Chapter 10 Financing the Maker Movement

Where does Making end and Selling begin? In the new Maker Markets, it’s often the same thing.

Don’t put a jellyfish in a regular fish tank. Just don’t. What hap­pens if you do is not pretty.

You may be tempted all the same. Jellyfish are perhaps the most beautiful, magical creatures you can have in a tank, as you will have seen if you’ve visited a jellyfish display in one of the larger public aquaria. Illuminated with colored lights, they’re a moving art display, gently undulating in groups or peacefully alone, an ever-changing liv­ing lava lamp. But if you want one in your own home, you’ll typically need a custom tank made at a cost of thousands of dollars.

This didn’t seem right to Alex Andon. He had taken a fancy to jellyfish while sailing in the British Virgin Islands as a teenager. After graduating from Duke with a biology degree in 2006, he came to the San Francisco Bay Area for a biotech job. But the jellyfish fascinated him more, in part because San Francisco Bay is one of the best places in the world to catch them. He decided to quit his job and set up a company in a friend’s garage to make custom jellyfish tanks. He called it Jellyfish Art, and it grew quickly, offering modified fish tanks with special pumps and custom water-flow systems that kept the jellyfish off the sides. He learned how to freeze plankton to make perfect jelly­fish food, and how to ship small moon jellyfish live through the mail.

But as jellyfish pets grew increasingly popular, Andon decided he needed to design and manufacture a brand-new kind of tank, one de­signed from the ground up for jellyfish.

This meant getting into the manufacturing business at scale, which would not be cheap. Normally, at that point, an entrepreneur would seek funding. A bank loan is one method; venture capital is another. But neither is easy to get, and both come with risks and loss of control. A bank loan would probably be collateralized with whatever property Andon had, and would have to be paid back with interest, while a venture capitalist would want a sizable portion of the company.

There was, however, another way. Over the past few years, a new phenomenon of “crowdfunding” has taken off, by which supporters and potential customers collectively contribute the money necessary to get the product made. Crowdfunding may take many forms, from glorified tip jars to formal loans backed by people, not banks.

The one Andon chose was Kickstarter, a website where people post descriptions of their projects and anyone can chip in to help. Rather than just making a donation, most contributors essentially preorder the product by making a contribution above a certain level. In the case of the Desktop Jellyfish Tank, donors who gave $350 or more would get be the first to get the tank when it was available, at a lower price than regular customers would pay.

Kickstarter required Andon to set a minimum amount to be raised. If he hit that target within 30 days of posting the project, everyone who pledged money would have their credit cards charged, Andon would get the money and he would be expected to go ahead with the project. If he didn’t reach that amount, nobody would pay a penny and Andon would have to find some other source of funding. He set a target of $3,000.

The DesktopJellyfish Tank hit that figure in less than twenty-four hours.

Andon now had seed capital to start production. He had guaran­teed orders. And he had the confidence in knowing that the world wanted what he was making. And all this without giving up any of the company, getting into debt, or even doing much more than post­ing a video and project description on a website.

Underground VC

Kickstarter solves three huge problems for entrepreneurs. First, it simply moves revenues forward in time, to right when they’re needed. One of the reasons startups traditionally have to raise money at the start is to pay for product development, tooling, purchasing compo­nents, and manufacturing, all of which they’ll presumably get back later when they sell the products. But if they can get those sales into presales, which is essentially what Kickstarter does, they’ll have the money when they need it and won’t have to raise venture capital or take out a loan.

Second, Kickstarter turns customers into a community. By back­ing a project, you’re doing more than pre-buying a product. You’re also betting on a team, and in turn they update you with progress reports and respond to suggestions in comments and discussion forums dur­ing the product’s genesis. This encourages a sense of participation in the project and turns backers into word-of-mouth evangalists, which helps projects go viral.

Finally, Kickstarter provides perhaps the most important service a new company needs: market research. If your project doesn’t hit its funding target, it probably would have failed in the marketplace any­way. Getting that information before you’ve made the time and in­vestment in developing and manufacturing the product is invaluable, and “de-risks” one of the most hard-to-access factors in any startup.

All this makes perfect sense, but it just wasn’t possible before the Web. What this sort of crowdfunding offers is simple: a way for the people who most want a product to help make it happen. Each pays no more (and usually less) than they would pay anyway when the product comes out, but simply by paying earlier and delaying receipt, they collectively remove one of the greatest barriers to small-business innovation: early-stage capital.

What’s more, it helps find these people, wherever they may be. How would you know what the market was for a jellyfish tank before the Web? Is it people who already have a fish tank? People who have lava lamps? People who like kinetic art? None of the above, but rather an entirely new class of consumers who just happen to love the idea of jellyfish on their desk—but only once presented with that idea? How would you even find out? And how much would it cost to do so?

Kickstarter and markets like it let such people find you. It’s the ultimate social capital. Word of mouth will send news of a project to the most receptive people through paths that are often totally unpre­dictable. The means of transmission themselves are prosaic: e-mail, Twitter, Facebook, other social media. But the degrees of separation they connect are the real magic, reflecting latent knowledge about people’s desires that can only be identified by the combination of the people they know and ideas that are compelling enough to pass along (what social scientists call memetic).

How did you come to hear of your first Kickstarter project (assum­ing you have)? Was it a friend who thought you might be interested?

The feed of someone who you follow on social media? Coverage in the news in some area you follow?

The point is that you probably didn’t go to Kickstarter looking for it. It found you. And if you responded, you were the right target audi­ence even though nobody might have been able to guess that before­hand. So Kickstarter is not just money-raising, it’s market research.

Maker vs multinational

On April 12, 2012, Sony announced with its usual great fanfare the U.S. release of its new Smartwatch, a sexy $150 gadget that would let you read texts, emails, and social status updates from your wrist, thanks to a Bluetooth connection to your phone. Although this is the sort of thing that would once have made headlines—Sony takes on the wrist!—it was almost completely ignored. Why? Because a day earlier, a small startup team of engineers and hardware hackers work­ing on the ground floor of their founder’s apartment building in Palo Alto had announced their own watch on Kickstarter... and it was simply better.

The Kickstarterproject, called Pebble, had a crisp sunlight-readable e-paper display rather than Sony’s OLED color display. Although color is usually preferable for computer screens, when it comes to watches, color means dim screens in sunlight, shorter battery life, and the need to push a button or shake the watch to show the time, remi­niscent of the original LED watches from the ’70s. Unlike the Sony watch, which only worked with Android phones, Pebble also worked the iPhone, and even though the Sonywatch had already been out for months in Europe, Pebble ran more apps. And it was offered at $115, nearly 25 percent cheaper than the Sony product.

In short, a few Maker-style entrepreneurs had outdesigned, out- marketed, and outpriced one of the biggest electronics companies in the world. And then, thanks to Kickstarter, they got ready to ou-sell Sony, too.

The Pebble team set a Kickstarter target of $100,000. It reached that in just two hours (I was one of those early backers). And then it kept on going. By the end of the first day, it had passed $ 1 million. By the end of its first week, it had broken the previous Kickstarter record of $3.34 million. After a little more three weeks, Pebble had already passed $10 million in backing and had pre-sold 85,000 watches.

What was particularly interesting about the Pebble Kickstarter phenomenon was how the design team responded to the crowd of customers. First the backer asked for better waterresistance, so the Pebble team figured out how to make the watch waterproof so you could swim with it. Then they asked for Bluetooth 4.0, rather than the original Bluetooth 2.0 (or Sony’s 3.0). So the team, emboldened by its flood of orders, went looking for the right 4.0 modules and were able to source them, giving the watch better battery life and mak­ing it more future-proof Finally, other Kickstarter projects joined the parade and announced that they would be writing apps to run on Pebble, including Twine, an “Internet of things” device that could let Pebble do things like tell you when someone’s knocking at your door.

As of this writing, Pebble has not yet shipped its watches (they’re due in September 2012), and perhaps production glitches will mar or delay the launch. But even before that, it’s not hard to see in Pebble a superior model: a small team using crowdfunding to move more quickly in all ways—R&D, finance, and marketing- than a lumber­ing electronics giant. To be sure, these were not rank amateurs mak­ing their first product; the Pebble team had been together for three years and had already raised seed funding and shipping a smartwatch for the BlackBerry phone (which didn’t do very well). But they were still a startup, with twenty-something founders figuring it out as they go, and prototyping with Ç-D printers and Arduino open-source pro­cessor boards, just like so many other Makers. What Kickstarter did was catapult them from just another small company trying to get a break to an overnight viral hit—with money attached.

The future of funding?

Today, crowdfunding is big and getting bigger fast, and is attract­ing notice from Wall Street to the White House. The next step in crowdfunding is to go from simply making a donation or preordering a product to actually investing in the company itself. But such invest­ment is heavily regulated by the Securities and Exchange Commis­sion (notionally to protect small investors) and is typically limited to accredited professional investors.

However, as Paul Spinrad pointed out in an O’Reilly analysis of the issue:

These laws were enacted to protect unsophisticated inves­tors from fraud, but they also prevent people from investing in small businesses in their own neighborhoods, or garage ventures launched out of communities of interest that they belong to— despite the likelihood that their personal ties to such investments gives them a better basis for evaluating risk (and contributing to success) than some mass of SEC filings cooked up in an office somewhere. And so, in the name of investor protection, the in­vestments industry currently has a monopoly on all the invested assets of the non-millionaire public. People can’t invest in the people they know from their own communities; they can only entrust their money to the choices contained in a managed menu of exclusively non-local, large-scale investment products.⁴¹

A number of entrepreneurs, technology leaders, and even celebri­ties such as Whoopi Goldberg petitioned Congress to rethink this, and carve out a way for individuals to invest small amounts (less than $10,000, or 10 percent of the investor’s income from the past year) in companies that they believe in.

Washington listened. In April 2012, crowdfunding became part ofPresident Obama’s Jumpstart Our Business Startups (JOBS) Act, which he signed into law. The act makes it easier for small companies to use regulated Web-based crowdfunding sites such as RocketHub, Crowdfunder, and Launcht to raise up to $1 million in investment money from regular people, not just qualified Wall Street investors, without the laborious accounting and public disclosure rules of a tra­ditional stock market listing.⁴² Although some are concerned that such equity-based funding (as opposed to the simple pre-ordering and charitable backing of Kickstarter) could lead to fraud, the hope is by having the SEC regulating the websites, rather than the compa­nies; they can help self-regulate the industry. And because the total amounts are small, the capacity for damage is limited.

The point is to unlock an economic engine that can drive innova­tion, even as the traditional financial industry pulls back. As Dominic Basulto put it in a Washington Post essay, “There is a unique, un­derground venture capital economy happening right now in America that is, in many ways, off the radar screens of economists. When we tally up the economic indicators, the conventional wisdom seems to be that economic growth in this country has stalled. Yet, that same conventional wisdom ignores the economic activity on DIY sites like Kickstarter.”⁴³

Social capital

Let’s return to the jellyfish example to see what makes this model so powerful. Consider the advantages Andon had by going the Kickstart route with his project, rather than to a bank or traditional investor:

1. He raised the money without having to pay interest or give up a portion of the company.

2. The process of raising the money also served as free market testing. If he hadn’t been able to hit his target, he probably also wouldn’t have been able to sell the tank. Raising money directly from your future customers improves the chances that you’ll be successful once the product hits the market.

3. The public fund-raising effort got attention from everything from popular blogs to NBC television, serving as free market­ing. Grassroots funding leads to word-of-mouth support.

Crowdfunding is venture capital for the Maker Movement. Just as the tools of production have been democratized, creating a new class of producer, so have the tools of capital-raising, creating a new class of investor. Not investors in a company but in a product, or, to be precise, the idea of a product. And not investors in that they ex­pect a financial return, but rather in that they expect to be repaid in kind with the product itself, whether by actually getting it (because they donated enough) or in just the emotional return of knowing that they had something to do with bringing that product into existence.

The act of “making in public,” which is what Kickstarter proj­ect leaders do, turns product development into marketing. The creator posts an idea, then updates frequently on the progress to completion. Backers comment and the creator responds, evolving the product in response to feedback. In the course of this public exchange, money is raised, but, more important, a product develops a constituency. The backers are not only rooting for the product because they’ve put some money into it, but also because they feel a sense of co-ownership in its creation. Making in public is an incredibly effective form of advertis­ing, but rather than having to pay for the promotion, you can actually get paid instead.

Beat that, Madison Avenue.

What’s more, it’s fun. As Sarah Dopp explains at Culture Con­ductor, a Web community blog:

Most of Kickstarter’s magic mojo is simply that they made a game out of raising money. Here are the rules to that game:

1. Set a deadline. Let people know there is a limited time to this campaign.

2. Set a minimum funding goal. “If we don’t reach this number, the project won’t have enough funding to happen.”

3. Enforce the deadline and the funding goal. The campaign STOPS at the deadline, and if you didn’t meet the goal, the project Doesn’t happen. (This is where Kickstarter is most valuable: they play bad cop about the rules of the game, while you get to play good cop and try to get people excited.)

4. Set up tiered levels of giving, and promise people different thank-you gifts for each level.

5. Let the fundraisers keep full ownership of their projects. (It’s not investment; it’s sponsorship. It’s pre-selling. It’s generosity.)⁴⁴

This is not without risk, of course. There is no guarantee that the entrepreneur will actually make the product or that it will be as good as was promised. Nor is there a promise of how long it will take. And if the entrepreneur drops the ball or simply disappears, there is no easy mechanism for the donors to get their money back. Technically, you are making a donation to a cause. Although you have been prom­ised that you will get a product in return, there is no binding legal agreement to ensure that.

Kickstarter, as with many of the sites like it (IndeGoGo, Rock- etHub, and Funded By Me, to name just a few), counts on transpar­ency and the sophistication of Web users to access risk themselves to protect against fraud or incompetence. It advises backers to use their own judgment, but offers no protections of its own. Its advice to pro­spective backers:

Each project is crafted solely by its creator, and it’s up to them to make the case that they can successfully bring their project to life. Part of every creator’s job is earning their backers’ trust, especially backers who don’t personally know them.

The Web is an excellent resource for learning about some­one’s prior experience. If someone has no demonstrable prior history of doing something like their project or is unwilling to share information, backers should consider that when weighing a pledge. If something sounds too good to be true, it very well may be.

IfKickstarter were helping companies raise funding or attract in­vestors, it would be regulated by the Securities and Exchange Com­mission, and all sorts of rules and protections would kick in. But it is not. It is simply giving people an opportunity to contribute to a cause, and in this case the cause is the creation of a product they want. You’re not even backing a company; you’re just backing a spe­cific project.

It’s a clever way around many of the barriers that keep most small companies and inventors from raising enough money to get started. No single person puts up more money than he or she can afford, and typically people only back products that they personally want and understand.

No doubt there will be some disasters ahead. Most likely are the naive inventors with a good idea but absolutely no competence in manufacturing who discover that they have badly underpriced their product and are unable to make it for the promised cost. Teams may fall apart, personal issues may arise, and some people will just flake out. And then, inevitably, there will be fraudsters. But so far the social support and accountability that comes with transparency has avoided the usual catastrophes. And the service is growing at an astounding rate.

As of May 2012, three years after its founding, more than 47,000 projects have been launched on Kickstarter, of which more than 40 percent were successful, raising a total of $ 175 million.⁴⁵ More than ten thousand of those projects were successful in meeting their pledge totals, so $60 million went to the project creators. Most were just a few thousand dollars for music, film, and other arts projects (for which Kickstarter was originally intended), but there were also hun­dreds of successful physical products. Two dozen such projects, like the Jellyfish Tank, raised more than $100,000 each.

Other examples include ScottWilson, a former creative director at Nike. With his connections, he didn’t need crowdfunding for his idea for a special strap that could turn an iPod Nano into a wristwatch. But he chose that route anyway because he wanted the direct feedback and simplicity of the Kickstarter process. His TikTok+LunaTik pro­posal raised nearly a million dollars. Sixty days after his Kickstarter fund-raising period closed in December 2010, Wilson had shipped more than twenty thousand of the watch cases.

What Wilson avoided by going this route was the prosaic path of corporate product development: layers and layers of approval pro­cesses, which tend to favor the conventionally tried and true over true innovation. As Carlye Adler put it in Wired:

Build a better mousetrap and the world is supposed to beat a path to your door. It’s a lovely thought, one that has inspired generations of American inventors. Reality, though, has fallen somewhat short of this promise: Build a better mousetrap and, if you’re extremely lucky, some corporation will take a look at it, send it through dozens of committees, tweak the design to make it cheaper to manufacture, and let the marketing team decide whether it can be priced to return a profit. By the time your mousetrap makes it to store shelves, it is likely to have been fine-tuned and compromised beyond recognition.⁴⁶

Take Peter Dering, a civil engineer and an expectant father with an idea for a device called Capture that would allow you to easily clip a camera to your clothes or backpack. He, too, could have pitched his idea to a camera accessory company. Instead, he decided to go it alone. His Kickstarter project raised $365,000 from more than five thousand backers. This, he wrote, “transformed my life. On May 2, 2011, I launched Capture as a guy with a dream, out on a limb. Seventy-five incredible days later, I am a father with a business.”

An open-source flashlight raised $260,000. A stainless-steel pen raised $282,000. A camping hammock raised $209,000. And so on, for hundreds more (I myself have backed everything from a three- string guitar kit for kids to a desktop CNC machine). Kickstarter has become the favored funding route for inventors everywhere, or at least for those who can put together a video and story that describes their vision in a way that compels people to buy into it.

The accidental bank

Kickstarter’s origins go back long before its founding in 2009. One of its cofounders, Perry Chen, was living in the French Quarter of New Orleans in 2002, working on his own electronic music and dreaming of hosting a great DJ show with the Austrian DJs Kruder and Dorf- meister. Trouble was, it would cost $15,000 up front. And although Kruder and Dorfmeister are huge in the DJ scene now, they weren’t then. What if nobody showed up? Chen would be wiped out.

The risk scared him off from doing that concert, but he continued thinking about the problem. Anything sufficiently new is risky, but the number of people who have the resources to handle large financial risk is small. What if you could just charge people up front (not such a radical idea, given that’s the way most concert sales work), but more importantly not have to commit to the show if the sales weren’t strong enough? That way the organizer wouldn’t have to put up any money and the bands would only go where they were sufficiently wanted.

A few years later, Chen had moved to Brooklyn and was waiting tables at a hipster diner called, predictably, “Diner.” There he struck up a conversation with Yancey Strickler, a brunch regular, and started to tell him about his idea. Before the Web went mainstream, the idea of surfacing demand and pre-funding projects was theoretically clever, but impractical. But now it might just be worth trying. Strickler loved it (Chen told Adler it was “the best idea any waiter pitched him that year”), and the two decided to build a website to try it out.

Today, Kickstarter is multimillion-dollar Web company that’s try­ing as hard as it can to stick to its indie roots. Its building at 155 Riv­ington Street on Manhattan’s Lower East Side is nothing to look at. The only sign on the front, painted in gold letters, reads underwear (a former tenant). Inside, it looks like the entry to a group house.

Chen and Strickler are still slightly uncomfortable with the rise of Kickstarter as a financing engine for physical goods. They had origi­nally intended it mostly for the kind of music and film projects that the record labels and Hollywood weren’t willing to take a chance on, along with art, theater, comic books, and fashion. But at the core was bankrolling creativity, and more and more creatives were getting interested in making physical goods. It was just too hard to draw the line, so they didn’t. A team of twenty-five approves projects before they are listed, but that is mostly on the quality of their presentation, not on their artistic merits. The biggest projects on Kickstarter, like it or not, are consumer goods. It simply fills a market need that was there all along, waiting for someone to tap it.

Voting capital

For all Kickstarter’s egalitarian charms, once a project is funded, the creator is pretty much on their own to get it actually made. As they’ll quickly discover, the idea is the easy part. Supply-chain manage­ment and manufacturing is much harder, to say nothing of just run­ning a small business. What if a community could help decide which user-submitted product ideas get made, just like Kickstarter, but then a team of product-development professionals could help steer it from there, handling all the tricky factory issues?

That, in a nutshell, is the model of Quirky, which launched around the same time as Kickstarter in 2009 and is growing just as fast.

Ben Kauffman, its founder (age twenty-four at the time of this writing), got his start in his senior year of high school, when he some­how persuaded his parents to take out a second mortgage on their house to fund the creation of mophie, a company to design and make iPod accessories. He sold that company in 2007 and his next project was to create a website where people could vote on ideas and give sug­gestions on how to improve them. Although that never took off as a stand-alone site, it became the technological foundations of Quirky, which sought to combine the two ideas: using the crowd to develop better products like, well, iPod accessories.

Today, to be fair, Quirky does a lot more than that. Every week it puts into production two new products invented by its community. They tend to be handy “solution” household accessories, like expanding towel racks and closet organizers, mostly under fifty dollars. Quirky has a display rack in Bed Bath & Beyond, a big American home-products retailer. None of this is world-changing stuff, but the products tend to be well designed, attractive, and actually useful. It’s hard to peruse the list and not find something you wouldn’t mind having.

As I write this, the hot product at the moment at Quirky is the “Pivot Power” flexible power strip. It’s like a regular power strip, but each outlet can pivot so that bulky power adapters don’t block neigh­boring outlets. Designed by Jake Zein, a software programmer from Milwaukee, Wisconsin, it’s classic Quirky: clever, clearly solving a problem, stylishly designed, and slightly inessential. It’s the kind of thing you’d see in the store and think, “Yeah, I hate it when I can’t fit power adapters in all the power strip outlets,” admire its design, and maybe buy one. You don’t need it, but once you’ve seen it you might want it.

This is not an accident. Quirky’s products are the result of a remarkable series of public review steps, each of which weeds out bad ideas and improves good ones. Hundreds of people have had a hand in every Quirky product, either originating the idea, suggesting some change, or voting on which variation they prefer. Amazingly, they all get paid, ranging from the person with the original concept to every­one else who had “influence” in a final product, even just voting on a winning design.

For most of them it’s just pennies, but the original inventor can earn thousands of dollars. Not millions, but not nothing. And they don’t have to do much work—just describing the idea and submitting some sketches. In all, 30 percent of the sales from Quirky.com and 10 percent from retail partners goes to the community. Of that, 35 per­cent goes to the inventor; the rest goes to others who helped improve or select the winning design.

The way it works is this:

• Anybody can submit an idea, but it costs ten dollars to do so. This is just to keep out spammers and cranks.

• Community members vote for ideas they like, and offer comments.

• The most popular ideas go to the next phase, design. Both the inventor and Quirky’s own professionals submit designs. The most popular wins.

• More voting (“influencing”) happens for the product name, tagline, feature set, and other branding.

• Quirky’s engineers make the winning design manufacturable and work with a factory to make it.

As at Kickstarter, there are countdown clocks and competitions everywhere—the whole thing feels like a game. You don’t need to have any ideas of your own to participate and feel as though you’re helping create things, or at least improve them. And it suits everyone from words people (names and tag lines) to visual thinkers (design). Top influencers participate in dozens of projects and can earn thou­sands of dollars. It can be addictive, they report. Partly it’s the act of improving ideas, but equally it’s the gamble that the product you vote for will ultimately be made and become a big hit.

At the core, what the Quirky community represents is crowd­sourced market research. By getting so much feedback at each stage of the process, Quirky reduces its risk. The products that get the most votes are the ones most likely to get the most sales. That way it can put its own engineers and designers to work only on the products that are most worth their time. Like Kickstarter, Quirky also uses a presale process, where products are only made if they reach a certain number of purchase commitments. (Your credit card is only charged if the product goes into production.)

This is Making for people who don’t actually want to get their hands dirty. They can participate in every step of conjuring a product into existence, but they don’t have have to make the prototype them­selves. The initial physical work is all done in Quirky’s offices, which are outfitted with a high-end Ç-D printer and a full suite of other digital prototyping tools, and the manufacturing is done by Quirky’s factory partners, mostly in China. The community can influence the final product, but they can’t completely control it. At the end, they’re just helping a professional design team work faster and better. And in turn, the design team cuts them in on a piece of the action, both in money and glory.

Industrialized crafting

Finally, at the other end of the spectrum is Etsy This is the by far the biggest of the three Maker markets I’ve profiled here. Launched in 2005, it now has more than 15 million members, and did a half bil­lion dollars’ worth of sales in 2011. As of April 2012, it had 300 em­ployees and was selling $65 million in goods per month from 875,000 sellers to 40 million visitors from around the world.⁴⁷ Indeed, at an estimated value of $688 million after six years, its growth is spookily similar to eBay in the early 1990s—a fast-growing marketplace for the Long Tail of Things.

What is being sold? Handmade goods. That’s right. So far, Etsy has just been arts and crafts on an epic scale. The range is incredible, from fine art to needlepoint, with a lot of jewelry and hipster ephem­era in between. Each is made by someone (the rules of Etsy is that everything must be handmade in some way, although that doesn’t mean production equipment can’t be used as well).

Γve bought everything from cool panda stickers for my daughters’ Macbook to some awesome silkscreened prints of scientists’ names and symbolic images done in the style of rock-band posters that are now on the wall of my workshop. (Tesla and Bohr are my favorites.) All around my office people have Etsy purchases: jewelry, bookends, furniture, clothes. It plays into the generational quest for individuality and authenticity—real stuff from real people, not packaged culture from companies. Etsy stuff is sometimes gorgeous and Sometimesjust odd (there is a whole site, called Regretsy, focused on the most comic of the head-scratchers available there), but it is always unique. If what you want is something created by a person and not just by a machine, Etsy is a gold mine.

Unlike Kickstarter and Quirky, Etsy doesn’t try to help Makers fund or create their products. Instead, it’s simply a way to sell them, with a strong social component that comes from its focus on hand­made goods and the crafting and arts communities that make them. Like eBay, Etsy offers simple ways for sellers to create their own list­ings and handles the payment processing. It charges twenty cents for each listing for four months, and 3.5 percent of the sale.

There is some debate as to whether Etsy really is a viable market­place for small businesses. Its emphasis on handcrafting means that sellers are generally prohibited from scaling up with more-efficient automated production techniques or outsourcing some of the work. It’s hard to get noticed in such a huge marketplace, and the listing fees necessary to show up in search can add up. And all that competition can drive down prices.

Although some Etsy sellers make a living at it, most do not, and tales of that grim moment when a seller actually calculates how much she is making per hour (and how poorly that compares to flipping burgers at McDonald’s) abound; suffice it to say that it’s not about the money for most of them. For most, this is a hobby or their art, and much of the incentive lies in finding an audience for that, even if not much money follows. But for the others, who do want to make a go of it as a business, Etsy may be a place to start, but it’s not the platform for growth. For that, they need to build their own company and learn how to do real manufacturing, the twenty-first-century way.

Fortunately, Etsy is now moving that direction, too. Although it intends to remain a place for crafters, it also intends to become a place for entrepreneurs who are using Maker-style manufacturing to grow their businesses, The handmade rule will give way to hand-designed and perhaps machine- made, or even outsourced manfacturing (the rules were being developed as I’m writing this). The point is to cata­lyze a new kind of cottage industry, one that really could become an engine of a new micro-manufacturing economy.

As Chad Dickerson, Etsy^,s CEO, put it in the company’s first small business conference in late 2011:

Decades of an unyielding focus on economic growth and a cor­porate mentality has left us ever more disconnected with nature, our communities, and the people and processes behind the ob­jects in our lives. We think this is unethical, unsustainable, and unfun. However, with the rise of small businesses around the world, we feel hope and see real opportunities: Opportunities for us to measure success in new ways... to build local, living economies, and most importantly, to help create a more perma­nent future.

Right now, he noted, Etsy is still small compared to the global economy—hundreds of millions of dollars versus tens of trillions. But as Etsy expands around the world, it is bringing its model with it, from France to Germany. With its expansion comes a greater focus on growing small businesses, not just selling arts and crafts. Yet its roots remain at the human scale, with a person and face behind each product. “Don’t think of it as Etsy becoming more like the rest of the world,” Dickerson said. “Rather the rest of the world becoming more like Etsy.”