Investors Are Obsessed With Handmade Crafts Right Now

(Bloomberg) -- It’s boom times in the crafts business. Since the start of last year, the market value of Etsy Inc. has nearly quadrupled. In that same time period, three former colleagues at Square Inc. started an online wholesale market for handmade goods and have already amassed more than $100 million in investments.

Their company, called Faire, offers a similar selection of products to what’s found on Etsy but sells them to independent shop owners, most of whom manage just one store. Faire pitches its service as a way for mom-and-pops to keep up with Amazon.com Inc.

On Thursday, the San Francisco-based company plans to announce that it raised $112 million in three funding rounds this year. The most recent deal values the company at about $535 million, said a person familiar with the matter, who asked not to be identified because the terms are private. Investors include Lightspeed, Sequoia Capital and a venture arm of Y Combinator. Willett Advisors, the investment arm for the personal and philanthropic assets of Michael Bloomberg, the founder and majority owner of Bloomberg LP, is an investor in Y Combinator startups.

Faire sells products from a variety of small businesses and some larger manufacturers. The startup is part of a growing ecosystem that supports a dwindling list of retailers not named Amazon. Canadian software maker Shopify Inc. has rocketed to a $17 billion valuation by providing tools for small businesses to sell online, while Square is pushing deeper into the field, spending $365 million in April on a startup to help online sellers build their websites.

For years, Etsy tried to develop a similar business to Faire that catered more to larger retailers. But the project failed to gain traction, and Etsy closed it down this year.

Meanwhile, Faire said it’s currently on track to move $100 million worth of goods through its platform this year and has signed up 15,000 retailers. Alex Taussig, a partner at Lightspeed who led the firm’s investment in Faire, said the company is succeeding where Esty failed by providing perks like free returns and the exclusive rights to sell a particular product in a retailer’s geographic area.

As some high-profile big-box retailers march into bankruptcy, the ubiquity of Amazon is, unexpectedly, opening an opportunity for small, bespoke stores that can feel more authentic, said Max Rhodes, co-founder and chief executive officer of Faire. “The data is showing these retailers are making a comeback,” he said.

The most popular product category on Faire’s marketplace, according to Rhodes: “Not sold on Amazon.”

To contact the reporter on this story: Gerrit De Vynck in New York at gdevynck@bloomberg.net

To contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Mark Milian

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