects some joy into my everyday life. In doing so I support a maker, I support a creator, I think that’s really important. And if you think about where the world is going in terms of work, automation is transforming the nature of work. But creativity can’t be automated. So the idea that you can harness your creative energy and turn that into a global business that you run from your living room. I think that’s incredibly powerful. And so I think there’s real meaning and real purpose. And I think that meaning and purpose is going to become even bigger. As Amazon and Alibaba get even bigger, I think the role for Etsy is actually going to become even larger as sort of the antidote to that.

Glenn Solomon  07:00

Very cool. The Etsy today versus the Etsy that you inherited are pretty different companies. And like you talked about, one of the first things you did was reposition. But I want to just talk about something you’ve said about focus. I think that a lot of entrepreneurs when they know they need to change things, start to expand the number of items on their list and try to optimize in 100 different ways to try to turn things around. You inherited a company that needed some changing, and you’ve said that you actually simplified, tried to focus the company in a couple of key ways. I’m curious if you could walk us through how you decided what to focus on, how you killed projects, which is very hard to do, and what were the benefits, in particular for the buyer, and how the buyer became a different kind of focus for the company.

Josh Silverman 07:59

Let me try to tackle all of that. I think it is super relevant. When I joined Etsy, we had been public for about a year and a half. But sales on Etsy had been decelerating every quarter for the past like eight quarters. And in fact, the quarter that I joined, sales only grew 11% year over year. So the team had sort of come to the conclusion that we’re as big as we can be, the handmade market must be mature, so we got to go to a bunch of other things. And so they started to place a bunch of bets and a bunch of other areas, sort of like venture bets. I’ve seen this a lot, it feels really common, where people say let’s diversify away. I felt like Etsy was at the very early stages of what we could be, and our decelerating growth was because of insufficient focus and insufficient execution. And diversifying away was really harming us. And in fact, a lot of the diversification efforts, you’re kind of starting all over again in areas where you don’t have a lot of natural advantage.

So we needed to do a lot fewer things. So the challenge I posed to the team is what are the fewest things we need to do well to succeed? And if you’re going to say fewer things we need to do to succeed, you’ve got to define success. And the company had a bunch of metrics to track. You know, 10,12, it was definitely a data-driven company, 10, or 12, different metrics, and all of them sort of mattered. And the problem with having 10 metrics, or even five metrics that all matter equally, is if you have a project and you can ladder it up to any one of those five metrics, you can make the case for why you want to do it. And in other words, if it’s a good idea, you’re going to do it. And that’s way too low a bar. If it’s a good idea, it’s a candidate to be on a long list of good ideas from which you’re going to handpick the fewest you need to do. And that’s an entirely different mindset. So I picked one metric that mattered. In our case, it’s called gross merchandise sales. Gross merchandise sales is the total volume of sales on our platform. So that’s a metric of customer success, our buyers finding things they love and our sellers making sales. GMS is the only metric that matters in this company right now. And if you say, GMS is the metric that matters, what are the fewest things we need to do to move GMS, you suddenly get to a very different outcome. And I said, through some thresholds, it needs to produce at least $10 million of incremental GMS in the next 24 months for us to do it. Now I’m not saying we’re going to do everything that will produce $10 million of GMS. Because again, that would be too low bar, I’m saying I’m not even going to consider it if it won’t produce $10 million of incremental GMS. So again, how do you go from the worthwhile many to the vital few, the worthwhile many, of all projects, which are good ideas, they’re aligned with your strategy, they have a positive ROI. And you’d feel comfortable standing in front of the board and advocating for them. If you do all of those projects, you’re dead in the water. So you’ve got to take the worthwhile many, and you’ve got to say now of all those, what are the few that I’m going to prioritize right now and why. The result was we stopped about 60% of all the projects in the company.

Within my fifth week, we did a pretty significant layoff, we laid off about 22% of the staff. And I’d say 80 to 90% of the remaining people had new jobs. So it was enormously tumultuous and very difficult for the staff. And I don’t want to undersell that. You don’t do that level of change unless you really need to. But it did signal real change to the team. And if we didn’t make dramatic change quickly, we were going to get bought, and we were going to get bought for pennies on the dollar. And the story of Etsy would have been it failed, the only conversation about Etsy would be why did it fail. And at the time, there are 2 million sellers who wake up every day counting on Etsy to put food on the table for their families. So I’m thinking about who do we have empathy for, it was really hard on the 1000 people who are lucky enough to work for Etsy, this was really hard on them. But it’s easy to have empathy for the relatively small number of people who work for you. But having empathy for your customers, the 2 million people who count on us every single day, they needed us to make some pretty dramatic change. So we had to go through some hard things ourselves in order to do that. And just one example, the Etsy team had a good idea to create a new marketplace for craft supplies. It’s called Etsy studio. Go to the website of Etsy studio,  you could buy craft supplies. Given that we already had a lot of people who sold craft supplies on Etsy, and we already had a lot of people have bought craft supplies on Etsy, creating a standalone marketplace for craft supplies was not at all a crazy idea. And we had a large number of people, over 100 people who’d spent 18 months building this product. They launched it on Friday. I started on Tuesday, and I redirected everyone of it on Friday, 100 people on my third day. It’s because when we looked at what were the things that were going to drive GMS and the core business, this was not one of them. It wasn’t a good idea. It just wasn’t one of the things that was the most important ideas. And the ability to rack and stack everything versus GMS was incredibly helpful. What I started with 800 projects, and we killed about 60% of them. These are either things that were in our product pipeline or our marketing pipeline. But 26 of those 800 looked like they had a chance to materially impact GMS in days or weeks. So I called those ambulances because when an ambulance drives down the road, everyone has to get out of the way. So I said those teams have to be fully staffed by tomorrow with top talent and no project was allowed to get in their way, they win in every dependency. And we ship those things within five or six weeks. And lo and behold, within four or five weeks after that, they were actually showing promise. And we saw that GMS was accelerating again for the first time in two years. GMS was growing faster month over month. And that’s what gave us real hope that there was a big opportunity here, it worth the pain to keep going.

Glenn Solomon  15:34

Amazing story. Thanks for sharing that. I know, it must have been a very difficult time, but also a time with a lot of energy in the company. Speaking of energy, we’d love you to talk a little bit about the Etsy community, you know, we’re still in the pandemic, when face masks became standard, where, supply constraints on traditional supply chains made supply in the market and the demand pretty difficult. And your sellers mobilized rapidly, you guys have become a big seller. I think it’s kind of an interesting case study. Tell us a little bit about how that happened. And what it tells you about the marketplace you’ve built?

Josh Silverman 16:14

To use a WWII reference. I think this was kind of our Dunkirk, where the cottage industry comes to rescue. So in our case, the cottage industry adds ability to mobilize tiny individual sellers to come to the rescue of the US and Europe. I think it exemplifies what Etsy does best and in its best moments, but when we were living it, it was a lot of hard choices. So on April 2, the Centers for Disease Control in the United States, the CDC changed its guidelines to say that they now recommended that Americans wear fabric facemasks. So we woke up that morning, to discover crazy amounts of sales on Etsy, and crazy amounts of traffic on it. I get a report in my email inbox every four hours. So I woke up in the morning, if I haven’t checked it all through the night, and I can see like traffic, it was just crazy. So I’m on Slack with my team by 15, trying to diagnose what’s going on. And it turns out that there’s massive surge in demand for masks. At that moment, if you searched for masks on Etsy, you saw Halloween masks or face cream, which were the only two things that masks had ever meant up until April 2, right. And suddenly, the word masks has changed.

Josh Silverman 17:42

It’s a really unsatisfying search result. And like I’m searching at 8:15 in the morning, and I’m getting a bunch of Halloween masks and face masks, and I’m thinking and face cream. And I’m thinking there are millions of people logging into our site this hour, who are getting the search result, and it’s terrible. So immediately, I got my team together to talk about it. And we had a really good rigorous debate. And there were a lot of push for focus, focus, focus, facemasks are only going to be a thing for probably a week. And Josh, you’ve been all about focus, and the fewest things that matter and the vital few. And so let’s not get distracted by this, let’s not deal with this. And I think that was a very valid point of view at the time. And I have a lot of heart for that point of view. I appreciate that. That’s now an instinct of the team. I love it.

But it felt like a moment that could be brand-defining for Etsy, you know that it exemplifies what we stand for. And so I thought this mask search would last for a week or two. But it still worth us rising to the challenge to deliver a great experience because of the importance of the moment. And so we diverted the whole search team to redefine of the hardcode what masks mean. You might have sold face masks before we had a few sellers who did, and they might sold of one face mask a day. Suddenly there’s something like 300 face masks, so how do we make sure they can still fulfill and deliver for buyers. So we had a whole team to put on making sure our sellers could actually fulfill, we put out the word to sellers to start making facemasks, we sent an email to all of our sellers, here’s how you do it. We had to scrub our site to make sure that our sellers were not making medical claims. So you can’t have seller saying this facemask is going to protect you from COVID because we don’t know that it does, and there’s inconclusive research on that. So we really took a very large percentage of the company and redirected them to facemasks for pretty much the whole month of April. And it turns out that we were right, it was a brand moment for Etsy. We were wrong about the duration.

Now we’re four months later, and we’ve sold about $500 million with the facemasks, half a billion dollars of just face masks in the past four months, and there’s 20,000 sellers who have made a material amount of money selling face masks. That’s great because they’re putting food on the table at a time when they’re suffering from a lot of other economic hardships. So I think it really worked out well for everyone.

Hans Tung  20:31

During COVID-19, we definitely see an acceleration of e-commerce, especially in the US before a lot of people thought they would take a while for us to adopt mobile payments and other mobile internet services, because offline was working so well. During COVID-19, most of our friends shut down. And you guys noticed a 130% year on year growth in revenue at the peak of the pandemic. Do you see this as a permanent behavior? Do you see that consumer behavior has changed? And how do you plan to continue to build on your current momentum, just full disclosure, during COVID-19, I became a personal shareholder of yours. I’m already late because since you joined the company, you have already 80 x 70 x the stock before the pandemic. So you’re doing an incredible job.

Josh Silverman 21:35

I don’t think you’re late. I think you’re early. I hope that 5 and 10 years from now you look back and say I got in Etsy, and the summer of 2020. But I think that’s a great question. I’ve actually roll back by one month and say that, what we now know is that the pandemic caused a tremendous tailwind for all e-commerce, including Etsy. But in March, it didn’t feel that way. In March in the United States, that’s when the shutdown really hit. And in fact, in the third week of March, it’s when life changed for Americans suddenly overnight. In the third week of March, our revenue dropped 60%. We were in freefall. And what I think was important was we as a team, lucked and together with the board said, we think there’s a long term opportunity for Etsy, we think we’ve been running the team in a lean, in a very efficient fashion. And we don’t plan to make cuts, we think we’re already lean. And we think that this is something which is driven by an event and will pass. So we kept the team going. And that wouldn’t have been the right decision for everyone. And there’s a lot of businesses that needed to make cuts early. But in the third week of March, it felt pretty awful and pretty gut wrenching. But pulling up and taking the long view on where are we, and fortunately we’re a cash generative business. And we’d already made a lot of deep cuts, several years ago and been very efficient. So we could stay breakeven under pretty dire scenarios. And that was very helpful to us. The fact that we came in lean, meant that we could keep going with our momentum, because suddenly, in the first week of April, our sales exploded. And as you’ve said, in the second quarter, we announced that sales were up 130% year over year. And if we had been cutting and pulling back in the third week of March, we would have been in big trouble trying to keep up with the sales surge that happened in late April. So there’s a lot in life that’s unpredictable. And keeping your eye on the prize, I think is really important.

Hans Tung  23:53

You’ve got global perspective, data points helped you make decisions.

Josh Silverman 23:56

Yeah. that’s a great point too. We were watching China very carefully. We had a COVID response team that met weekly starting in late January. So based on all the data that was coming out of China, we were very concerned, and we already had plans in place by mid-February for what happens if everybody needs to work from home. In the first week of March, we closed all of our offices globally. But by that time, we’d already want to run a global work from home day, we tested all of our systems to make sure that we were ready, so plan for the worst and hope for the best. But I think keeping that perspective,  on the medium and the long term, it’s hard to say 2021 is going to play out, we’ve had a ton of tailwinds from offline being largely shut down. So everyone has to shop online, whether they like it or not. I think they’re finding that they like it. What we see is that our customer experience on Etsy is as good as it was pre pandemic. So I think customers are having a great experience and optimistic about it. But you know that the economies in the US and Europe have largely held quite strong, or let’s say consumer spending is held quite strong in spite of serious shocks to the economy. And I don’t know that’s gonna continue, we could see a very serious recession with serious consumer spending pullbacks, that would not be an unrealistic scenario at all. And so I think that the shift to online is probably largely permanent. We’ll probably see some litigation when stores open up again, but a lot of habits are being reformed in this moment. And we’ll see what happens with the economy. So we are at Etsy, staying nimble and being prepared for the fact that although things feel very good right now, they might not feel good in a quarter or two, but we’re gonna be prepared to respond and react regardless.

And the other thing is that almost everything in life we do is driven by habit, we are on autopilot with 98 or 99% of the decisions we make. And we don’t even realize we’re on autopilot, we just are. And there are very few opportunities for those habits to be reformed. The classic three are when you get married, when you have a baby, and when you move home, those are three times you’ll consider changing where you shop, or where you bank or things like that. And suddenly, before you make any decision at all about where to shop right now, you’ve got to stop and think to yourself, are they open? Can they ship on time? And those are habit breaking moments. So we are investing like crazy right now in marketing and in our customer experience, because we think this is a moment when everyone’s shopping habits are up for grabs. And we very much intend to win a large share of that.

Hans Tung  27:05

And we haven’t seen this on a couple of occasions. Now one way for us to think about the difference in the e-commerce platform is the open versus closed system debate. And one could argue that Amazon started as sort of that iOS of e-commerce, where on the other end, you have Etsy, Shopify and Wish and Poshmark, they are more open. For people who are starting thinking about their own creative projects, how would you advise them where to open a shop, and how to? Should they open multiple jobs? And how are these platforms are different? They help them make a better decision on what to do? And if they’re picking Etsy, what are the things that need to be paid attention to, to fully leverage and contribute to the community that you have helped bring about.

Josh Silverman 27:58

I think for most people, they don’t want to shop, they want sales. And there’s a lot of people that will offer you the opportunity to have a shop. And for the sellers on Etsy. I mean, they’re artisans, they’re craftspeople, they make things and then they try to sell them. And they are blades of grass in the tornado of e-commerce. I think it’s incredibly difficult for their standalone shop to succeed in getting more and more so over time. So build your own shop sites allows you to federate your item on to places like Amazon or Ebay or others where you will be commoditized, racked and stacked versus things that are mass produced, and sold cheap and shipped fast, without the opportunity to showcase what’s so great about your particular product, which was made with love and care just for the person who’s buying it. So our goal at Etsy is not to give you a shop, it’s to give you sales. And the way that we do that is by building a brand that stands for something in the minds of consumers and then lending that brand to our sellers in a way that really creates connection with the buyers trust in and therefore sales, and allowing what is so special and unique about each seller to really stand out and be highlighted.

That’s our goal. And in doing that we need to do things sometimes that are very unpopular with sellers, because we look out for the good of the commons. It’s actually a question Glenn was asking earlier about refocusing on buyers, There’s a lot of things that each individual seller wants, and if you give it to them, you end up with something which makes no sense to buyers. We have 3 million sellers on Etsy, you could end up with 3 million brand promises, 3 million return policies, 3 million free shipping policies. So Etsy is a place where something ships for free and something ships really expensive, something ships fast, something ships slow and buyers think to themselves, I have no idea what that means, I’m going to go somewhere else. So we need to set some standards. And in setting standards, the Etsy brand means something to buyers. And as a place buyers want to come and shop, and because of that all of our sellers are more successful. So doing what our sellers need, not what each of them individually demands, allows them to rise the whole community up and do better. And, we’ve seen that conversion rate on the site is much higher than it was before. I’ll give you an example.

Search sellers, when I first joined Etsy, would say two things. One, the search engine is terrible, which needed work for sure. And two, don’t you dare change the search engine. And they’d say in the same sentence, they’d mean both parts of it, like I log in every day, and I look at where I rank in search. And that’s how I know how to manage my business. And I’ve spent time optimizing the SEO, if you change the search engine, I’ve kind of got to start over. So don’t change search, because it’s a lot of work for me. But search is really bad. And at the time, we were iterating the search engine once a quarter. Now we iterate one or two times a week. And you know, it’s made vast improvements. And one thing I can guarantee is if you log in today and log in tomorrow, you’re going to see something different because we’re now very personalized.

It depends on the time of day, and it depends on who the person is, depends on a million factors like the days where any given keyword search results in the exact same set of listings, like those days are long gone. So it was very disruptive to sellers, and they were pretty upset about the fact that we were iterating search really fast. But it created a much better buyer experience. And in creating a much better buyer experience to create a lot more sales for sellers. And ultimately, that’s what they really want. So what we need to do is obsess over the buyer experience. And if we obsess over the buyer experience, we’re going to give a really good seller experience. So when I say in a way that’s consistent with that value proposition, we obsess over the buyer experience, but with a mind to what’s different about us. So you know, the idea that we promised that absolutely everything would that’s in Etsy will arrive within two days. Although that is the norm in the market, it’s not gonna be the norm for Etsy, because things that are made just for you are not sitting on a shelf waiting to ship. And so shipping within two days,  I don’t say that being part of the brand, I would rather say special takes time. And let me explain why the thing that was made with love and care, and why this part of our being different is better. But cost of shipping, everyone expects shipping to be free. There’s no such thing as free shipping, there’s no parcel service that will ship a package from here to there for free. What they mean by that is shipping as a cost of goods sold, which has now been incorporated into the item price. So there’s no reason Etsy should be different there. If the whole rest of the world has incorporated shipping into the item price, we should too. So we made a huge push last year to get our sellers to incorporate shipping into their item price. We basically said you can’t be on the first page of search results if you don’t do that. Because having items that have separate shipping cost is bad for the brand. And sellers were really mad about that. But it drove a lot more buyers and drove more buyer loyalty and it was the right thing to do. And they are getting more sales from that, they are benefiting, so having the conviction to do things that are in their best interest, even if they don’t love us at the time, I think it has been an important ingredient of success.

Hans Tung  34:05

I do notice that there’s quite a big difference in approach between developed markets and developing markets. I’m not sure if that holds true for you guys as well. In the case of Alibaba, the focus this is trying to start in a new market. And it’s very under-penetrated with e-commerce, it had a focus on the interests of the sellers to make sure they have all the sellers who could sell, and over time the buyer experience should improve because the selection/choices are so much better. And initially, the buyers may be more impacted because you don’t have counterfeits and other stuff on it. That’s not as appropriate. And you don’t have selves gouge consumers, but in emerging market whether or not a lot of great offline choices, that consumers bear that and persevere through it. And over time, the better sellers we may determine most number of sales, competing in a developed market. You can’t do that because consumers have plenty of choices offline digitally. So you did exactly the right thing to focus on buyers and the buyer experience, or else the artisan doesn’t make money. As some do make money as sellers, the word of mouth will happen that, hey, you can make great money here, the burden is on you to figure out how to make a great experience for buyers to buy. It’s a quite different dynamic in developed markets, as you can hear, expand and will really go into developing markets.  What is sort of the formula you see that’s working for you, as you penetrate in, go deeper and grow an even bigger global business?

Josh Silverman 35:38

So a two-sided marketplaces lightning in a bottle, it almost never happens. I mean, you guys are VCs, so you know that every year, you probably get 1000 pitches, for “I’m going to create this two sided marketplace”. And at scale, it’s going to be amazing. And 100% of them are right that at scale, a two sided marketplace is amazing. And roughly 0% of them will succeed at that. So in any given year, there’s like 2000 marketplaces that get funded by VCs, and usually between 0 and 1% of them actually becomes a meaningful two sided marketplace. So statistically speaking, there’s a 0% probability of getting to scale.

That’s the hard thing, solving the chicken and egg, the day you open, you have no sellers. So buyers show up and there’s nothing to buy, and they go away. And you’ve got no buyers. So sellers show up and they list an item and nobody buys it. They go away and solve that conundrum. Well, basically it’s actually incredibly hard and very few people solve it. So you actually have to do both, you have to be very attentive to the needs are sellers, and you have to be very attentive to the needs of buyers. At some point, you get to a big enough scale that supply finds demand, that you start obsessing about buyers, because sellers just know you and find you and come anyway, for Etsy, like we saw a huge explosion in sales of bread and bread-making products in the month of May, grocery stores were closed and they were all sold out. No one could buy bread. So everyone started turning to Etsy for bread. And also people thought it was fun to make bread at home, so they’re doing a big project. We had no idea like we never expected that was going to be a thing on Etsy and we had zero hours of effort put against getting supply of bread making. It just happened that when buyers started searching Etsy for bread stuff, bakers started selling on Etsy.

Because Etsy is well known enough, supply just found the demand. But we had to get to the point that we were big enough for that. And that making that pivot once you are big enough, obsessing almost exclusively about buyers, is the right thing to do. And that’s a pivot that I think a lot of people don’t make. So when you think about international expansion, then for Etsy, I go back to principle one, which is getting a two sided marketplace at scales lightning in a bottle. So the day we open in France, we’re have that same chicken and egg conundrum anyone would have. So how do we solve that? What is our unique advantage? Well, export-import is our unique advantage. So a seller who lists on Etsy France can sell to the US where we have a very big market. And a buyer who comes to Etsy France can buy from the US where we have a very big market. We have machine translated for a long time and machine translation is getting better and better into a number of languages. So in the early days in a market, we focus exclusively on export-import. And at some point, you have enough export business, you have enough supply and you have enough import business, you have enough demand that you can start pointing them at each other. Then we start changing our search algorithms to prioritize local. So now in the UK, and in Germany, more than 50% of purchases in those countries are from local sellers. So now we’re investing and we’re about to be running TV campaigns and other things where we’re investing in those markets as truly local markets, branding them, as you know, Etsy in the UK is really a UK first market. But the way we got there was leveraging our advantage in export-import.

Glenn Solomon  39:17

Very interesting. Josh, let’s shift gears a little bit. I love the conversation about the lightning in a bottle and how difficult it is to get liquidity on both sides of the marketplace. But obviously if you do you can, you can move very quickly. It’s reminiscent of the conversation Hans and I had with Nathan Blecharczyk over at Airbnb,  I remember we were there in the early days, they do a lot of things that were very non-standard, and quote-unquote didn’t scale to try to get both sides of the marketplace to work. And I’m curious, obviously, you’ve made vast improvements as the leader of Etsy but you did inherit a business that had some scale on both sides of the marketplace. If you joined a board today of a small early-stage company that was trying to build a marketplace and in any market, what are some of the things you’d be recommending? What are the things you’ve seen have worked versus kind of the natural challenges you face when you’re trying to get a marketplace stood up.

Josh Silverman 40:34

I would say the number one thing that I’ve observed and that I would recommend is to find your marketplace incredibly narrowly and incredibly tightly in the early days, and then expand out in concentric circles. So I worked for eBay. And you know, I would be launching eBay in a new market. And we’d start with just coins and stamps, let’s just get supply and demand to meet on coins and stamps.

And to your point, Glenn, we do a lot of non-scalable things, we would go to coin and stamp fairs. And we would meet with sellers one on one and spend like two hours trying to convince them why they should put their stuff up online, and then hold their hand to do that. You obviously can’t do that at scale.

But if we could get 20 really influential coin sellers and 20 really influential stamp sellers to come online,  they could help bring their community with them that created enough liquidity of that one particular vertical to get supply and demand to start meet. And from coins and stamps, maybe we could go to Beanie Babies or pet rocks move up to other collectables, and from other collectables, then we can start to move towards, you know the next category for eBay was typically clothing. And then we can move on , before you know it, you’re in autos. And when I say before, you know like years later, not weeks or months later, years later, you’re in autos, and auto parts and all kinds of things. But we needed to start with getting liquidity somewhere and then building out from that base.

Hans Tung  41:47

And then one more question for you before we get into our quickfire session. You talked about leadership quite a bit throughout the years. And what would be your advice for young professionals as they rise through the ranks, how to become a great leader. And sometimes there are multiple stakeholders who have conflicting interests they have to balance. What will be the sort of advice you want to give them as they navigate and develop a career?

Josh Silverman 42:10

I think for me, every job I’ve had was a job nobody else wanted. I can’t think of a job I’ve had where six people before me didn’t turn it down, you know, Skype, they tried to get any other CEO who is more qualified than me to take that job. And no one would take it. It was like, the culture was really challenging. It’s a telco regulated business going to zero, you know, and I thought, the effect it has on people’s lives is so meaningful, that I’m sure we can turn that into a good business. And I’m willing to move my family to Estonia to try to unlock that value. You know, Etsy, like the stock was down 50% from the IPO, everyone had written it off as this kitschy little business that was. I mean, I think going to a place where, at least for me, I have believed there is true and inherent value, where we do something really important and differentiated for the world, but other people are missing it. And then be willing to roll up my sleeves and try to have a really big impact. And by the way, I didn’t get fancy titles, I didn’t get paid a lot. Like obviously things have worked out very well for me at Etsy, and Skype. But all coming up in my career, if you looked at my class at Stanford Business School, I was among the lowest-paid people for, you know, year after year, and I didn’t care that.

Glenn Solomon  43:38

I don’t believe that, he was one of the smartest guys in the class. I don’t know about that.

Josh Silverman 43:43

But I can quantify I wasn’t one of the highest-paid people. I am working on something really interesting, or I think that my team and I can have a really outsized impact we can be proud of for a really long time. And eventually I have to believe karma will work that like good things will come from that.

Hans Tung  44:06

I couldn’t agree with you more. When people ask me for advice about VC career. You got to be ready to make unpopular decisions and have the stamina to stick to it when people are making fun of you. It doesn’t matter if you are taking a contrarian view and you’re wrong. But you have to develop a conviction to be able to do that. Okay, let’s do our quickfire questions. What’s something you have read recently, or that you’ll recommend to people and why? And how that could help someone to shift their life and develop a career?

Josh Silverman 44:39

I read a ton of biographies. I read almost exclusively biographies. And I think that studying great leaders, good or bad people. There’s a lot to learn from that. So I definitely recommend that.

Glenn Solomon  44:53

Have you tried Shoe Dog (a memoir by the creator of Nike)?

Josh Silverman 44:55

Yeah, any biography I’ve read a super fun. So much to learn from all of the stories of business history, so much to learn from that. I think if I had to do it all over again, I’d probably go back and get a PhD in history. I just would have a hard time picking a time period because I find them all as fascinating.

Glenn Solomon  45:14

All right, well, sticking with the historical theme, if you could construct a the proverbial dinner with three people dead or alive, who would you want to take to dinner? And why?

Josh Silverman 45:27

I’m afraid these are going to be cliche. Theodore Roosevelt is a huge hero of mine. Abraham Lincoln, Martin Luther King, Jr. Those are the first three that come to mind,  incredible leaders who move the world. I’m not sure I want them all three at the same dinner party, what a waste.

Glenn Solomon  45:51

What about the Santa Claus seller on Etsy?

Josh Silverman 45:54

Oh, my God, those guys are great. Thank you for watching our commercials, too. That’s awesome. For those who are just listening to the podcast, there is a seller who makes wonderful wooden toys for kids by hand. He literally looks like Santa Claus, and he is a Santa Claus. In that season, he dresses up as Santa Claus and goes to malls, a really warm and wonderful guy.

Hans Tung  46:23

So at the beginning, I mentioned you guys were classmates in Stanford, you guys took a study trip to Israel together. What were some of the interesting stories that you can share about the other?

Josh Silverman 46:42

Well, first, we had some amazing Israeli classmates who connected us with incredible leaders. We got to meet some of the biggest political and business leaders living in that day. And we stayed up all night long, enjoying ourselves and taking advantage of all that Israel had to offer such that, no one’s awake, I’m afraid during many of those meetings. So it may not have been our proudest moment, but it was a great trip.

Glenn Solomon  47:13

I felt the same way. I think we got a lot out of it. What we got out of it was unscripted. But it was great. And Josh, I remember, actually one of my first exposures to an experienced VC was on that trip. And I really remember that you were involved somehow in helping us get set up, or you were prominent in the meeting we had with a VC, maybe from Jerusalem venture partners, I can’t remember the firm, but it was a great introduction to kind of innovation in Israel. I’d always thought of Israel as kind of a land of a religious homeland, but not a place where people that people lived, not capitalism, and such kind of energy and innovation.

And I think on that trip, I was really shocked by how much energy there was on the street, and how excited people were to start new things. And now having been to Beijing, Singapore and other centers around the world, seeing that energy and other places. It always brings me back to that trip and what I felt like when we were there, it’s really fun.

Josh Silverman 48:27

So much entrepreneurial energy in Israel, but actually, as I think about it in all seriousness, for the Israel study trip, one of the companies that we met, Vocal Tech. It was the first Voice over IP company. And we met them in the summer of 1996, when we were there for this Israel study trip. And I would later go on to be the CEO of Skype, which I had no idea that was gonna happen. But vocal tech was Skype. It was just five years too early, exactly the right technology, exactly the right idea. Just the wrong timing.

Glenn Solomon  49:07

We know in Silicon Valley that being too early is the same thing as being wrong. So timing is everything.

Hans Tung  49:14

And this important question very relevant for the context, over 80% of your sellers are women. So it must have some incredibly inspirational stories about some of these amazing sellers. That’s life changing. Feel free to take some time. And can you think of one or two anecdotes that you can share with us?

Josh Silverman 49:40

Sure. I mean, we have a woman who sells on Etsy and she was a seamstress in a bridal factory, who was working 16 hour shifts, trying to raise her daughter, working very hard for very little money. And she opened a shop on Etsy, making her own bridal dresses. And she’s built a big and thriving business. Now she’s got a lot of her own employees, but it’s been able to really provide a great living for her family from her the beautiful work that she does of making beautiful dresses. And we have so many stories like that of people who’ve been able to really build brands for themselves, build a thriving business and do what they love, provide for their whole community and lift up their whole community. It’s a really incredibly rewarding and centering part of what we do at Etsy.

Hans Tung  50:41

If someone is a young, aspiring seller on Etsy, what would be some of the important things that that seller should pay attention to and think about?

Josh Silverman 50:52

First, make something a little different. I mean, the temptation is to go look at what’s already popular and selling on Etsy, but you’re going to be in a bit of a race to the bottom there on price. So be creative and think about something that you can make that you think there is a community of people who need. It doesn’t need to be an enormous community. It just should be a little bit unique. And then photography and branding matters. So take really good photographs, think about the name of your shop and create a little bit of a brand identity around what that shop looks like and stands for because it turns out the customers really respond well to that.

Hans Tung  51:28

Last question, what are some of the largest sellers are doing on Etsy in terms of GMS?

Josh Silverman 51:44

I don’t think we’ve disclosed a lot of specifics. But we certainly have sellers selling more than a million dollars a year on Etsy,  so the idea that you can go from nothing and grow to be selling more than a million dollars a year on Etsy, and with 20 cents of startup cost. I mean, the really great thing about Etsy is you don’t need to rent any retail facility, you don’t need to hire employees in the beginning, you don’t even need to buy a lot of supplies. As you get sales, you make the product and then you sell. So the cost to start a business is just 20 cents to list an item on Etsy. For 20 cents you can get in business and then grow from there.