Form S-1

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to such Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. We and the selling stockholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Etsy is offering shares of common stock to be sold in the offering. The selling stockholders identified in this prospectus are offering an additional shares of common stock. Etsy will not receive any of the proceeds from the sale of the shares of common stock being sold by the selling stockholders.

Prior to this offering, there has been no public market for the common stock. It is currently estimated that the initial public offering price per share will be between $ and $ . Etsy intends to apply to have the common stock listed on the Nasdaq Global Select Market under the symbol “ETSY.”

Etsy is an “emerging growth company” as that term is used in the Jumpstart Our Business Startups Act of 2012 and, as such, has elected to comply with certain reduced public company reporting requirements.

See “Risk Factors” beginning on page 15 to read about factors you should consider before buying shares of the common stock.

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

To the extent that the underwriters sell more than shares of common stock, the underwriters have the option to purchase up to an additional shares from Etsy at the initial public offering price less the underwriting discount.

The underwriters expect to deliver the shares against payment in New York, New York on , 2015.

We, the selling stockholders and the underwriters have not authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses prepared by us or on our behalf or to which we have referred you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of the date on the front cover of the prospectus. Our business, financial condition, results of operations and prospects may have changed since that date.

For investors outside the United States: We, the selling stockholders and the underwriters have not done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of our common stock and the distribution of this prospectus outside of the United States.

Through and including , 2015 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

Prospectus Summary

This summary highlights information contained in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in our common stock, you should carefully read this entire prospectus, including our consolidated financial statements and the related notes thereto and the information in “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Unless the context otherwise requires, we use the terms “Etsy,” “company,” “we,” “us” and “our” in this prospectus to refer to Etsy, Inc. and, where appropriate, our consolidated subsidiaries. See “—Glossary” for the definitions of the following terms: “active buyer,” “active seller,” “community,” “ecosystem,” “global-local,” “GMS,” “member,” “platform” and “visit.”

Our Mission

Our mission is to reimagine commerce in ways that build a more fulfilling and lasting world.

We are building a human, authentic and community-centric global and local marketplace. We are committed to using the power of business to create a better world through our platform, our members, our employees and the communities we serve. These guiding principles are core to our mission:

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Make it easy to find and buy unique goods from real people every day, on any platform, online and offline, anywhere in the world.

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Help creative entrepreneurs start, responsibly scale and enjoy their businesses with Etsy.

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Communicate the power of human connection whenever anyone experiences Etsy.

Overview

We operate a marketplace where people around the world connect, both online and offline, to make, sell and buy unique goods. Handmade goods are the foundation of our marketplace. Whether crafted by an Etsy seller herself, with the assistance of her team or with an outside manufacturer in small batches, handmade goods spring from the imagination and creativity of an Etsy seller and embody authorship, responsibility and transparency. We believe we are creating a new economy, which we call the Etsy Economy, where creative entrepreneurs find meaningful work and both global and local markets for their goods, and where thoughtful consumers discover and buy unique goods and build relationships with the people who sell them.

Etsy was founded in June 2005 in Brooklyn, New York as a marketplace for handmade goods and craft supplies. From those beginnings, we have built an innovative, technology-based platform that, as of

December 31, 2014, connected 54.0 million members, including 1.4 million active sellers and 19.8 million active buyers, in nearly every country in the world. In 2014, Etsy sellers generated GMS of $1.93 billion, of which 36.1% came from purchases made on mobile devices and 30.9% came from an Etsy seller or an Etsy buyer outside of the United States.

Our community is the heart and soul of Etsy. Our community is made up of creative entrepreneurs who sell on our platform, thoughtful consumers looking to buy unique goods in our marketplace, responsible manufacturers who help Etsy sellers grow their businesses and Etsy employees who maintain our platform and nurture our ecosystem.

Our business model is based on shared success: we make money when Etsy sellers make money. Our revenue is diversified, generated from a mix of marketplace activities and the services we provide Etsy sellers to help them create and grow their businesses. Marketplace revenue includes the fee an Etsy seller pays for each completed transaction and the listing fee an Etsy seller pays for each item she lists. Seller Services revenue includes fees an Etsy seller pays for services such as prominent placement in search results via Promoted Listings, payment processing via Direct Checkout and purchases of shipping labels through our platform via Shipping Labels. Other revenue includes the fees we receive from a third-party payment processor.

In 2014, Etsy sellers generated GMS of $1.93 billion, up 43.3% over 2013. In 2014, we generated revenue of $195.6 million, up 56.4% over 2013. In 2014, we generated a net loss of $15.2 million and Adjusted EBITDA of $23.1 million compared to a net loss of $0.8 million and Adjusted EBITDA of $16.9 million in 2013. See “Selected Consolidated Financial and Other Data—Non-GAAP Financial Measures” for more information and for a reconciliation of Adjusted EBITDA to net loss, the most directly comparable financial measure calculated and presented in accordance with generally accepted accounting principles in the United States, or GAAP.

Our Values

We plan and build for the long term. We want to build a company that lasts, and we plan to measure our success in years and decades. Etsy sellers in particular depend on us and on our platform to grow their businesses, so we will strive to make decisions that are best for the long-term health of our ecosystem.

We value craftsmanship in all we make. Craftsmanship is the marriage of skill and passion. We believe every job at our company should demonstrate our commitment to craft. We are an engineering-driven company, and we think of our code as craft: we are makers of the products and services that our members use, and we approach the work we do with the same care and inspiration as do Etsy sellers.

We believe fun should be part of everything we do. Our mission includes fostering a world in which personal fulfillment is a key element of success. We believe that this way of working is connected and joyful. We strive to do excellent work and bring a sense of humor and playfulness to it.

We keep it real, always. We have the courage and the will to do business in ways that are unconventional and impactful. We strive to stay genuine, maintaining integrity, humility and sincerity in everything we do. When we feel that we are not being true to our values or our mission, we are not afraid to stop and change course.

Our Opportunity

We operate at the center of several converging macroeconomic trends in online and mobile commerce, employment, consumption and manufacturing. We believe that in combination these trends will benefit millions of people in our ecosystem around the world: Etsy sellers engaging in their creative passion, working for themselves and defining success on their own terms; Etsy buyers accessing a diverse, global marketplace of goods that have historically been found in highly fragmented markets; and, increasingly, responsible manufacturers using modern tools to craft goods in partnership with Etsy sellers.

Trends in Online and Mobile Commerce. Etsy sellers offer goods in dozens of online retail categories, including jewelry, stationery, clothing, home goods, craft supplies and vintage items. Euromonitor, a consumer market research company, estimated that the global online retail market was $695 billion in 2013, up from $280 billion in 2008, representing a compound annual growth rate, or CAGR, of 19.9%. This growth is expected to continue, with the global online retail market becoming a significantly larger portion of the total retail market, reaching $1.5 trillion by 2018, implying a 16.6% CAGR from 2013. Mobile commerce is also increasingly important in online retail. comScore estimated that since the first quarter of 2013, consumers visiting online commerce sites spent more than half of their browsing time on mobile devices; however, online commerce spending via mobile devices represented only 11% of total online commerce dollars in the third quarter of 2014.

Trends in Employment. Whether motivated by economic necessity or personal preference, a growing number of people are turning to self-employment for their livelihoods. In a 2012 survey of middle-class households in the United States by the Pew Research Center, 85% said that it was more difficult to maintain their living standards today than it was ten years ago. A study commissioned in July 2014 by the Freelancers Union and Elance-oDesk estimated that 53 million Americans are working as freelancers. Women are also contributing to the trend towards self-employment. World Bank research shows that, in certain developing nations, over half of the women in the labor force are self-employed. We believe that many of these people have creative skills that could provide a foundation for entrepreneurship, but that they often have little or no experience running their own businesses, and they typically lack the marketing resources, the technological expertise and the manufacturing and logistics capabilities to turn their creativity into a business.

Trends in Consumption. Most large retailers today follow the same formula, emphasizing efficiency and scale and pressuring their suppliers to reduce their costs in order to serve mass-produced goods at the lowest-possible prices. We believe, however, that many consumers want to purchase goods that are unique and that reflect their personality and style, not simply mass-produced, generic goods. Some consumers want their purchases to reflect their values; they want to support retailers and suppliers that have responsible and sustainable policies toward their employees, their communities and the environment. Finding these goods can be difficult, as markets for such goods have historically been highly fragmented across boutiques, consignment stores and other venues and marketplaces.

Trends in Manufacturing. Because of advances in manufacturing technologies, individuals and small businesses now have the ability to manufacture goods in their homes and studios using tools such as computer-assisted design, 3D printers, computer-controlled routers and other machines at a fraction of the historical cost. We believe the decrease in the size and the cost of these tools will make it easier for creative entrepreneurs to start new businesses. We also believe that small-batch manufacturers will be able to use these new technologies to provide high-quality manufacturing services so that creative entrepreneurs can scale their own businesses.

Our Strengths

Our platform connects millions of Etsy sellers and Etsy buyers globally, making it one of the largest online marketplaces in the world. We have achieved our scale because of the following key strengths:

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Our Authentic, Trusted Marketplace. We have built an authentic, trusted marketplace that embodies our values-based culture, emphasizing respect, direct communication and fun. We have developed a reputation for authenticity as a result of Etsy sellers’ unique offerings and their adherence to our policies for handmade goods. We establish trust in our marketplace by emphasizing the person behind every transaction. We deepen connections among our members, making a personal relationship central to the member experience. The authenticity of our marketplace and the connections among people in our community are the cornerstones of our business.

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Our Passionate, Engaged and Loyal Members. Our members are passionate, engaged and loyal—not only to us, but to each other—building a strong community.

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Our Scaled, Global-Local Marketplace. Our marketplace is global-local, meaning that we focus on building local Etsy communities around the world. Etsy sellers and Etsy buyers in these local

communities, in turn, have global reach and access through our platform. We believe our global-local marketplace creates strong competitive advantages outside the United States because our success is not dependent on scale in any given country.

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Our Strategy: The Path Ahead

We plan to continue connecting creative entrepreneurs, thoughtful consumers and responsible manufacturers and expanding the impact of our platform through the following key strategies:

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Make Etsy an Everyday Experience. We emphasize relationships, connecting creative entrepreneurs to thoughtful consumers around the world, and we continually strive to make those connections a daily habit for our members. The everyday experience starts with mobile.

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Build Local Marketplaces, Globally. Our vision is global and local. We plan to invest in local marketing and content and local payment and shipping solutions in countries around the world. We believe our locally-focused work will broaden the reach of our global platform.

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Offer High-impact Seller Services. Seller Services help an Etsy seller spend more time on the pleasures of her craft and less time on the administrative aspects of her business. We intend to enhance existing Seller Services, extend their geographic reach and introduce new ones.

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Expand the Etsy Economy. We intend to fulfill our mission to reimagine commerce by expanding the impact of our platform beyond our community. For example, we intend to further develop our manufacturing program, our strategic partnerships and our public-private endeavors to bring the benefit of the Etsy Economy to more people and more communities.

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Invest in Marketing. We believe that the rapid growth of our marketplace is a testament to our compelling value proposition for Etsy sellers and Etsy buyers. Etsy sellers and Etsy buyers have been our best marketers, sharing their positive experiences with their own communities. Even so, we plan to increase our marketing spending on traditional and online media to increase awareness of our brand and attract additional members to our ecosystem.

Risks Associated With Our Business

Our business is subject to numerous risks described in “Risk Factors” immediately following this prospectus summary and elsewhere in this prospectus. Some of the more significant risks are:

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We have a history of operating losses and we may not achieve or maintain profitability in the future.

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Our quarterly operating results may fluctuate, which could cause our stock price to decline.

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Adherence to our values and our focus on long-term sustainability may negatively influence our short- or medium-term financial performance.

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The authenticity of our marketplace and the connections within our community are important to our success. If we are unable to maintain them, our ability to retain existing members and attract new members could suffer.

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Further expansion into markets outside of the United States is important to the growth of our business but will subject us to risks associated with operations abroad.

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We expect to increase our marketing efforts to help grow our business, but those efforts may not be effective at attracting new members and retaining existing members.

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Our payments system depends on third-party providers and is subject to evolving laws and regulations.

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Our ability to expand our ecosystem is important to the growth of our business.

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We must develop new offerings to respond to our members’ changing needs.

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If the mobile solutions available to Etsy sellers and Etsy buyers are not effective, the use of our platform could decline.

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We face intense competition and may not be able to compete effectively.

See “Risk Factors” immediately following this prospectus summary for a more thorough discussion of these and other risks and uncertainties we face.

Our Corporate Information

Etsy was incorporated in the state of Delaware in February 2006 as Indieco, Inc., and we changed our name to Etsy, Inc. in June 2006. Our headquarters are located at 55 Washington Street, Suite 512, Brooklyn, New York 11201. Our telephone number is (718) 855-7955. Our website address is www.etsy.com. The information contained in, or accessible through, our website is not part of, and is not incorporated into, this prospectus, and investors should not rely on any such information in deciding whether to invest in our common stock.

We use various trademarks, trade names and design marks in our business, including Etsy^®, Code as Craft^™ and Craft Entrepreneurship^™. This prospectus also contains trademarks and trade names of other businesses that are the property of their respective holders. We do not intend our use or display of other companies’ trademarks and trade names to imply a relationship with, or endorsement or sponsorship of us by, those other companies.

JOBS Act

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenue of at least $1.0 billion or (c) in which we become a large accelerated filer, which means that we have been public for at least 12 months, have filed at least one annual report and the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last day of our then most recently completed second fiscal quarter, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. We refer to the Jumpstart Our Business Startups Act of 2012 as the “JOBS Act,” and references to “emerging growth company” have the meaning associated with such term in the JOBS Act.

In addition, the JOBS Act provides that an emerging growth company can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

Glossary

The following terms are used throughout this prospectus:


Term		Definition
Active buyer		An Etsy buyer is a member who has created an account in our marketplace. An Etsy buyer is identified by a unique e-mail address; a single person can have multiple Etsy buyer accounts. An active buyer is an Etsy buyer who has made at least one purchase in the last 12 months.

Active seller		An Etsy seller is a member who has created an account and has listed an item in our marketplace. An Etsy seller is identified by a unique e-mail address; a single person can have multiple Etsy seller accounts. An active seller is an Etsy seller who has incurred at least one charge from us in the last 12 months. Charges include transaction fees, listing fees and fees for Direct Checkout, Promoted Listings, Shipping Labels and Wholesale enrollment.

Community		Our community consists of Etsy sellers, Etsy buyers, manufacturers who work with Etsy sellers and Etsy employees.

Ecosystem		Our ecosystem consists of Etsy and the people and communities around the world who benefit from our platform.

Global-local		Global-local refers to our focus on building local Etsy communities around the world. The Etsy sellers and Etsy buyers in these local communities, in turn, have global reach and access through our platform.

GMS		Gross merchandise sales, or GMS, is the dollar value of items sold in our marketplace within the applicable period, excluding shipping fees and net of refunds associated with cancelled transactions. International GMS is GMS from transactions in which either the billing address for the Etsy seller or the shipping address for the Etsy buyer at the time of sale is outside of the United States. Mobile GMS is GMS from transactions that occur on a mobile device, such as a tablet or a smartphone. Mobile GMS excludes orders initiated on mobile devices but ultimately completed on a desktop. We began tracking mobile GMS in 2013.

Member		A member is represented by an open member account based on a unique e-mail address; a single person can have multiple member accounts.

The Offering


Common stock offered by us		shares

Common stock offered by the selling stockholders		shares

Underwriters’ option to purchase additional shares		shares

Common stock to be outstanding after this offering		shares, or shares if the underwriters exercise their option to purchase additional shares in full

Use of proceeds		We estimate that our net proceeds from the sale of the common stock that we are offering will be approximately $ million, or approximately $ million if the underwriters exercise their option to purchase additional shares in full, assuming an initial public offering price of $ per share, the midpoint of the offering price range on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We will not receive any of the proceeds from the sale of shares by the selling stockholders. The principal purposes of this offering are to increase our visibility, create a public market for our common stock and facilitate our future access to the public equity markets. We currently intend to use the net proceeds from this offering for working capital and general corporate purposes, including continued investments in the growth of our business. We also intend to use $300,000 of the proceeds of this offering to partially fund Etsy.org, a Delaware non-profit organization that we formed in January 2015. We may use a portion of the net proceeds to fund the build-out of our new corporate headquarters. In addition, we may use a portion of the net proceeds received by us from this offering for acquisitions of other complementary businesses, technologies or other assets. However, we have no current understandings, agreements or commitments for any specific material acquisitions at this time. See “Use of Proceeds.”

Risk factors		Read “Risk Factors” and other information included in this prospectus for a discussion of factors you should consider before deciding to invest in our common stock.

Proposed Nasdaq trading symbol		“ETSY”

The number of shares of common stock to be outstanding after this offering is based on 195,258,466 shares of common stock (including preferred stock on an as-converted basis) outstanding as of December 31, 2014, and excludes:

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376,471 shares of common stock issued to Etsy.org;

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23,050,594 shares of common stock issuable upon the exercise of options outstanding as of December 31, 2014 under our 2006 Stock Plan, with a weighted-average exercise price of approximately $2.67 per share;

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2,037,490 shares of common stock issuable upon the exercise of options granted after December 31, 2014 under our 2006 Stock Plan, with an exercise price of $8.50 per share;

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406,060 shares of common stock issuable upon exercise of warrants outstanding as of December 31, 2014 with a weighted-average exercise price of approximately $0.66 per share; and

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shares of our common stock reserved for issuance under our equity compensation plans, consisting of shares of common stock that will be reserved for issuance under our 2015 Equity Incentive Plan, 3,036,004 shares of common stock reserved for issuance under our 2006 Stock Plan as of December 31, 2014 and shares of common stock that will be reserved for issuance under our 2015 Employee Stock Purchase Plan. On the date of this prospectus, any remaining shares available for issuance under our 2006 Stock Plan will be added to the shares reserved for issuance under our 2015 Equity Incentive Plan, and we will cease granting awards under our 2006 Stock Plan. Our 2015 Equity Incentive Plan and 2015 Employee Stock Purchase Plan also provide for automatic annual increases in the number of shares reserved thereunder, as more fully described in “Executive Compensation—Equity Plans.”

Except as otherwise indicated, all information in this prospectus assumes:

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the effectiveness of our amended and restated certificate of incorporation and the adoption of our amended and restated bylaws immediately prior to the completion of this offering;

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the automatic conversion of all outstanding shares of preferred stock into an aggregate of 106,896,493 shares of common stock, the conversion of which will occur immediately prior to the completion of this offering;

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no exercise of outstanding options or warrants; and

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no exercise by the underwriters of their option to purchase up to an additional shares of common stock.

Summary Consolidated Financial and Other Data

You should read this summary consolidated financial and other data in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Selected Consolidated Financial and Other Data” and our consolidated financial statements and related notes included elsewhere in this prospectus.

The consolidated statements of operations data for the years ended December 31, 2012, 2013 and 2014, and the consolidated balance sheet data as of December 31, 2014, are derived from our audited consolidated financial statements and related notes included elsewhere in this prospectus. The following tables also show certain operational and non-GAAP financial measures. See the accompanying footnotes and “Selected Consolidated Financial and Other Data—Non-GAAP Financial Measures” below for more information. Our historical results and key metrics are not necessarily indicative of future results, and results for any interim period presented below are not necessarily indicative of the results to be expected for any annual period. The consolidated financial statements for the years ended December 31, 2012 and 2013 have been revised to correct for the understatement of certain non-income tax-related expenses. See Note 15 of the accompanying notes to our consolidated financial statements.


	Year Ended December 31,
	2012			2013			2014
	(in thousands, except share and per share data)
Consolidated Statements of Operations Data:
Revenue:
Marketplace	$	55,330		$	78,544		$	108,732
Seller Services		15,863			42,817			82,502
Other		3,409			3,661			4,357

Total revenue		74,602			125,022			195,591
Cost of revenue(1)		24,493			47,779			73,633

Gross profit		50,109			77,243			121,958
Operating expenses:
Marketing(1)		10,902			17,850			39,655
Product development(1)		18,653			27,548			36,634
General and administrative(1)		21,909			31,112			51,920

Total operating expenses		51,464			76,510			128,209

(Loss) income from operations		(1,355)			733			(6,251)
Total other expense		(1,175)			(675)			(4,009)

(Loss) income before income taxes		(2,530)			58			(10,260)
Benefit (provision) for income taxes		145			(854)			(4,983)

Net loss	$	(2,385)		$	(796)		$	(15,243)

Net loss per share of common stock—basic and diluted	$	(0.04)		$	(0.01)		$	(0.19)

Weighted average shares of common stock used in computing net loss per share—basic and diluted		60,563,723			65,334,548			80,493,407
Pro forma net loss per share of common stock—basic and diluted(2) (unaudited)							$	(0.08)
Weighted average shares of common stock used in computing pro forma net loss per share—basic and diluted(2) (unaudited)								187,389,900

	Year Ended December 31,
	2012			2013			2014
	(in thousands, except percentages)
Other Operational and Financial Data(3):
GMS	$	895,152		$	1,347,833		$	1,931,981
Adjusted EBITDA	$	10,669		$	16,947		$	23,081
Active sellers		830			1,074			1,353
Active buyers		9,317			14,032			19,810
Percent mobile visits		N/A			41.3	%		53.2	%
Percent mobile GMS		N/A			29.5	%		36.1	%
Percent international GMS		28.4	%		28.4	%		30.9	%


	As of December 31, 2014
	Actual		Pro Forma(4)
	(in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents and short-term investments	$	88,843
Working capital		88,540
Total assets		249,135
Deferred revenue		3,452
Long-term liabilities		60,382
Convertible preferred stock		80,212
Total stockholders’ equity		67,088

(1)	Includes total stock-based compensation expense as follows:


	Year Ended December 31,
	2012		2013		2014
	(in thousands)
Cost of revenue	$	166	$	200	$	1,113
Marketing		57		79		216
Product development		436		785		1,461
General and administrative		3,435		2,770		7,260

Total stock-based compensation expense	$	4,094	$	3,834	$	10,050

(2)	Pro forma basic and diluted net loss per share have been calculated assuming the conversion of all outstanding shares of convertible preferred stock into 106,896,493 shares of common stock as of the beginning of the applicable period or at the time of issuance, if later.

(3)

See “—Glossary” for the definitions of the following terms: “active buyer,” “active seller,” “GMS” and “visit.” See “Selected Consolidated Financial and Other Data—Non-GAAP Financial Measures” below for the definition of Adjusted EBITDA and for a reconciliation of Adjusted EBITDA to net loss, the most directly comparable financial measure calculated in accordance with GAAP. We began tracking mobile visits and mobile GMS in 2013.

(4)

Reflects the conversion of all outstanding shares of convertible preferred stock into 106,896,493 shares of common stock as of the date reflected and, on a pro forma basis, our sale of shares of common stock that we are offering at the assumed initial public offering price of $ per share, which is the midpoint of the offering price range on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. The pro forma balance sheet data is illustrative only and will change based on the actual initial public offering price and other terms of this offering determined at pricing. Each $1.00 increase or decrease in the assumed initial public offering price of $ per share, which is the midpoint of the offering price range on the cover page of this prospectus, would increase or decrease each of cash and cash equivalents and short-term investments, working capital, total assets, deferred revenue, long-term liabilities and total stockholders’ equity on a pro forma basis by approximately $ , assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same. We may also increase or decrease the number of shares we are offering. Each increase or decrease by shares in the number of shares offered by us would increase or decrease each of cash and cash equivalents and short-term investments, working capital, total assets, deferred revenue, long-term liabilities and total stockholders’ equity by approximately $ million, assuming that the assumed initial price to public remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

Investing in our common stock involves a high degree of risk. Before deciding whether to purchase shares of our common stock, you should consider carefully the risks and uncertainties described below, our consolidated financial statements and related notes and all of the other information in this prospectus. If any of the following risks actually occurs, our business, financial condition, results of operations and prospects could be adversely affected. As a result, the price of our common stock could decline and you could lose part or all of your investment.

We have a history of operating losses and we may not achieve or maintain profitability in the future.

We incurred net losses of $15.2 million, $0.8 million and $2.4 million for the years ended December 31, 2014, 2013 and 2012, respectively. As of December 31, 2014, we had an accumulated deficit of $32.4 million. We may not achieve or maintain profitability in the future. We expect that our operating expenses will increase substantially as we hire additional employees, increase our marketing efforts, expand our operations and continue to invest in the development of our platform, including new services and features for our members. These efforts may be more costly than we expect and our revenue may not increase sufficiently to offset these additional expenses. In addition, as a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. Further, our revenue growth may slow or our revenue may decline for a number of reasons, including those described in these Risk Factors.

Our quarterly operating results may fluctuate, which could cause our stock price to decline.

Our quarterly operating results may fluctuate for a variety of reasons, many of which are beyond our control. These reasons include those described in these Risk Factors as well as the following:

Fluctuations in our quarterly operating results may cause those results to fall below the expectations of analysts or investors, which could cause the price of our common stock to decline. Fluctuations in our results could also cause a number of other problems. For example, analysts or investors might change their models for valuing our common stock, we could experience short-term liquidity issues, our ability to retain or attract key personnel may diminish and other unanticipated issues may arise.

In addition, we believe that our quarterly operating results may vary in the future and that period-to-period comparisons of our operating results may not be meaningful. For example, our historical growth may have overshadowed the seasonal effects on our historical operating results. These seasonal effects may become more pronounced over time, which could also cause our operating results to fluctuate. You should not rely on the results of one quarter as an indication of future performance.

Adherence to our values and our focus on long-term sustainability may negatively influence our short- or medium-term financial performance.

Our values are integral to everything we do, and accordingly, we intend to focus on the long-term sustainability of our business and our ecosystem. We may take actions that we believe will benefit our business and our ecosystem and, therefore, our stockholders over a period of time, even if those actions do not maximize short- or medium-term financial results. However, these longer-term benefits may not materialize within the timeframe we expect or at all. For example:

We have built an authentic, trusted marketplace that embodies our values-based culture, emphasizing respect, direct communication and fun. We have developed a reputation for authenticity as a result of Etsy sellers’ unique offerings and their adherence to our policies for handmade goods. We establish trust in our marketplace by emphasizing the person behind every transaction. We deepen connections among our members through our direct communication tools, seller stories on our website and our in-person events, making a personal relationship central to the member experience. As part of our community, we also strive to build meaningful connections with our members. For example, each of our employees, including

management, is expected to perform member support rotations to help foster connections among our community and to help us better understand the needs of our members. The authenticity of our marketplace and the connections among our members are the cornerstones of our business. Many things could undermine these cornerstones, such as:

If we are unable to maintain the authenticity of our marketplace and encourage connections among members of our community, then our ability to retain existing members and attract new members could be impaired and our reputation and business could be adversely affected.

In addition, our reputation could be harmed if we lose our status as a Certified B Corporation, whether by our choice or by our failure to meet B Lab’s certification requirements. Likewise, our reputation could be harmed if our publicly reported B Corporation score declines. B Lab, an independent, third-party organization, sets the standards for Certified B Corporation certification and may change those standards over time.

Our growth depends on our ability to attract and retain an active community of Etsy sellers and Etsy buyers.

In order to increase revenue and to achieve and maintain profitability, we must attract new members and retain existing members. We must also encourage Etsy sellers to list items for sale and use our Seller Services and encourage Etsy buyers to purchase items in our marketplace.

We believe that many of our new members find Etsy by word of mouth and other non-paid referrals from existing members. If existing Etsy sellers are dissatisfied with their experience on our platform, they may stop listing items in our marketplace and may stop referring others to us. Likewise, if existing Etsy buyers do not find our platform appealing, whether because of a negative experience, lack of buyer-friendly features, declining interest in the nature of the goods offered by Etsy sellers or other factors, they may make fewer purchases and they may stop referring others to us. Under these circumstances, we may have difficulty attracting new Etsy sellers and Etsy buyers without incurring additional marketing expense.

Even if we are able to attract new members to replace members we lose, they may not maintain the same level of activity and the revenue generated from new members may not be as high as the revenue generated from the lost members. If we are unable to retain existing members and attract new members who contribute to an active community, our growth prospects would be harmed and our business could be adversely affected.

Further expansion into markets outside of the United States is important to the growth of our business but will subject us to risks associated with operations abroad.

Expanding our community into markets outside of the United States is an important part of our strategy. Although we have a significant number of members outside of the United States, we have limited experience in developing local markets outside the United States. The nature of the goods that Etsy sellers list in our marketplace may not appeal to non-U.S. consumers in the same way as they do to consumers in the United States. Also, visits to our marketplace from Etsy buyers outside the United States may not convert into sales as often as visits from within the United States. Our success in markets outside the United States will be linked to our ability to attract local Etsy sellers and Etsy buyers to our platform. If we are not able to do so, our growth prospects could be harmed.

In addition, competition is likely to intensify in the international markets where we operate and plan to expand our operations. Local companies based in markets outside the United States may have a substantial competitive advantage because of their greater understanding of, and focus on, those local markets. Some of our competitors may also be able to develop and grow in international markets more quickly than we will.

Continued expansion in markets outside of the United States will also require significant financial investment. These investments include marketing to attract and retain new members, developing localized services, forming relationships with third-party service providers, supporting operations in multiple countries and potentially acquiring companies based outside the United States and integrating those companies with our operations.

Doing business in markets outside of the United States also subjects us to increased risks and burdens such as:

Etsy sellers face similar risks in conducting their businesses across borders. Even if we are successful in managing the risks of conducting our business across borders, if Etsy sellers are not, our business could be adversely affected.

Finally, operating in markets outside of the United States requires significant management attention. If we invest substantial time and resources to expand our operations outside of the United States and cannot manage these risks effectively, the costs of doing business in those markets may be prohibitive or our expenses may increase disproportionately to the revenue generated in those markets.

We expect to increase our marketing efforts to help grow our business, but those efforts may not be effective at attracting new members and retaining existing members.

Maintaining and promoting awareness of our marketplace and broader platform is important to our ability to retain existing members and to attract new members. We believe that much of the growth in our member base to date has originated from word-of-mouth referrals and other organic means, as our historical marketing efforts and expenditures have been relatively limited. Going forward, we intend to invest more in marketing, with a particular focus on bringing more Etsy buyers to our platform. We anticipate that our marketing initiatives may become increasingly expensive as competition increases, and generating a meaningful return on those initiatives may be difficult. Also, the marketing efforts we implement in the future may not succeed as we have limited marketing experience. Even if we successfully increase revenue as a result of these efforts, that additional revenue may not offset the expenses we incur.

Our marketing efforts currently include search engine marketing and display advertising, as well as search engine optimization, social media usage, mobile “push” notifications and email. We obtain a significant number of visits via search engines such as Google, Bing and Yahoo!. Search engines frequently change the algorithms that determine the ranking and display of results of a user’s search, and those changes can negatively affect the placement of links to our marketplace and, therefore, reduce the number of visits to our marketplace. We also obtain a significant number of visits through email advertising. If we are unable to successfully deliver emails to our members or if members do not open our emails, whether out of choice, because those emails are marked as low priority or spam or for other reasons, our business could be adversely affected. Social networking websites, such as Facebook and Pinterest, are another important

source of visits to our marketplace. As online commerce and social networking continue to evolve, we must maintain a presence within these networks. We may be unable to develop or maintain such a presence.

Our payments system depends on third-party providers and is subject to evolving laws and regulations.

Etsy buyers can pay for purchases using Direct Checkout or PayPal. In the United States and other countries where Direct Checkout is available, Etsy buyers can pay with credit cards, debit cards, bank transfers and Etsy gift cards on our platform rather than being directed to a third-party payment platform. A significant portion of our GMS is processed through Direct Checkout, and a portion of our revenue is derived from Direct Checkout.

We have engaged third-party service providers to perform underlying card processing, currency exchange, identity verification and fraud analysis services. If these service providers do not perform adequately or if our relationships with these service providers were to terminate, Etsy sellers’ ability to accept orders could be adversely affected and our business would be harmed. In addition, if these providers increase the fees they charge us, our operating expenses could increase. Alternatively, if we respond by increasing the fees we charge to Etsy sellers, some Etsy sellers may stop using Direct Checkout, stop listing new items for sale or even close their accounts altogether.

The laws and regulations related to payments are complex and vary across different jurisdictions in the United States and globally. As a result, we are required to spend significant time and effort to comply with those laws and regulations. Any failure or claim of our failure to comply, or any failure by our third-party service providers to comply, could cost us substantial resources, could result in liabilities, or could force us to stop offering Direct Checkout. As we expand the availability of Direct Checkout or offer new payment methods to our members in the future, we may become subject to additional regulations and compliance requirements.

Further, through our agreement with our third-party credit card processor, we are indirectly subject to payment card association operating rules and certification requirements, including the Payment Card Industry Data Security Standard. We are also subject to rules governing electronic funds transfers. Any change in these rules and requirements could make it difficult or impossible for us to comply.

Our ability to expand our ecosystem is important to the growth of our business.

We spend substantial time and resources creating new offerings in order to add new constituents to our ecosystem and to open new sales channels for Etsy sellers. For example, in October 2013, we expanded our ecosystem by allowing Etsy sellers to work with small-batch manufacturers. Additionally, in August 2014, we added traditional retailers to our ecosystem with the launch of our Wholesale offering, which allows Etsy sellers to sell their products to retailers on our platform.

Our efforts to expand our ecosystem could fail for many reasons, including lack of acceptance of our offerings by existing members or new constituents, our failure to market our offerings effectively to new constituents, defects or errors in our new offerings or negative publicity about us or our new offerings.

Diversifying our offerings and expanding our ecosystem to benefit our community involves significant risk. For example, these initiatives may not drive increases in revenue, may require substantial investment and planning and may bring us more directly into competition with companies that are better established or have greater resources than we do. It will require additional investment of time and resources in the development and training of our personnel and our members. If we are unable to cost-effectively expand our ecosystem, then our growth prospects and competitive position may be harmed.

Our industry is characterized by rapidly changing technology, new service and product introductions and changing customer demands. We spend substantial time and resources understanding our members’ needs and responding to them. For example, we are continually developing additional Seller Services, improving search and discovery functionality and enhancing the member experience. Recently, we have focused on providing additional Seller Services and tools to help Etsy sellers manage and scale their businesses. For example, in August 2014, we launched our Wholesale offering. In addition, we developed a mobile app and expanded Direct Checkout to enable an Etsy seller in the United States to use our “Sell on Etsy Reader” to accept credit card and debit card payments in person, such as at her store or her booth at a craft fair.

Our members may not be satisfied with our new offerings or perceive that the new offerings respond to their needs. Developing new offerings is complex, and the timetable for commercial release is difficult to predict and may vary from our historical experience. As a result, the introduction of new offerings may occur after anticipated or announced release dates. Our new offerings also may bring us more directly into competition with companies that are better established or have greater resources than we do.

If we do not continue to cost-effectively develop new offerings that satisfy our members, then our competitive position and growth prospects may be harmed. In addition, new offerings may have lower margins than existing offerings and our revenue may not grow enough as a result of the new offerings to offset the cost of developing them.

If the mobile solutions available to Etsy sellers and Etsy buyers are not effective, the use of our platform could decline.

Visits and purchases made on mobile devices by consumers, including Etsy buyers, have increased significantly in recent years. The smaller screen size and reduced functionality associated with some mobile devices may make the use of our platform more difficult or less appealing to members. Visits to our marketplace on mobile devices may not convert into purchases as often as visits made through personal computers, which could result in less revenue for us. Etsy sellers are also increasingly using mobile devices to operate their businesses on our platform. If we are not able to deliver a rewarding experience on mobile devices, Etsy sellers’ ability to manage and grow their businesses may be harmed and, consequently, our business may suffer. Further, although we strive to provide engaging mobile experiences for both Etsy sellers and Etsy buyers who visit our mobile website using a browser on their mobile device, we depend on Etsy sellers and Etsy buyers downloading our mobile apps to provide them the optimal mobile experience.

As new mobile devices and mobile platforms are released, we may encounter problems in developing or supporting apps for them. In addition, supporting new devices and mobile device operating systems may require substantial time and resources.

The success of our mobile apps could also be harmed by factors outside our control, such as:

If our members encounter difficulty accessing or using our platform on their mobile devices, or if our members choose not to use our platform on their mobile devices, our growth prospects and our business may be adversely affected.

Our industry is highly competitive and we expect competition to increase in the future. To be successful, we need to attract and retain both Etsy sellers and Etsy buyers. As a result, we face competition from a wide range of online and offline competitors. See “Business—Competition.”

We compete with retailers for Etsy sellers. An Etsy seller can list her goods for sale with online retailers, such as Amazon.com, eBay or Alibaba, or sell her goods through local consignment and vintage stores and other venues or marketplaces. She may also sell wholesale directly to traditional retailers, including large national retailers, who discover her goods in our marketplace or otherwise. We also compete with companies that sell software and services to small businesses, enabling an Etsy seller to sell from her own website or otherwise run her business independently of our platform, such as Square, Intuit and Shopify.

We compete to attract, engage and retain Etsy sellers based on many factors, including:

In addition, we compete with retailers for the attention of the Etsy buyer. An Etsy buyer has the choice of shopping with any online or offline retailer, whether large marketplaces, such as Amazon.com, eBay or Alibaba, or national retail chains, such as Pottery Barn or Target, or local consignment and vintage stores or other venues or marketplaces. Many of these competitors offer low-cost or free shipping, fast shipping times, favorable return policies and other features that may be difficult or impossible for Etsy sellers to match.

We compete to attract, engage and retain Etsy buyers based on many factors, including:

Many of our competitors and potential competitors have longer operating histories, greater resources, better name recognition or more customers than we do. They may invest more to develop and promote their services than we do, and they may offer lower fees to sellers than we do. Additionally, we believe that it is relatively easy for new businesses to create online commerce offerings or tools or services that enable entrepreneurship.

Local companies or more established companies based in markets where we operate outside of the United States may also have a better understanding of local customs, providing them a competitive advantage. For example, in certain markets outside the United States, we compete with smaller, but similar, local online marketplaces with a focus on unique goods that are attempting to attract sellers and buyers in those markets.

If we are unable to compete successfully, or if competing successfully requires us to expend significant resources in response to our competitors’ actions, our business could be adversely affected.

We may expand our business through acquisitions of other businesses, which may divert management’s attention and/or prove to be unsuccessful.

We have acquired a number of other businesses in the past and may acquire additional businesses or technologies in the future. For example, in April 2014 we acquired Jarvis Labs, Inc. (d/b/a Grand St.) and in June 2014 we acquired Incubart SAS (d/b/a A Little Market). Acquisitions may divert management’s time and focus from operating our business. Acquisitions also may require us to spend a substantial portion of our available cash, incur debt or other liabilities, amortize expenses related to intangible assets or incur write-offs of goodwill or other assets. In addition, integrating an acquired business or technology is risky. Completed and future acquisitions may result in unforeseen operational difficulties and expenditures associated with:

Moreover, we may not benefit from our acquisitions as we expect, or in the time frame we expect. We also may issue additional equity securities in connection with an acquisition, which could cause dilution to our stockholders. Finally, acquisitions could be viewed negatively by analysts, investors or our members.

We strive to attract and motivate employees, from our office administrators to our management team, who share our dedication to our community and our mission.

Our ability to attract, retain and motivate employees, including our management team, is important to our success. In general, our key personnel work for us on an at-will basis. Other companies, including our competitors, may be successful in recruiting and hiring our employees, and it may be difficult for us to find suitable replacements on a timely basis or on competitive terms.

Filling engineering, product management and other technical positions in the New York City area is particularly challenging, especially in light of our distinctive technology philosophy and engineering culture. Qualified individuals are limited and in high demand, and we may incur significant costs to attract, develop and motivate them. Even if we were to offer higher compensation and other benefits, people with suitable technical skills may choose not to join us or to continue to work for us. If we are not able to maintain our engineering culture and broader company culture, then our ability to recruit and retain employees could suffer and our business would be harmed.

The growth of our business may strain our management team and our operational and financial infrastructure.

We have experienced rapid growth in our business, such as in headcount, the number of Etsy sellers and the number of countries in which we have members, and we plan to continue to grow in the future, both in the United States and abroad. For example, our headcount has grown from 251 employees on December 31, 2011 to 685 employees on December 31, 2014, an increase of 172.9%. The growth of our business places significant demands on our management team and pressure to expand our operational and financial infrastructure. As we continue to grow, our operating expenses will increase. If we do not manage our growth effectively, the increases in our operating expenses could outpace any increases in our revenue and our business could be harmed.

Continued growth could also pose other challenges, such as the need to develop and improve our operational, financial and management controls and to enhance our reporting systems and procedures. For example, in 2013 we began implementing a new enterprise resource planning, or ERP, system to enhance a variety of important functions such as invoicing, accounts receivable, accounts payable, foreign currency translation, financial consolidation and internal and external financial and management reporting matters. ERP system implementations are complex, long-term projects that involve substantial expenditures. To fully realize the benefits of the new ERP system we must also make significant changes to our business and financial processes. Our business may be harmed if the ERP system does not function as expected or does not result in the expected benefits.

A small portion of Etsy buyers complain to us about their experience with our platform. For example, Etsy buyers may report that they have not received the items that they purchased, that the items received were not as represented by an Etsy seller or that an Etsy seller has not been responsive to their questions.

Negative publicity and member sentiment generated as a result of these types of complaints could reduce our ability to attract new members or retain our current members or damage our reputation. A perception that our levels of responsiveness and member support are inadequate could have similar results. In some situations, we may choose to reimburse Etsy buyers for their purchases to help avoid harm to our reputation, but we may not be able to recover the funds we expend for those reimbursements.

Anything that disrupts the operations of a substantial number of Etsy sellers, such as interruptions in delivery services, natural disasters, inclement weather, public health crises or political unrest, could also result in negative experiences for a substantial number of Etsy buyers.

Etsy sellers work with a number of third-party services such as FedEx, UPS, the United States Postal Service and Canada Post to deliver their products to Etsy buyers. Anything that prevents timely delivery of goods to Etsy buyers could harm Etsy sellers and could negatively affect our reputation. Delays or interruptions may be caused by events that are beyond the control of the delivery services, such as inclement weather, natural disasters, transportation disruptions, terrorism, public health crises or labor unrest. For example, certain delivery services were reported to have been overwhelmed by the volume of shipments during the 2013 holiday season, resulting in significant delays in delivery times. The delivery services could also be affected by industry consolidation, insolvency or government shut-downs. Although we have agreements with certain delivery services that enable us to provide pre-paid shipping labels as a convenience to Etsy sellers, our agreements do not require these providers to offer delivery services to Etsy sellers. Further, our competitors could obtain preferential rates or shipping services, causing Etsy sellers to pay higher shipping costs or find alternative delivery services. If the goods sold in our marketplace are not delivered in proper condition, on a timely basis or at shipping rates that Etsy buyers are willing to pay, our reputation and our business could be adversely affected.

Our reputation may be harmed if members of our community use unethical business practices.

Our emphasis on our values makes our reputation particularly sensitive to allegations of unethical business practices by Etsy sellers or other members of our community. Our policies promote legal and ethical business practices, such as encouraging Etsy sellers to work only with manufacturers who do not use child or involuntary labor, who do not discriminate and who promote sustainability and humane working conditions. However, we do not control Etsy sellers or other members of our community or their business practices and cannot ensure that they comply with our policies. If members of our community engage in illegal or unethical business practices or are perceived to do so, we may receive negative publicity and our reputation may be harmed.

Although we have measures in place to detect and reduce the occurrence of fraudulent activity in our marketplace, those measures may not always be effective.

For example, Etsy sellers occasionally receive orders placed with fraudulent or stolen credit card data. Under current credit card practices, we may be liable for orders placed through Direct Checkout with fraudulent credit card data even if the associated financial institution approved the credit card transaction. Although we attempt to detect or challenge allegedly fraudulent transactions, we may not be able to do so effectively. As a result, our business could be adversely affected. We could also incur significant fines or lose our ability to give members the option of paying with credit cards if we fail to follow payment card industry data security standards or fail to limit fraudulent transactions conducted in our marketplace.

Negative publicity and member sentiment resulting from fraudulent or deceptive conduct by members or the perception that our levels of responsiveness and member support are inadequate could reduce our ability to attract new members or retain existing members and damage our reputation.

If sensitive information about our members is disclosed, or if we or our third-party providers are subject to cyber attacks, our members may curtail use of our platform, we may be exposed to liability and our reputation would suffer.

We collect, transmit and store personal and financial information provided by our members, such as names, email addresses, the details of transactions and credit card and other financial information. Some of our third-party service providers, such as identity verification and payment processing providers, also regularly have access to member data. In an effort to protect sensitive information, we rely on a variety of security measures, including encryption and authentication technology licensed from third parties. However, advances in computer capabilities, increasingly sophisticated tools and methods used by hackers and cyber terrorists, new discoveries in the field of cryptography or other developments may result in our failure or inability to adequately protect sensitive information. The preventive measures we take to address these risks are costly and may become more costly in the future.

Like all online services, our platform is vulnerable to power outages, telecommunications failures and catastrophic events, as well as computer viruses, break-ins, phishing attacks, denial-of-service attacks and other cyber attacks. Any of these incidents could lead to interruptions or shutdowns of our platform, loss of data or unauthorized disclosure of personally identifiable or other sensitive information. Cyber attacks could also result in the theft of our intellectual property. If we gain greater visibility, we may face a higher risk of being targeted by cyber attacks. Advances in computer capabilities, new technological discoveries or other developments may result in cyber attacks becoming more sophisticated and more difficult to detect. We and our third-party service providers may not have the resources or technical sophistication to anticipate or prevent all such cyber attacks. Moreover, techniques used to obtain unauthorized access to systems change frequently and may not be known until launched against us or our third-party service providers. Security breaches can also occur as a result of non-technical issues, including intentional or inadvertent breaches by our employees or employees of our third-party service providers.

We and our third-party service providers regularly experience cyber attacks aimed at disrupting our and our third-party service providers’ services. If we or our third-party service providers experience security breaches that result in marketplace performance or availability problems or the loss or unauthorized

disclosure of sensitive information, people may become unwilling to provide us the information necessary to set up member accounts. Existing members may also decrease their purchases or stop listing new items for sale or close their accounts altogether. We could also face potential liability and litigation, which may not be adequately covered by insurance. Any of these results could harm our growth prospects, our business and our reputation.

Our business depends on network and mobile infrastructure provided by third parties and on our ability to maintain and scale the technology underlying our platform.

The reliability of our platform is important to our reputation and our ability to attract and retain members. As our number of members, volume of traffic, number of transactions and the amount of information shared on our platform grow, our need for additional network capacity and computing power will also grow. The operation of the technology underlying our platform is expensive and complex, and we could experience operational failures. If we fail to accurately predict the rate or timing of the growth of our platform, we may be required to incur significant additional costs to maintain reliability.

We also depend on the development and maintenance of the Internet and mobile infrastructure. This includes maintenance of reliable Internet and mobile networks with the necessary speed, data capacity and security, as well as timely development of complementary products.

Third-party providers host much of our technology infrastructure. Any disruption in their services, or any failure of our providers to handle the demands of our marketplace could significantly harm our business. We exercise little control over these providers, which increases our vulnerability to their financial conditions and to problems with the services they provide. If we experience failures in our technology infrastructure or do not expand our technology infrastructure successfully, then our ability to attract and retain members could be adversely affected, which could harm our growth prospects and our business.

Our business depends on continued and unimpeded access to the Internet and mobile networks.

Our members rely on access to the Internet or mobile networks to access our marketplace. Internet service providers may choose to disrupt or degrade our members’ access to our platform or increase the cost of such access. Mobile network operators or operating system providers could block or place onerous restrictions on our members’ ability to download and use our mobile apps.

Internet service providers or mobile network operators could also attempt to charge us for providing access to our platform. Although the Federal Communications Commission, or FCC, recently approved new rules that would prohibit Internet service providers from charging content providers higher rates in order to deliver their content over certain “fast traffic” lanes, these rules will not go into effect until later this year and could be subject to legal challenge or statutory preemption, which could delay or prevent implementation. If the FCC’s rules are not implemented, our business could be adversely impacted. Outside of the United States, government regulation of the Internet, including the idea of network neutrality, may be developing or non-existent. As a result, we could face discriminatory or anti-competitive practices that could impede both our and Etsy sellers’ growth prospects, increase our costs and harm our business.

Our business is subject to a large number of U.S. and non-U.S. laws, many of which are evolving.

We are subject to a variety of laws and regulations in the United States and around the world, including those relating to traditional businesses, such as employment laws and taxation, and newer laws and regulations focused on the Internet and online commerce, such as payment systems, privacy, anti-spam, data protection, electronic contracts and consumer protection. These laws and regulations are continuously evolving, and compliance is costly and can require changes to our business practices and significant management time and effort. Additionally, it is not always clear how existing laws apply to the Internet as many of these laws do not address the unique issues raised by the Internet or online commerce.

For example, laws relating to online privacy are evolving differently in different jurisdictions. Federal, state and non-U.S. governmental authorities, as well as courts interpreting the laws, continue to evaluate the privacy implications of the use of third-party “cookies,” “web beacons” and other methods of online tracking. The United States, the European Union and other governments have enacted or are considering legislation that could significantly restrict the ability of companies and individuals to collect and store user information, such as by regulating the level of consumer notice and consent required before a company can employ cookies or other electronic tracking tools.

Some providers of consumer devices and web browsers have implemented, or have announced plans to implement, ways to block tracking technologies which, if widely adopted, could also result in online tracking methods becoming significantly less effective. Any reduction in our ability to make effective use of such technologies could harm our ability to personalize the experience of Etsy buyers, increase our costs and limit our ability to attract new members and retain existing members on cost-effective terms. As a result, our business could be adversely affected.

In some cases, non-U.S. privacy, data protection, consumer protection and other laws and regulations are more restrictive than those in the United States. For example, the European Union traditionally has imposed stricter obligations under such laws than the United States. Consequently, the expansion of our operations internationally may require changes to the ways we collect and use consumer information.

Existing and future laws and regulations enacted by federal, state or non-U.S. governments could impede the growth or use of the Internet or online commerce. It is also possible that governments of one or more countries may seek to censor content available on our platform or may even attempt to block access to our platform. If we are restricted from operating in one or more countries, our ability to attract or retain members may be adversely affected and we may not be able to grow our business as we anticipate.

We strive to comply with all applicable laws, but they may conflict with each other, and by complying with the laws or regulations of one jurisdiction, we may find that we are violating the laws or regulations of another jurisdiction. Despite our efforts, we may not have fully complied in the past and may not in the future. If we become liable under laws or regulations applicable to us, we could be required to pay significant fines and penalties, and we may be forced to change the way we operate. That could require us to incur significant expenses or to discontinue certain services, which could negatively affect our business.

Additionally, if third parties with whom we work violate applicable laws or our policies, those violations could result in other liabilities for us and could harm our business.

Our intellectual property is an essential asset of our business. To establish and protect our intellectual property rights, we rely on a combination of trade secret, copyright, trademark and, to a lesser extent, patent laws, as well as confidentiality procedures and contractual provisions. The efforts we have taken to protect our intellectual property may not be sufficient or effective. We generally do not elect to register our copyrights or the majority of our trademarks, relying instead on the laws protecting unregistered intellectual property, which may not be sufficient. In addition, our copyrights and trademarks, whether or not registered, and patents, may be held invalid or unenforceable if challenged. While we have obtained or applied for patent protection with respect to some of our intellectual property, we generally do not rely on patents as a principal means of protecting intellectual property. To the extent we do seek patent protection, any U.S. or other patents issued to us may not be sufficiently broad to protect our proprietary technologies.

In addition, we may not be effective in policing unauthorized use of our intellectual property. Even if we do detect violations, we may need to engage in litigation to enforce our intellectual property rights. Any enforcement efforts we undertake, including litigation, could be time-consuming and expensive and could divert our management’s attention. In addition, our efforts may be met with defenses and counterclaims challenging the validity and enforceability of our intellectual property rights or may result in a court determining that our intellectual property rights are unenforceable. If we are unable to cost-effectively protect our intellectual property rights, then our business could be harmed.

We may be subject to claims that items listed in our marketplace are counterfeit, infringing or illegal.

Although we do not create or take possession of the items listed in our marketplace by Etsy sellers, we frequently receive communications alleging that items listed in our marketplace infringe third-party copyrights, trademarks, patents or other intellectual property rights. We have intellectual property complaint and take-down procedures in place to address these communications, and we believe such procedures are important to promote confidence in our marketplace. We follow these procedures to review complaints and relevant facts to determine whether to take the appropriate action, which may include removal of the item from our marketplace and, in certain cases, closing the shops of Etsy sellers who repeatedly violate our policies.

Our procedures may not effectively reduce or eliminate our liability. In particular, we may be subject to civil or criminal liability for activities carried out by Etsy sellers on our platform, especially outside the United States where we may be less protected under local laws than we are in the United States. Under current U.S. copyright law and the Communications Decency Act, we may benefit from statutory safe harbor provisions that protect us from liability for content posted by our members. However, trademark and patent laws do not include similar statutory provisions, liability for these forms of intellectual property is often

determined by court decisions. These safe harbors and court rulings may change unfavorably. In that event, we may be held secondarily liable for the intellectual property infringement of Etsy sellers.

Regardless of the validity of any claims made against us, we may incur significant costs and efforts to defend against or settle them. If a governmental authority determines that we have aided and abetted the infringement or sale of counterfeit goods or if legal changes result in us potentially being liable for actions by Etsy sellers on our platform, we could face regulatory, civil or criminal penalties. Successful claims by third-party rights owners could require us to pay substantial damages or refrain from permitting any further listing of the relevant items. These types of claims could force us to modify our business practices, which could lower our revenue, increase our costs or make our platform less user-friendly for our members. Moreover, public perception that counterfeit or other unauthorized items are common in our marketplace, even if factually incorrect, could result in negative publicity and damage to our reputation.

We may be subject to intellectual property claims, which are extremely costly to defend, could require us to pay significant damages and could limit our ability to use certain technologies in the future.

Companies in the Internet and technology industries are frequently subject to litigation based on allegations of infringement or other violations of intellectual property rights. We periodically receive notices that claim we have infringed, misappropriated or misused other parties’ intellectual property rights. To the extent we gain greater public recognition, we may face a higher risk of being the subject of intellectual property claims. Third-party intellectual property rights may cover significant aspects of our technologies or business methods or block us from expanding our offerings. Any intellectual property claim against us, with or without merit, could be time consuming and expensive to settle or litigate and could divert the attention of our management. Litigation regarding intellectual property rights is inherently uncertain due to the complex issues involved, and we may not be successful in defending ourselves in such matters.

In addition, some of our competitors have extensive portfolios of issued patents. Many potential litigants, including some of our competitors and patent holding companies, have the ability to dedicate substantial resources to enforcing their intellectual property rights. Any claims successfully brought against us could subject us to significant liability for damages and we may be required to stop using technology or other intellectual property alleged to be in violation of a third party’s rights. We also might be required to seek a license for third-party intellectual property. Even if a license is available, we could be required to pay significant royalties or submit to unreasonable terms, which would increase our operating expenses. We may also be required to develop alternative non-infringing technology, which could require significant time and expense. If we cannot license or develop technology for any allegedly infringing aspect of our business, we would be forced to limit our service and may be unable to compete effectively. Any of these results could harm our business.

We may be involved in litigation matters that are expensive and time consuming.

In addition to intellectual property claims, we may become involved in other litigation matters, including class action lawsuits. Any lawsuit to which we are a party, with or without merit, may result in an unfavorable judgment. We also may decide to settle lawsuits on unfavorable terms. Any such negative outcome could result in payments of substantial damages or fines, damage to our reputation or adverse changes to our offerings or business practices. Any of these results could adversely affect our business. In addition, defending claims is costly and can impose a significant burden on our management.

The software underlying our platform is highly complex and may contain undetected errors or vulnerabilities, some of which may only be discovered after the code has been released. We rely heavily on a software engineering practice known as “continuous deployment,” meaning that we typically release software code many times per day. This practice may result in the more frequent introduction of errors or vulnerabilities into the software underlying our platform. Any errors or vulnerabilities discovered in our code after release could result in damage to our reputation, loss of members, loss of revenue or liability for damages, any of which could adversely affect our growth prospects and our business.

We are subject to the terms of open source licenses because our platform incorporates open source software.

The software powering our marketplace incorporates software covered by open source licenses. In addition, we regularly contribute source code to open source software projects and release internal software projects under open source licenses, and we anticipate doing so in the future. The terms of many open source licenses have not been interpreted by U.S. courts and there is a risk that the licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to operate our marketplace. Under certain open source licenses, we could be required to publicly release the source code of our software or to make our software available under open source licenses. To avoid the public release of the affected portions of our source code, we could be required to expend substantial time and resources to re-engineer some or all of our software. In addition, use of open source software can lead to greater risks than use of third-party commercial software because open source licensors generally do not provide warranties or controls on the origin of the software. Use of open source software may also present additional security risks because the public availability of such software may make it easier for hackers and other third parties to determine how to compromise our platform. Additionally, because any software source code we contribute to open source projects is publicly available, our ability to protect our intellectual property rights in such software source code may be limited or lost entirely, and we will be unable to prevent our competitors or others from using such contributed software source code. Any of these risks could be difficult to eliminate or manage and, if not addressed, could adversely affect our business, financial condition and results of operations.

The application of indirect taxes, such as sales and use tax, value-added tax, or VAT, provincial taxes, goods and services tax, business tax and gross receipt tax, to businesses like ours and to our members is a complex and evolving issue. For example, as of January 1, 2015, the European Union imposed an obligation on marketplaces to collect and remit VAT on sales of automatically-downloaded digital items, and we are in the process of implementing such collection and remittance procedures. Significant judgment is required to evaluate applicable tax obligations and as a result amounts recorded are estimates and could change. In many cases, the ultimate tax determination is uncertain because it is not clear how existing statutes apply to our business or to Etsy sellers’ businesses. One or more states, the federal government or other countries may seek to impose additional reporting, record-keeping or indirect tax collection obligations on businesses like ours that facilitate online commerce. For example, the U.S. Congress is currently considering the “Marketplace Fairness Act,” which would grant states the authority to require online merchants to collect sales tax on online sales at the time a transaction is completed. New taxes could also require us or Etsy sellers to incur substantial costs to capture data and collect and remit taxes. If such obligations were imposed, the additional costs associated with tax collection, remittance and audit requirements could make selling in our marketplace less attractive and more costly for Etsy sellers, which could adversely affect our business.

We may experience fluctuations in our tax obligations and effective tax rate.

We are subject to taxation in the United States and in numerous other jurisdictions. We record tax expense based on current tax payments and our estimates of future tax payments, which may include reserves for estimates of probable settlements of tax audits. At any one time, multiple tax years could be subject to audit by various taxing jurisdictions. As a result, we expect that throughout the year there could be ongoing variability in our quarterly tax rates as taxable events occur and exposures are re-evaluated. Further, our effective tax rate in a given financial statement period may be adversely impacted by changes in tax laws, changes in the mix of revenue among different jurisdictions, changes to accounting rules and changes to our ownership or capital structure. Fluctuations in our tax obligations and effective tax rate could adversely affect our business.

In January 2015, we implemented a revised corporate structure to more closely align our structure with our global operations and future expansion plans outside of the United States. Our new corporate structure changes how we use our intellectual property and implements certain intercompany arrangements, which we expect may result in a reduction in our overall effective tax rate and other operational efficiencies. The tax laws of the jurisdictions in which we operate are subject to interpretation, and their application may depend on our ability to operate our business in a manner consistent with our corporate structure. Moreover, these tax laws are subject to change. Tax authorities may disagree with our position as to the tax treatment of our transfer of intangible assets or determine that the manner in which we operate our business does not achieve the intended tax consequences. If our new corporate structure does not achieve our expectations for any of these or other reasons, we may be subject to a higher overall effective tax rate and our business may be adversely affected.

We rely on consumer discretionary spending and may be adversely affected by economic downturns and other macroeconomic conditions or trends.

Macroeconomic conditions may adversely affect our business. If general economic conditions deteriorate in the United States or other markets where we operate, consumer discretionary spending may decline and demand for the goods available in our marketplace may be reduced. This would cause sales in our marketplace to decline and adversely impact our business. Conversely, if recent trends supporting self-employment and the desire for supplemental income were to reverse, the number of Etsy sellers offering their goods in our marketplace could decline and the number of goods listed in our marketplace could decline.

Even without changes in economic conditions, the demand for the goods listed in our marketplace is dependent on consumer preferences. Consumer preferences can change quickly and may differ across generations and cultures. If demand for the goods that Etsy sellers offer in our marketplace declines, our business would be harmed. Trends in socially-conscious consumerism and buying locally could also shift or slow to the detriment of our business. Our growth prospects would also be hampered if the shift to online and mobile commerce does not continue.

The terms of our debt instruments may restrict our ability to pursue our business strategies.

We do not currently have any obligations outstanding under our credit facility. However, our credit facility requires us, and any debt instruments we may enter into in the future may require us, to comply with various covenants that limit our ability to take actions such as:

These restrictions could limit our ability to pursue our business strategies. If we default under our credit facility and if the default is not cured or waived, the lenders could terminate their commitments to lend to us and cause any amounts outstanding to be payable immediately. Such a default could also result in cross defaults under other debt instruments. Our assets and cash flow may not be sufficient to fully repay borrowings under all of our outstanding debt instruments if some or all of these instruments are accelerated upon a default. Moreover, any such default would limit our ability to obtain additional financing, which may have an adverse effect on our cash flow and liquidity.

We may need additional capital, which may not be available to us on acceptable terms or at all.

We believe that our existing cash and cash equivalents and short-term investments, together with cash generated from operations and available borrowing capacity under our credit facility, will be enough to meet our anticipated cash needs for at least the next 12 months. However, we may require additional cash resources due to changed business conditions or other developments, such as acquisitions or investments we may decide to pursue. If our resources are insufficient to satisfy our cash requirements, we may seek to borrow funds under our credit facility or sell additional equity or debt securities. The sale of additional equity securities could result in dilution to our existing stockholders. Borrowing funds would result in increased debt service obligations and could result in additional operating and financial covenants that would limit our operations. It is also possible that financing may not be available to us in amounts or on terms acceptable to us, if at all.

If our insurance coverage is insufficient or our insurers are unable to meet their obligations, our insurance may not mitigate the risks facing our business.

We contract for insurance to cover a number of risks and potential liabilities. Our insurance policies cover areas such as general liability, errors and omissions liability, employment liability, business interruptions, data breach, crime, product liability and directors’ and officers’ liability. For certain types of business risk, we may not be able to, or may choose not to, acquire insurance. In addition, we may not obtain enough insurance to adequately mitigate the risks we face or we may have to pay high premiums and/or deductibles for the coverage we do obtain. Additionally, if any of our insurers becomes insolvent, it would be unable to pay any claims that we make.

We are an emerging growth company and the reduced disclosure requirements applicable to emerging growth companies may make our common stock less attractive to investors.

We are an emerging growth company as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we intend to take advantage of some of the exemptions from the reporting requirements applicable to other public companies. For example, we intend to take advantage of the exemption from the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, the reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and the exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments. It is possible that investors will find our common stock less attractive as a result of our reliance on these exemptions. If so, there may be a less active trading market for our common stock and our stock price may be more volatile.

We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenue of at least $1.0 billion or (c) in which we become a large accelerated filer, which means that we have been public for at least 12 months, have filed at least one annual report and the market value of our common

stock that is held by non-affiliates exceeds $700 million as of the last day of our then most recently completed second fiscal quarter, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

Operating as a public company will require us to incur substantial costs and will require substantial management attention. In addition, our management team has limited experience managing a public company.

As a public company, we will incur substantial legal, accounting and other expenses that we did not incur as a private company. For example, we will be subject to the reporting requirements of the Securities Exchange Act of 1934 as amended, or the Exchange Act, the applicable requirements of the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations of the Securities and Exchange Commission, or the SEC. The rules and regulations of Nasdaq will also apply to us following this offering. As part of the new requirements, we will need to establish and maintain effective disclosure and financial controls and make changes to our corporate governance practices. We expect that compliance with these requirements will increase our legal and financial compliance costs and will make some activities more time-consuming.

Most of our management and other personnel have little experience managing a public company and preparing public filings. In addition, we expect that our management and other personnel will need to divert attention from other business matters to devote substantial time to the reporting and other requirements of being a public company. In particular, we expect to incur significant expense and devote substantial management effort to complying with the requirements of Section 404 of the Sarbanes-Oxley Act. We will need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge.

Our management will not be required to evaluate the effectiveness of our internal control over financial reporting until the end of the fiscal year for which our second annual report is due. If we are unable to maintain effective internal control over financial reporting, investors may lose confidence in the accuracy of our financial reports.

As a public company, we will be required to maintain internal control over financial reporting and to report any material weaknesses in such internal controls. Section 404 of the Sarbanes-Oxley Act requires that we evaluate and determine the effectiveness of our internal control over financial reporting. Beginning with our second annual report following this offering, we will be required to provide a management report on internal control over financial reporting. When we are no longer an emerging growth company, our management report on internal control over financial reporting will need to be attested to by our independent registered public accounting firm. We do not expect to have our independent registered public accounting firm attest to our management report on internal control over financial reporting while we are an emerging growth company.

If we have a material weakness in our internal control over financial reporting, we may not detect errors on a timely basis and our financial statements may be materially misstated. In addition, our internal control

over financial reporting will not prevent or detect all errors and fraud. Because of the inherent limitations in

all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.

If there are material weaknesses or failures in our ability to meet any of the requirements related to the maintenance and reporting of our internal controls, investors may lose confidence in the accuracy and completeness of our financial reports and that could cause the price of our common stock to decline. In addition, we could become subject to investigations by Nasdaq, the SEC or other regulatory authorities, which could require additional management attention and which could adversely affect our business.

As described below we currently have two material weaknesses, which we are in the process of remediating.

We currently have identified two material weaknesses in our internal control over financial reporting that, if not corrected, could result in material misstatements of our financial statements.

In connection with the audit of our financial statements as of and for the year ended December 31, 2014, we identified two material weaknesses in our internal control over financial reporting. A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis.

First, we determined that we did not have adequate procedures and controls to appropriately account for certain non-income tax-related expenses and comply with the related filing requirements. Second, we determined that we did not have adequate cut-off procedures to ensure the timely recording of certain period-end accruals.

These two material weaknesses resulted in a misstatement of expenses in prior periods that were immaterial to previously issued annual financial statements but in combination were material to certain interim periods. The impact of these material weaknesses resulted in the revision of our consolidated financial statements for the years ended December 31, 2012 and 2013, for the three months ended March 31, 2013, the three and six months ended June 30, 2013, the three and nine months ended September 30, 2013, the three months ended December 31, 2013 and the three months ended September 30, 2014. The impacts of these material weaknesses also resulted in the restatement of our consolidated financial statements for the three months ended March 31, 2014, the three and six months ended June 30, 2014 and the nine months ended September 30, 2014.

Neither we nor our independent registered public accounting firm has performed an evaluation of our internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. In light of the material weaknesses that were identified, we believe that it is possible that additional material weaknesses and control deficiencies may have been identified if such an evaluation had been performed.

We are working to remediate the material weaknesses. We have taken steps to enhance our internal control environment and plan to take additional steps to remediate the material weaknesses. Specifically:

The actions that we are taking are subject to ongoing senior management review as well as audit committee oversight. Although we plan to complete this remediation process as quickly as possible, we cannot at this time estimate how long it will take, and our efforts may not be successful in remediating these material weaknesses. In addition, we will incur additional costs in improving our internal control over financial reporting. If we are unable to successfully remediate these material weaknesses or if we identify additional material weaknesses, we may not detect errors on a timely basis. This could harm our operating results, cause us to fail to meet our SEC reporting obligations or Nasdaq listing requirements on a timely basis, adversely affect our reputation, cause our stock price to decline or result in inaccurate financial reporting or material misstatements in our annual or interim financial statements.

Our business could be adversely affected by natural disasters, public health crises, political crises or other unexpected events.

Natural disasters and other adverse weather and climate conditions, public health crises, political crises, such as terrorist attacks, war and other political instability, or other unexpected events, could disrupt our operations, Internet or mobile networks, or the operations of one or more of our service providers. For example, when Hurricane Sandy struck New York in October 2012, although our data centers were unaffected, our headquarters in Brooklyn was closed for five days, and we experienced a heavy volume of

member support requests which required us to devote additional resources to handle those requests. Events of this type could also impact Etsy sellers’ ability to continue producing goods for sale in our marketplace. In addition, such events could negatively impact consumer spending in the affected regions. If any of these events occurs, our business could be adversely affected.

The price of our common stock could be volatile and you may not be able to resell your shares at or above our initial public offering price. Declines in the price of common stock could subject us to litigation.

There has not been a public market for our common stock prior to this offering and an active trading market may not develop following this offering. Even if such a market does develop, it may not be sustainable. If trading in our common stock is not active, you may not be able to sell your shares quickly, at the market price or at all. The initial public offering price for the shares was determined by negotiations between us and the representative of the underwriters and may not be indicative of prices that will prevail in the trading market following this offering. In addition, the trading prices of the securities of technology companies have historically been highly volatile. Accordingly, the price of our common stock could be subject to wide fluctuations for many reasons, many of which are beyond our control, including those described in these Risk Factors and others such as:

In addition, if the market for technology stocks or the stock market in general experiences a loss of investor confidence, the price of our common stock could decline for reasons unrelated to our business, results of operations or financial condition. The price of our common stock might also decline in reaction to events that affect other companies, even if those events do not directly affect us. Some companies that have experienced volatility in the trading price of their stock have been the subject of securities class action litigation. If we are the subject of such litigation, it could result in substantial costs and could divert our management’s attention and resources, which could adversely affect our business.

We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.

The principal purposes of this offering are to increase our visibility, create a public market for our common stock and facilitate our future access to the public equity markets. We currently intend to use the net proceeds from this offering for working capital and general corporate purposes, including continued investments in the growth of our business. We also intend to use $300,000 of the proceeds of this offering to partially fund Etsy.org, a Delaware non-profit organization that we formed in January 2015. We may use a portion of the net proceeds to fund the build-out of our new corporate headquarters. In addition, we may use a portion of the net proceeds received by us from this offering for acquisitions of other complementary businesses, technologies or other assets. However, we have no current understandings, agreements or commitments for any specific material acquisitions at this time. Except with respect to Etsy.org, we have not yet determined the manner in which we will allocate the net proceeds we receive from this offering. As a result, our management will have broad discretion in the allocation and use of the net proceeds. See “Use of Proceeds.”

The failure by our management to allocate or use these funds effectively could harm our business. Pending their use, we may invest the net proceeds we receive from this offering in a manner that does not produce income or that loses value. Our ultimate use of the net proceeds from this offering may vary substantially from their currently intended use.

We do not intend to pay dividends on our capital stock, so any returns will be limited to increases in the value of our common stock.

We have never declared or paid any cash dividends on our capital stock. We currently anticipate that we will retain future earnings for the operation and expansion of our business. Accordingly, we do not anticipate declaring or paying any cash dividends for the foreseeable future. In addition, our ability to pay cash dividends on our capital stock is restricted by the terms of our credit facility and is likely to be restricted by

any future debt financing arrangement we enter into. Any return to stockholders will therefore be limited to increases in the price of our common stock, if any.

Our directors, executive officers and principal stockholders beneficially own a substantial percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.

Our directors, executive officers, greater than 5% stockholders and their respective affiliates will hold in the aggregate approximately % of the voting power of our outstanding capital stock following this offering, assuming no exercise of the underwriters’ option to purchase additional shares of our common stock in this offering. Therefore, these stockholders will continue to have the ability to influence us through their ownership position, even after this offering. If these stockholders act together, they may be able to determine all matters requiring stockholder approval. For example, these stockholders will be able to control elections of directors, amendments of our charter documents or approval of any merger, sale of assets or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our capital stock that other stockholders may feel are in their best interests.

If you purchase our common stock in this offering, you will incur immediate and substantial dilution.

The initial public offering price is substantially higher than the pro forma net tangible book value per share of our common stock of $ per share as of December 31, 2014. Investors purchasing common stock in this offering will pay a price per share that substantially exceeds the net tangible book value per share. As a result, investors purchasing common stock in this offering will incur immediate dilution of $ per share, based on the initial public offering price of $ per share, the midpoint of the price range on the cover page of this prospectus.

This dilution is due to the substantially lower price paid by our investors who purchased shares prior to this offering as compared to the price offered to the public in this offering. In addition, as of December 31, 2014, there were outstanding options to purchase 23,050,594 shares of our common stock with a weighted average exercise price of approximately $2.67 per share and warrants to purchase 406,060 shares of our common stock (including preferred stock on an as-converted basis) with a weighted average exercise price of approximately $0.66 per share. The exercise of any of these options or warrants would result in additional dilution. As a result of the dilution to investors purchasing shares in this offering, investors may receive less than the purchase price paid in this offering in the event of our liquidation. See “Dilution.”

Sales of a substantial number of shares of our common stock in the public market by our existing stockholders following this offering could cause the price of our common stock to decline.

Sales of a substantial number of shares of our common stock in the public market, or the perception that these sales might occur, could depress the price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. We cannot predict the effect that sales may have on the prevailing price of our common stock.

All of our executive officers and directors and the holders of substantially all of our capital stock are subject to lock-up agreements with the underwriters of this offering that restrict the stockholders’ ability to transfer shares of our common stock for periods of at least 180 days, and for a portion of the shares, 270 and 360 days from the date of this prospectus. The lock-up agreements limit the number of shares of common stock that may be sold immediately following this offering. Subject to certain limitations, approximately shares will become eligible for sale upon expiration of the 180-day lock-up period, approximately shares will become eligible for sale upon expiration of the 270-day lock-up period and approximately shares will become eligible for sale upon expiration of the 360-day lock-up period. In addition, based on our capitalization as of December 31, 2014, shares issuable upon exercise of outstanding options and shares issuable upon exercise of outstanding warrants will also be eligible for sale upon expiration of the 180-day lock-up period. We intend to register all of the shares underlying outstanding options and any shares underlying other equity incentives we may grant in the future for public resale under the Securities Act of 1933, as amended, or the Securities Act. Accordingly, these shares will be able to be freely sold in the public market upon issuance to the extent permitted by any applicable vesting requirements and the lock-up agreements described above. Sales of stock by these stockholders could adversely affect the trading price of our common stock.

Certain holders of shares of our common stock have registration rights. See “Description of Capital Stock—Registration Rights.” Registration of these shares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act, except for shares held by our affiliates as defined in Rule 144 under the Securities Act. Sales of securities by any of these stockholders could adversely affect the trading price of our common stock.

Future sales and issuances of our common stock or rights to purchase common stock could result in additional dilution to our stockholders and could cause the price of our common stock to decline.

We may issue additional common stock, convertible securities or other equity following the completion of this offering. We also expect to issue common stock to our employees, directors and other service providers pursuant to our equity incentive plans. Such issuances could be dilutive to investors and could cause the price of our common stock to decline. New investors in such issuances could also receive rights senior to those of holders of our common stock.

If analysts do not publish research about our business or if they publish inaccurate or unfavorable research, our stock price and trading volume could decline.

The trading market for our common stock will depend in part on the research and reports that analysts publish about our business. We do not have any control over these analysts. If one or more of the analysts who cover us downgrade our common stock or publish inaccurate or unfavorable research about our business, the price of our common stock would likely decline. If few analysts cover us, demand for our common stock could decrease and our common stock price and trading volume may decline. Similar results may occur if one or more of these analysts stop covering us in the future or fail to publish reports on us regularly.

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, could limit attempts to make changes in our management and could depress the price of our common stock.

Provisions in our certificate of incorporation and bylaws may have the effect of delaying or preventing a change in control of our company or limiting changes in our management. Among other things, these provisions:

These provisions may delay or prevent attempts by our stockholders to replace members of our management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. In addition, Section 203 of the Delaware General Corporation Law may delay or prevent a change in control of our company. Section 203 imposes certain restrictions on mergers, business combinations and other transactions between us and holders of 15% or more of our common stock. Anti-takeover provisions could depress the price of our common stock by acting to delay or prevent a change in control of our company.

For information regarding these and other provisions, see “Description of Capital Stock.”

Our certificate of incorporation will provide that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our certificate of incorporation will provide that the Court of Chancery of the State of Delaware is the exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a breach of fiduciary duty, any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our certificate of incorporation or our bylaws or any action asserting a claim against us that is governed by the internal affairs doctrine. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees and may discourage these types of lawsuits. Alternatively, if a court were to find the choice of forum provision contained in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions.

This prospectus contains forward-looking statements that are based on our beliefs and assumptions and on information currently available to us. The forward-looking statements are contained principally in “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Letter from Chad” and “Business.” Forward-looking statements include information concerning our possible or assumed future results of operations and expenses, business strategies and plans, competitive position, business environment and potential growth opportunities. Forward-looking statements include all statements that are not historical facts. In some cases, forward-looking statements can be identified by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “seeks,” “should,” “will,” “would” or similar expressions and the negatives of those terms.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Those risks include those described in “Risk Factors” and elsewhere in this prospectus. Given these uncertainties, you should not place undue reliance on any forward-looking statements in this prospectus. Also, forward-looking statements represent our beliefs and assumptions only as of the date of this prospectus. You should read this prospectus and the documents that we have filed as exhibits to the registration statement, of which this prospectus is a part, and any related free writing prospectus, completely and with the understanding that our actual future results may be materially different from what we expect.

Any forward-looking statement made by us in this prospectus speaks only as of the date on which it is made. Except as required by law, we disclaim any obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. All forward-looking statements are expressly qualified in their entirety by the foregoing cautionary statements.

We obtained the industry, market and competitive position data in this prospectus from our own internal estimates and research, from industry and general publications and from research, surveys and studies conducted by third parties. This information involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates.

In addition, industry publications, studies and surveys generally state that they have been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe that each of these studies and publications is reliable, we have not independently verified market and industry data from third parties. Likewise, while we believe our internal company data is reliable and the definitions of these key operating metrics are appropriate, neither such data nor these definitions have been verified by any independent source.

We estimate that the net proceeds to us from the issuance of our common stock in this offering, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, will be approximately $ million, or approximately $ million if the underwriters exercise their option to purchase additional shares in full, assuming an initial public offering price of $ per share, which is the midpoint of the offering price range on the cover page of this prospectus.

We will not receive any of the proceeds from the sale of shares by the selling stockholders.

Each $1.00 increase (or decrease) in the assumed initial public offering price of $ per share, the midpoint of the offering price range on the cover page of this prospectus, would increase (or decrease) net proceeds to us by $ million, assuming that the number of shares offered by us on the cover page of this prospectus remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Each 1,000,000 increase (or decrease) in the number of shares of common stock offered by us would increase (or decrease) net proceeds to us by approximately $ million, assuming an initial public offering price of $ per share, the midpoint of the price range on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The principal purposes of this offering are to increase our visibility, create a public market for our common stock and facilitate our future access to the public equity markets. We currently intend to use the net proceeds from this offering for working capital and general corporate purposes, including continued investments in the growth of our business. Consistent with our values and our mission, we also intend to use $300,000 of the proceeds of this offering to partially fund Etsy.org, a Delaware non-profit organization that we formed in January 2015. Etsy.org will be dedicated to educating women and other under-represented entrepreneurial populations and empowering them to build businesses that regenerate communities and the planet. See “Business—Our Strategy: The Path Ahead” for additional information about Etsy.org. We may use a portion of the net proceeds to fund the build-out of our new corporate headquarters. In addition, we may use a portion of the net proceeds received by us from this offering for acquisitions of other complementary businesses, technologies or other assets. However, we have no current understandings, agreements or commitments for any specific material acquisitions at this time. Except with respect to Etsy.org, we have not allocated specific amounts of the net proceeds received by us from this offering for any of these purposes and, as a result, we will have broad discretion in the allocation and use of the net proceeds.

Pending our use of the net proceeds received by us from this offering, we intend to invest the net proceeds in short and intermediate term, interest-bearing obligations, investment grade instruments, certificates of deposit or direct or guaranteed obligations of the U.S. government.

We have never declared or paid cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any cash dividends in the foreseeable future. Any future decision to declare cash dividends will be made at the discretion of our board of directors, subject to applicable laws, and will depend on a number of factors, including our financial condition, results of operations, capital requirements, contractual restrictions, general business conditions and other factors that our board of directors thinks are relevant. Under Delaware law, we can only pay dividends either out of “surplus” or out of the current or the immediately preceding year’s net profits. Surplus is defined as the excess, if any, at any given time, of the total assets of a corporation over its total liabilities and statutory capital. As a result, we may not pay dividends according to our policy or at all if, among other things, we do not have sufficient cash to pay the intended dividends. Our future ability to pay cash dividends on our stock may be limited by the terms of any future debt or preferred securities and is limited by the terms of our Credit Agreement. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Sources of Liquidity” for further information about our Credit Agreement.

The following table sets forth our cash and cash equivalents and short-term investments and capitalization as of December 31, 2014:

The unaudited pro forma and pro forma as adjusted information below is illustrative only, and cash and cash equivalents and short-term investments, total stockholders’ equity and total capitalization after this offering will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing. You should read this table in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Description of Capital Stock” and our consolidated financial statements and related notes included elsewhere in this prospectus.

See “Prospectus Summary—The Offering” for a description of those shares that are or are not reflected as outstanding shares on a pro forma basis in the table above.

If you invest in our common stock, your investment will be diluted to the extent of the difference between the offering price per share of our common stock and the pro forma as adjusted net tangible book value per share of our common stock immediately after this offering. Dilution results from the fact that the per share offering price of our common stock is substantially higher than the book value per share attributable to our existing stockholders.

Our pro forma net tangible book value as of was $ million, or $ per share of common stock. Our pro forma net tangible book value per share represents the amount of our total tangible assets reduced by the amount of our total liabilities and divided by the total number of shares of our common stock outstanding as of , after giving effect to the automatic conversion of all outstanding shares of our preferred stock into common stock in connection with this offering.

After giving effect to our sale in this offering of shares of common stock at an assumed initial public offering price of $ per share, the midpoint of the offering price range on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of would have been approximately $ million, or $ per share of common stock. This represents an immediate pro forma as adjusted dilution of $ per share to investors purchasing shares in this offering.

A $1.00 increase (or decrease) in the assumed offering price of $ per share would increase (or decrease) our pro forma as adjusted net tangible book value per share after this offering by $ , assuming that the number of shares offered by us on the cover page of this prospectus remains the same, and after deducting estimated underwriting discounts and commissions payable by us.

If the underwriters exercise their option to purchase additional shares in full, the pro forma as adjusted net tangible book value per share after giving effect to this offering would be approximately $ per share, and the dilution in pro forma net tangible book value per share to investors in this offering would be approximately $ per share.

The following table summarizes, as of , the differences between the number of outstanding shares of our common stock purchased from us, after giving effect to the conversion of our preferred stock into common stock, the total cash consideration paid and the average price per share paid by our existing

stockholders and by our new investors purchasing shares in this offering at the assumed offering price of the common stock of $ per share, the midpoint of the offering price range on the cover page of this prospectus, before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us:

Sales by the selling stockholders in this offering will cause the number of shares held by existing stockholders to be reduced to shares, or % of the total number of shares of our common stock outstanding after this offering, and will increase the number of shares held by new investors to shares, or % of the total number of shares outstanding after this offering.

A $1.00 increase (or decrease) in the assumed initial public offering price of $ per share would increase (or decrease) total consideration paid by new investors by $ million, assuming that the number of shares offered by us on the cover page of this prospectus remains the same, and after deducting estimated underwriting discounts and commissions payable by us.

After giving effect to the sale of shares in this offering by us and the selling stockholders, if the underwriters exercise their option to purchase additional shares in full, our existing stockholders would own % and our new investors would own % of the total number of shares of our common stock outstanding after this offering.

See “Prospectus Summary—The Offering” for a description of those shares that are or are not reflected in the foregoing tables or discussion.

To the extent that any outstanding options or warrants are exercised, new investors will experience further dilution.

The following tables show selected consolidated financial data. The selected consolidated statements of operations data for the years ended December 31, 2012, 2013 and 2014, and the selected consolidated balance sheet data as of December 31, 2013 and 2014, are derived from our audited consolidated financial statements and related notes included elsewhere in this prospectus. The following tables also show certain operational and non-GAAP financial measures. See the accompanying footnotes and “—Non-GAAP Financial Measures” below for more information. Our historical results and key metrics are not necessarily indicative of future results, and results for any interim period presented below are not necessarily indicative of the results to be expected for any annual period. Our consolidated financial statements for the years ended December 31, 2012 and 2013 have been revised to correct for the understatement of certain non-income tax related expenses. See Note 15 of the accompanying notes to our consolidated financial statements.

The following selected consolidated financial data and key metrics should be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus.

In this prospectus, we provide Adjusted EBITDA, a non-GAAP financial measure that represents our net (loss) income before interest expense, net, (benefit) provision for income taxes and depreciation and amortization, adjusted to eliminate stock-based compensation expense, net unrealized loss on warrant and other liabilities, foreign exchange loss and acquisition-related expenses. Below is a reconciliation of Adjusted EBITDA to net (loss) income, the most directly comparable GAAP financial measure.

We have included Adjusted EBITDA in this prospectus because it is a key measure used by our management and board of directors to evaluate our operating performance and trends, allocate internal resources, prepare and approve our annual budget, develop short- and long-term operating plans and assess the health of our business. As our Adjusted EBITDA increases, we are able to invest more in our platform. We believe

that Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our business as it removes the impact of certain non-cash items and certain variable charges.

Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including net (loss) income and our other GAAP results.

The following table reflects the reconciliation of net loss to Adjusted EBITDA for each of the periods indicated:

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes and other financial information included elsewhere in this prospectus. Some of the information contained in this discussion and analysis or elsewhere in this prospectus, including information with respect to our plans and strategy for our business and our performance and future success, includes forward-looking statements that involve risks and uncertainties. You should review the “Risk Factors” section of this prospectus for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Etsy was founded in June 2005 in Brooklyn, New York as a marketplace for handmade goods and craft supplies. From those beginnings, we have built an innovative, technology-based platform that, as of December 31, 2014, connected 54.0 million members, including 1.4 million active sellers and 19.8 million active buyers, in nearly every country in the world. In 2014, Etsy sellers generated GMS of $1.93 billion, of which 36.1% came from purchases made on mobile devices and 30.9% came from an Etsy seller or an Etsy buyer outside of the United States.

We operate a platform for third-party sellers. Our business model is based on shared success: we make money when Etsy sellers make money. We do not compete with Etsy sellers, hold inventory or sell goods. Our revenue is diversified, generated from a mix of marketplace activities and the services we provide Etsy sellers to help them create and grow their businesses. Marketplace revenue includes the fee an Etsy seller pays for each completed transaction and the listing fee an Etsy seller pays for each item she lists. Seller Services revenue includes fees an Etsy seller pays for services such as prominent placement in search results via Promoted Listings, payment processing via Direct Checkout and purchases of shipping labels through our platform via Shipping Labels. Other revenue includes the fees we receive from a third-party payment processor.

In 2013, Etsy sellers generated GMS of $1.35 billion, up 50.6% over 2012, and in 2014, Etsy sellers generated GMS of $1.93 billion, up 43.3% over 2013. In 2013, we generated revenue of $125.0 million, up 67.6% over 2012, and in 2014, we generated revenue of $195.6 million, up 56.4% over 2013. In 2013, we generated a net loss of $0.8 million and Adjusted EBITDA of $16.9 million compared to a net loss of $2.4 million and Adjusted EBITDA of $10.7 million in 2012. In 2014, we generated a net loss of $15.2 million and Adjusted EBITDA of $23.1 million compared to a net loss of $0.8 million and Adjusted EBITDA of $16.9 million in 2013. See “Selected Consolidated Financial and Other Data—Non-GAAP Financial Measures” for more information and for a reconciliation of Adjusted EBITDA to net loss, the most directly comparable financial measure calculated in accordance with GAAP.

The consolidated financial statements for the years ended December 31, 2012 and 2013 have been revised to correct for the understatement of certain non-income tax-related expenses. See Note 15 of the accompanying notes to our consolidated financial statements.

We collect and analyze operating and financial data to evaluate the health of our ecosystem, allocate our resources (such as capital, time and technology investments) and assess the performance of our business. In addition to revenue, net (loss) income and other results under GAAP, the key operating and financial metrics we use are:

Gross merchandise sales, or GMS, is the dollar value of items sold in our marketplace within the applicable period, excluding shipping fees and net of refunds associated with cancelled transactions. GMS does not represent revenue earned by us. GMS relates only to Marketplace activity and does not reflect Seller Services activity. However, because our revenue and cost of revenue depend significantly on the dollar value of items sold in our marketplace, we believe that GMS is an indicator of the success of Etsy sellers, the satisfaction of Etsy buyers, the health of our ecosystem and the scale and growth of our business.

Adjusted EBITDA represents our net (loss) income before interest expense, net, (benefit) provision for income taxes and depreciation and amortization, adjusted to eliminate stock-based compensation expense, net unrealized loss on warrant and other liabilities, foreign exchange loss and acquisition-related expenses. In future periods, we intend to exclude the impact of our contributions to Etsy.org from Adjusted EBITDA. We have included Adjusted EBITDA in this prospectus because it is a key measure used by our management and board of directors to understand and evaluate our operating performance and trends, allocate internal resources, prepare and approve our annual budget, develop short- and long-term operating plans and assess the health of our ecosystem. As our Adjusted EBITDA increases, we are able to invest more resources in our community. We also believe that Adjusted EBITDA provides a useful measure for period-to-period comparisons of our business as it removes the impact of non-cash items and certain variable charges. See “Selected Consolidated Financial and Other Data—Non-GAAP Financial Measures” for information regarding the limitations of using Adjusted EBITDA as a financial measure and for a reconciliation of Adjusted EBITDA to net (loss) income, the most directly comparable financial measure calculated in accordance with GAAP.

An active seller is an Etsy seller who has incurred at least one charge from us in the last 12 months. Charges include transaction fees, listing fees and fees for Direct Checkout, Promoted Listings, Shipping Labels and Wholesale enrollment. An Etsy seller is a member who has created an account and has listed an item in our marketplace. An Etsy seller is identified by a unique e-mail address; a single person can have multiple Etsy seller accounts. We succeed when Etsy sellers succeed, so we view the number of active sellers as a key indicator of the awareness of our brand, the reach of our platform, the potential for growth in GMS and revenue and the health of our ecosystem.

An active buyer is an Etsy buyer who has made at least one purchase in the last 12 months. An Etsy buyer is a member who has created an account in our marketplace. An Etsy buyer is identified by a unique e-mail address; a single person can have multiple Etsy buyer accounts. We succeed when Etsy buyers order items from Etsy sellers, so we view the number of active buyers as a key indicator of our potential for growth in GMS and revenue, the reach of our platform, awareness of our brand, the engagement and loyalty of Etsy buyers and the health of our ecosystem.

A mobile visit is a visit that occurs on a mobile device, such as a tablet or a smartphone. Etsy sellers are increasingly using mobile devices to manage their listings and track their business performance on our platform. In addition, Etsy buyers increasingly use mobile devices to search, browse and purchase items on our platform. We began tracking mobile visits in 2013. We view percent mobile visits as a key indicator of the level of engagement of our members on our mobile website and mobile apps and of our ability to sustain GMS and revenue.

Mobile GMS is GMS that occurs on a mobile device, such as a tablet or a smartphone. Mobile GMS excludes orders initiated on mobile devices but ultimately completed on a desktop. We began tracking mobile GMS in 2013. We believe that mobile GMS indicates our success in converting mobile activity into mobile purchases and demonstrates our ability to grow GMS and revenue.

International GMS is GMS from transactions where either the billing address for the Etsy seller or the shipping address for the Etsy buyer at the time of sale is outside of the United States. We believe that international GMS shows the level of engagement of our community outside the United States and demonstrates our ability to grow GMS and revenue.

We believe that our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in the section titled “Risk Factors.”

Our success depends in part on the growth and retention of our active sellers and active buyers. Our revenue is driven by the number of active sellers, seller engagement, the number of active buyers, buyer engagement and our ability to maintain an authentic, trusted marketplace. As of December 31, 2014, our marketplace had grown to 1.4 million active sellers and 19.8 million active buyers, up from 1.1 million active sellers and 14.0 million active buyers as of December 31, 2013. Failure to effectively attract and retain new active sellers and active buyers, to re-engage inactive sellers and inactive buyers and to engage active sellers and active buyers on a cost-effective basis would adversely affect our revenue growth, operating results and the overall health of our ecosystem.

We refer to active sellers as of December 31, 2011 as “2011 Active Sellers.” Fifty-three percent of 2011 Active Sellers remained active sellers as of December 31, 2012, 39% of 2011 Active Sellers remained active sellers as of December 31, 2013 and 32% of 2011 Active Sellers remained active sellers as of December 31, 2014. The average annual GMS per 2011 Active Seller in 2012 was nearly three times higher than in 2011, the average annual GMS per 2011 Active Seller in 2013 was four times higher than in 2011 and the average annual GMS per 2011 Active Seller in 2014 was five times higher than in 2011.

We refer to active buyers as of December 31, 2011 as “2011 Active Buyers.” Forty-six percent of 2011 Active Buyers remained active buyers as of December 31, 2012, 45% of 2011 Active Buyers remained active buyers as of December 31, 2013 and 45% of 2011 Active Buyers remained active buyers as of December 31, 2014. The average annual GMS per 2011 Active Buyer in 2012 was 72% higher than in 2011, the average annual GMS per 2011 Active Buyer in 2013 was 81% higher than in 2011 and the average annual GMS per 2011 Active Buyer in 2014 was 89% higher than in 2011.

Our business model is based on shared success: we make money when Etsy sellers make money. Because of this, we provide services to an Etsy seller to help her start and grow her shop. As of December 31, 2014, 18.2% of active sellers used Promoted Listings, 36.1% of active sellers used Direct Checkout and 21.4% of active sellers in the United States and Canada used Shipping Labels. Our effectiveness in increasing the uptake of our Seller Services, enhancing existing Seller Services and extending their geographic reach and introducing new Seller Services will directly impact the success of Etsy sellers, our revenue growth and our operating results.

Our growth will depend in part on international Etsy sellers and international Etsy buyers constituting an increasing portion of our community. International GMS was 28.4% of GMS in 2013 compared to 30.9% in 2014. Currently, Etsy sellers and Etsy buyers are based in nearly every country in the world, and our marketplace is available in 10 languages. Although we promote cross-border transactions, our strategy is to build and deepen local Etsy communities around the world, each with its own ecosystem of Etsy sellers and Etsy buyers. To meet this goal, we plan to invest in local marketing and content and local payment and shipping solutions. An inability to develop these Etsy communities or to otherwise grow our business outside the United States on a cost-effective basis could adversely affect our GMS, revenue and other operating results.

We believe continued enhancement of the mobile features of our platform will be critical to attracting and retaining Etsy sellers and Etsy buyers and maintaining the vibrancy of our marketplace. The success of this effort will be increasingly important as shopping on mobile devices displaces shopping on desktops and as Etsy sellers increasingly seek to run their shops via mobile devices.

We launched our first mobile app in 2011 and since then have expanded our mobile offerings for both Etsy sellers and Etsy buyers. Our “Sell on Etsy” mobile app, which we launched in April 2014, is designed to help an Etsy seller operate her shop, manage orders and access resources. Our Etsy buyer apps and mobile web experience include features designed to keep Etsy buyers engaged and offer an improved shopping experience. As of December 31, 2014, our mobile apps have been downloaded 21.8 million times, and mobile visits represented 53.2% of visits in 2014. In addition, in the same period, mobile GMS was 36.1% of GMS. If we are unable to continue to engage Etsy sellers and Etsy buyers through our mobile offerings, then our GMS and revenue growth and other operating results could be adversely affected.

To date, we have grown largely due to strong brand awareness and word-of-mouth referrals, with the majority of our visits coming from direct and organic channels. In 2013, we spent $17.9 million on marketing expenses, or 14.3% of revenue, compared with 14.6% of revenue in 2012. However, in 2014, we began

increasing our brand and digital marketing efforts. In 2014, we spent $39.7 million on marketing expenses, or 20.3% of revenue, up 122.2% over 2013. Our growth will depend in part on our continued ability to launch marketing campaigns that resonate with new and existing members and appropriately balance our level of marketing spending with the benefits that may be realized through member and revenue growth.

We have made, and will continue to make, significant investments in our platform to attract members and enhance the member experience. In 2013, we spent $27.5 million on product development expenses, or 22.0% of revenue, up 47.7% over 2012, and in 2014, we spent $36.6 million on product development expenses, or 18.7% of revenue, up 33.0% over 2013. We have invested significant resources in our technology platform and infrastructure to date and plan to continue to invest in innovation to address the needs of our members. We also plan to hire additional personnel to address the needs of our community. As part of this growth in headcount, we signed a lease in May 2014 for a new headquarters facility to accommodate our anticipated growth in personnel. The investments we make in our platform are all designed to grow our ecosystem and revenue and to improve our operating results in the long term, but these investments could also delay our ability to achieve profitability or reduce our profitability in the near term.

Our revenue consists of Marketplace revenue, Seller Services revenue and Other revenue.

Seller Services revenue. Seller Services revenue consists of fees an Etsy seller pays us for the Seller Services she uses, including Promoted Listings, Direct Checkout, Shipping Labels and Wholesale.

Other revenue. Other revenue includes the fees we receive from a third-party payment processor.

Our revenue recognition policies are discussed under “—Critical Accounting Policies and Significant Judgments and Estimates.”

Cost of revenue consists primarily of expenses associated with the operation and maintenance of our platform and data centers, including depreciation and amortization, employee-related costs, including stock-based compensation expense, and energy and bandwidth costs. Cost of revenue also includes the cost of interchange and other fees for credit card processing services, credit card verification service fees and credit card chargebacks to support Direct Checkout revenue, as well as employee-related costs, including stock-based compensation expense, for our member support staff, and costs of refunds made to Etsy buyers that we are not able to collect from Etsy sellers. Our cost of revenue as a percentage of revenue may change over time as our revenue mix changes; for example, to the extent that Direct Checkout revenue increases as a percentage of revenue, there may be a dampening effect on our gross margin.

Operating expenses consist of marketing, product development and general and administrative expenses. Direct and indirect employee-related costs, including stock-based compensation expense, are the most significant component of the product development and general and administrative expense categories, and we expect these costs to increase as we continue to hire new employees in order to support our anticipated growth. We include stock-based compensation expense in connection with the grant of stock options in the applicable operating expense category based on the respective equity award recipient’s function.

Marketing. Marketing expenses consist primarily of targeted online marketing costs, such as search engine marketing and, to a much lesser extent, offline marketing expenses, such as television advertising. Marketing expenses also include employee-related costs, including stock-based compensation expense, for our employees involved in marketing, public relations and communications activities. Marketing expenses are primarily driven by investments to grow and retain members on our platform.

Product development. Product development expenses consist primarily of employee-related costs, including stock-based compensation expense, for our employees involved in product development activities. Additional expenses include consulting costs related to the development, quality assurance and testing of new technology and enhancement of our existing technology.

General and administrative. General and administrative expenses consist primarily of costs associated with the use of facilities and equipment, including depreciation and amortization, rent, and certain professional services expenses. General and administrative expenses also include employee-related costs, including stock-based compensation expense, for our employees involved in general corporate functions and currency gains or losses. General and administrative expenses are primarily driven by increases in headcount required to support business growth, and, to a lesser extent in the near term, will be driven by expenses incurred to make the transition to being a public company.

Other expense, net consists of interest expense, interest income, foreign exchange loss and net unrealized loss on warrant and other liabilities.

The following tables show our results of operations for the periods presented and express the relationship of certain line items as a percentage of revenue for those periods. The period-to-period comparison of financial results is not necessarily indicative of future results.

Revenue increased $70.6 million, or 56.4%, to $195.6 million in 2014 compared to 2013, of which 55.6% consisted of Marketplace revenue and 42.2% consisted of Seller Services revenue.

Marketplace revenue increased $30.2 million, or 38.4%, to $108.7 million in 2014 compared to 2013. This growth corresponded with a 43.3% increase in GMS to a total of $1.93 billion for 2014. As our GMS increased, our Marketplace revenue increased, primarily as a result of an increase in the amount of transaction fees received and an increase in listings from new and existing Etsy sellers with a corresponding increase in listing fees received. During 2014, international GMS increased as a percentage of total GMS to 30.9%, up from 28.4% for 2013. During 2014, mobile GMS increased as a percentage of total GMS to 36.1%, up from 29.5% for 2013. Active sellers increased 26.0% to 1.4 million and active buyers increased 41.2% to 19.8 million for 2014 compared to 2013.

Seller Services revenue increased $39.7 million, or 92.7%, to $82.5 million in 2014 compared to 2013. The growth in Seller Services revenue was primarily driven by an increase in revenue from Direct Checkout services, as well as increases in Promoted Listings and Shipping Labels. The increase in Direct Checkout services revenue reflects continued increases in U.S. Direct Checkout revenue, as well as growth in international Direct Checkout services as those services were initiated in the second quarter of 2013. As of December 31, 2014, we offered Direct Checkout in 10 currencies, including the U.S. dollar. The increase in Promoted Listings revenue reflects enhancements made to the service in 2014. The increase in Shipping Label revenue reflects an increase in the number of Etsy sellers using the service and, to a lesser extent, the introduction of Shipping Labels in Canada in 2014.

Other revenue increased $0.7 million, or 19.0%, to $4.4 million in 2014 compared to 2013. Other revenue decreased as a percentage of total revenue, however, as Etsy buyers opted to use Direct Checkout for their purchases rather than a third-party payment processor.

Cost of revenue increased $25.9 million, or 54.1%, to $73.6 million in 2014 compared to 2013, primarily as a result of an increase in the cost of supporting Direct Checkout revenue due to the introduction of international Direct Checkout as well as growth in the U.S. Direct Checkout revenue. To a lesser extent, the increase was due to an increase in depreciation and amortization for ongoing maintenance of our technology infrastructure and an increase in employee-related costs resulting from increased headcount in our member support and technical operations teams.

Marketing expenses increased $21.8 million, or 122.2%, to $39.7 million in 2014 compared to 2013, primarily as a result of an increase in search engine marketing from Google product listing ads and, to a lesser extent, from an increase in employee-related costs resulting from increased headcount in our marketing team, which includes our public relations and communications teams.

Product development expenses increased $9.1 million, or 33.0%, to $36.6 million in 2014 compared to 2013, primarily as a result of an increase in employee-related costs resulting from increased headcount in our product and engineering teams.

General and administrative expenses increased $20.8 million, or 66.9%, to $51.9 million in 2014 compared to 2013, primarily as a result of an increase in employee-related costs from headcount growth in general corporate functions and from building out the executive management team and, to a lesser extent, due to increased legal and accounting fees.

Other expense, net increased $3.3 million, or 493.9%, to $4.0 million in 2014 compared to 2013, primarily as a result of the foreign exchange loss.

Our effective tax rate fluctuates from period to period due to changes in the mix of income and losses in jurisdictions with a wide range of tax rates, the amount of stock-based compensation expense and net unrealized loss on warrants, the impact of acquisitions, the change resulting from the amount of recorded valuation allowance, the permanent difference between GAAP and local tax laws and certain one-time items such as tax rate changes. For the year ended December 31, 2014, we determined that the existence of a three-year cumulative loss in a foreign jurisdiction was sufficient negative evidence to warrant the establishment of a valuation allowance against deferred tax assets in that jurisdiction. As a result, we recorded a valuation allowance against certain of our deferred tax assets of $0 as of December 31, 2013 and $2.1 million as of December 31, 2014.

Revenue increased $50.4 million, or 67.6%, to $125.0 million in 2013 compared to 2012, of which 62.8% consisted of Marketplace revenue and 34.2% consisted of Seller Services revenue.

Marketplace revenue increased $23.2 million, or 42.0%, to $78.5 million in 2013 compared to 2012. This growth corresponded with a 50.6% increase in GMS to a total of $1.35 billion for 2013. As our GMS increased, our Marketplace revenue increased, primarily as a result of an increase in the amount of transaction fees received and an increase in listings from new and existing Etsy sellers with a corresponding increase in listing fees received. During 2013, international GMS as a percentage of total GMS was 28.4%, and mobile GMS as a percentage of total GMS was 29.5%. Active sellers increased 29.4% to 1.1 million and active buyers increased 50.6% to 14.0 million for 2013 compared to 2012.

Seller Services revenue increased $27.0 million, or 169.9%, to $42.8 million in 2013 compared to 2012. The growth in Seller Services revenue was primarily driven by an increase in revenue from Direct Checkout services, as well as increases in Promoted Listings and Shipping Labels. The increase in Direct Checkout services revenue reflects a full year of U.S. Direct Checkout revenue, as the service was first introduced in the United States in the second quarter of 2012, as well as the introduction of international Direct Checkout services starting in the second half of 2013. As of the end of 2013, we offered Direct Checkout in 10 currencies, including the U.S. dollar. The increase in Promoted Listings revenue and the increase in Shipping Label revenue reflect an increase in the number of Etsy sellers using these services.

Other revenue increased $0.3 million, or 7.4%, to $3.7 million in 2013 compared to 2012. Other revenue decreased as a percentage of revenue, however, as Etsy buyers opted to use Direct Checkout for their purchases rather than a third-party payment processor.

Cost of revenue increased $23.3 million, or 95.1%, to $47.8 million in 2013 compared to 2012, primarily as a result of an increase in the cost of supporting Direct Checkout revenue due to the introduction of international Direct Checkout as well as growth in the U.S. Direct Checkout revenue. To a lesser extent, the increase was due to an increase in depreciation and amortization for ongoing maintenance of our technology infrastructure and an increase in employee-related costs resulting from increased headcount in our member support and technical operations teams.

Marketing expenses increased $6.9 million, or 63.7%, to $17.9 million in 2013 compared to 2012, primarily as a result of an increase in search engine marketing from Google product listing ads and, to a lesser extent, from an increase in employee-related costs resulting from increased headcount in our marketing team, which includes our public relations and communications teams.

Product development expenses increased $8.9 million, or 47.7%, to $27.5 million in 2013 compared to 2012, primarily as a result of an increase in employee-related costs resulting from increased headcount in our product and engineering teams.

General and administrative expenses increased $9.2 million, or 42.0%, to $31.1 million in 2013 compared to 2012, primarily as a result of an increase in employee-related costs from headcount growth in general corporate functions and from building out the executive management team.

Other expense, net decreased primarily as a result of a smaller unrealized loss in 2013 for our warrant liability and lower interest expense.

The following tables show selected unaudited quarterly results of operations and other operational and non-GAAP financial data for the eight quarters ended December 31, 2014, as well as the percentage that each line item in the following results of operations data represents of revenue. The results of operations data for each of these quarters has been prepared on the same basis as the audited annual financial statements included elsewhere in this prospectus and includes all adjustments, which include only normal recurring adjustments, necessary for the fair statement of our results of operations for these periods. The results of operations data for the three months ended March 31, 2013, the three and six months ended June 30, 2013,

the three and nine months ended September 30, 2013, the three months ended December 31, 2013 and the three months ended September 30, 2014 have been revised and the three months ended March 31, 2014, the three and six months ended June 30, 2014 and the nine months ended September 30, 2014 have been restated to correct for the understatement of certain non-income tax-related expenses and the misstatement of expenses due to period-end cutoff errors. See Note 16 of the accompanying notes to our consolidated financial statements. This data should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this prospectus. Our quarterly results of operations and operational and non-GAAP financial data will vary in the future. These quarterly operating results are not necessarily indicative of our operating results for any future quarter or year.

The following table reflects the reconciliation of net (loss) income to Adjusted EBITDA for each of the periods indicated (in thousands):

Etsy sellers experience increased sales and use more Seller Services during the fourth-quarter holiday shopping season. This has resulted in increased revenue for us during the fourth quarter of each fiscal year, which can compare to lower revenue in the first quarter of the following fiscal year. For example, revenue in the first quarter of 2014 decreased slightly when compared with revenue in the fourth quarter of 2013. We expect this seasonality to continue in future years. Our operating (loss) income has also been affected by these historical trends because many of our expenses are relatively fixed in the short term. As our growth rates begin to moderate, the impact of these seasonality trends on our results of operations may become more pronounced.

Our quarterly revenue increased sequentially quarter-to-quarter for all periods presented above, other than the first quarter of 2014, corresponding to our GMS performance in the same periods. We cannot assure you that this pattern of sequential revenue growth will continue. We believe that it is generally more meaningful to compare year-over-year results than sequential quarter-over-quarter results.

Our quarterly cost of revenue increased sequentially quarter-to-quarter for substantially all periods presented above, primarily due to increases in visits and to increased usage of Direct Checkout during the period and, to a lesser extent, to an increase in employee-related costs resulting from increased headcount in our member support and technical operations teams.

Marketing expenses increased sequentially quarter-to-quarter for substantially all periods presented above, and significantly increased beginning in the fourth quarter of 2013, primarily due to increased marketing

programs to attract and retain new Etsy sellers and Etsy buyers on our platform and, to a lesser extent, to an increase in employee-related costs resulting from increased headcount in our marketing team, which includes our public relations and communications teams.

Product development expenses generally remained consistent or increased sequentially quarter-to-quarter for the periods presented above, primarily as a result of an increase in employee-related costs resulting from increased headcount in our product and engineering teams.

General and administrative expenses increased sequentially quarter-to-quarter for substantially all periods presented above, primarily as a result of an increase in employee-related costs from headcount growth in general corporate functions and from building out the executive management team.

Our business is directly affected by the behavior of consumers. Economic conditions and competitive pressures can significantly impact, both positively and negatively, the level of demand by Etsy sellers and Etsy buyers on our platform. Consequently, the results of any prior quarterly or annual periods should not be relied upon as indications of our future operating performance.

The following tables show our cash and cash equivalents, short-term investments, accounts receivable and working capital as of the dates indicated:

As of December 31, 2014, our cash and cash equivalents, a majority of which were held in cash deposits and money market funds, were held for working capital purposes. We intend to increase our capital expenditures to support the growth in our business and operations, and intend to invest approximately $50.0 million through the middle of 2016 to build out our new Brooklyn, New York headquarters. We believe that our existing cash and cash equivalents and short-term investments, together with cash generated from operations and available borrowing capacity under our Credit Agreement, will be sufficient to meet our anticipated cash needs for at least the next 12 months. However, our liquidity assumptions may prove to be incorrect, and we could exhaust our available financial resources sooner than we currently expect. We may seek to borrow funds under our Credit Agreement or raise additional funds at any time through equity, equity-linked or debt financing arrangements. Our future capital requirements and the adequacy of available funds will depend on many factors, including those described in the section of this prospectus captioned “Risk Factors.” We may not be able to secure additional financing to meet our operating requirements on acceptable terms, or at all.

Since our inception, we have financed our operations and capital expenditures primarily through cash flows generated by operations and through non-registered sales of preferred stock and common stock. Since inception and as of December 31, 2014, we have raised a total of $125.6 million from the sale of preferred stock and common stock (including proceeds from the exercise of stock options), net of costs and expenses associated with such financings and net of repurchases of $0.5 million of capital stock.

In May 2014, we entered into a $35.0 million senior secured revolving credit facility pursuant to a Revolving Credit and Guaranty Agreement with several lenders, or the Credit Agreement. In March 2015, we amended the Credit Agreement to increase the credit facility to $50.0 million. As amended, the Credit Agreement will mature in May 2019. The amended Credit Agreement includes a letter of credit sublimit of $10.0 million and a swingline loan sublimit of $15.0 million.

Borrowings under the amended Credit Agreement (other than swingline loans) bear interest, at our option, at (i) a base rate equal to the highest of (a) the prime rate, (b) the federal funds rate plus 0.50% and (c) an adjusted LIBOR rate for a one-month interest period plus 1.00%, in each case plus a margin ranging from 0.00% to 0.25% or (ii) an adjusted LIBOR rate plus a margin ranging from 1.00% to 1.25%. Swingline loans under the amended Credit Agreement bear interest at the same base rate (plus the margin applicable to borrowings bearing interest at the base rate). These margins are determined based on the total leverage ratio for the preceding four fiscal quarters. We are also obligated to pay other customary fees for a credit facility of this size and type, including an unused commitment fee and fees associated with letters of credit. As amended, the Credit Agreement also permits us, in certain circumstances, to request an increase in the facility by an additional amount of up to $50.0 million (and in minimum amounts of $10.0 million) at the same maturity, pricing and other terms.

The amended Credit Agreement contains customary representations and warranties applicable to us and our subsidiaries and customary affirmative and negative covenants applicable to us and our restricted subsidiaries. The negative covenants include restrictions on, among other things, indebtedness, liens, investments, mergers, dispositions, transactions with affiliates and dividends and other distributions. These restrictions do not prohibit any of our subsidiaries from making pro rata payments to us or any other person that owns an equity interest in any such subsidiary. The amended Credit Agreement contains a financial covenant that requires us and our subsidiaries to maintain a total leverage ratio (defined as net debt to adjusted EBITDA) not to exceed 3.50 to 1.00.

As amended, the Credit Agreement includes customary events of default, including a change in control and a cross-default on our material indebtedness. Our obligations under the amended Credit Agreement are secured by substantially all of our and our subsidiaries’ assets, and our obligations under the amended Credit Agreement are guaranteed by certain of our subsidiaries.

As of March 4, 2015, no amounts have been drawn under the credit facility. In January 2015, we implemented a revised corporate structure to more closely align our structure with our global operations

and future expansion plans outside the United States. The amendment to the Credit Agreement includes a waiver with respect to our compliance with certain restrictions in the Credit Agreement, to the extent that actions taken to implement our revised corporate structure could be construed as breaches or defaults under the Credit Agreement.

Our cash flows from operations are largely dependent on the amount of revenue generated on our platform. Net cash provided by operating activities in each period presented has been influenced by changes in accounts receivable, funds receivable and customer accounts, prepaid expenses and other current assets, accounts payable and accrued liabilities, and funds payable and amounts due to customers.

Net cash provided by operating activities was $12.1 million in 2014, as a result of net loss of $15.2 million, depreciation and amortization expense, stock-based compensation expense and other non-cash charges of $27.1 million and changes in our operating assets and liabilities that provided $0.3 million in cash.

Net cash provided by operating activities was $16.5 million in 2013, as a result of net loss of $0.8 million, depreciation and amortization expense, stock-based compensation expense and other non-cash charges of $19.6 million and changes in our operating assets and liabilities that used $2.2 million in cash.

Net cash provided by operating activities was $9.7 million in 2012 as a result of net loss of $2.4 million, depreciation and amortization expense, stock-based compensation expense and other non-cash charges of $13.5 million and changes in our operating assets and liabilities that used $1.4 million in cash.

Our primary investing activities have consisted of capital expenditures, including investments in website development and internal-use software and purchases of property and equipment to support our overall business growth. Investments in website development and internal-use software and purchases of property and equipment may vary from period to period due to timing of the expansion of our operations. Additionally, we have invested some of our excess cash balances in U.S. Government and agency bills.

Net cash used in investing activities was $20.7 million in 2014. This was primarily attributable to $5.3 million in restricted cash associated with the lease of our new Brooklyn, New York headquarters, $4.7 million in cash paid to acquire businesses, capital expenditures, including $8.3 million for website development and internal-use software and $1.3 million for purchases of property and equipment, and net purchases of marketable securities of $1.1 million.

Net cash used in investing activities was $15.0 million in 2013. This was primarily attributable to capital expenditures, including $9.3 million for website development and internal-use software and $7.8 million for purchases of property and equipment, offset by sales of marketable securities of $2.8 million.

Net cash used in investing activities was $28.9 million in 2012. This was primarily attributable to purchases of U.S. Government and agency bills of $16.1 million as well as capital expenditures, including $7.4 million for website development and internal-use software and $6.5 million for purchases of property and equipment, offset by sales of marketable securities of $1.4 million.

Net cash provided by financing activities was $45.2 million in 2014. This was primarily attributable to net proceeds from a common stock financing of $35.0 million, proceeds from the exercise of stock options of $8.0 million and the excess tax benefit from the exercise of stock options of $4.9 million, offset by payments related to our public offering of $1.0 million and payments on capitalized lease obligations of $1.5 million.

Net cash used in financing activities was $0.1 million in 2013. This was primarily attributable to payments on capitalized lease obligations of $1.3 million, offset by proceeds from the exercise of stock options of $1.3 million.

Net cash provided by financing activities was $43.0 million in 2012. This was primarily attributable to net proceeds from a preferred stock financing of $39.8 million and proceeds from the exercise of stock options of $4.6 million, offset by payments on capitalized lease obligations of $1.4 million.

We did not have any off balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K, in 2012, 2013 or 2014.

The following table summarizes our future fixed contractual obligations as of December 31, 2014 (in thousands):

Capital lease obligations consist of obligations under capital leases for computer equipment.

Operating lease obligations consist of obligations under non-cancelable operating leases for our existing and new headquarters (both in Brooklyn, New York) and for our offices in San Francisco, California and Dublin, Ireland.

Long-term debt consists of obligations we assumed in connection with our acquisition of Incubart SAS.

Interest payments consist of interest due in connection with our capital leases.

Facility financing obligations consist of the portion of our obligations for our new headquarters in Brooklyn, New York that is accounted for as a build-to-suit lease.

Purchase obligations consist of commitments for our co-location and other support services. For those agreements with variable terms, we do not estimate what the total obligation may be beyond any minimum quantities and/or pricing.

In addition, we have uncertain tax positions of $0.4 million, which are not reflected in the table as the ultimate resolution and timing are uncertain.

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.

We believe that the assumptions and estimates associated with revenue recognition, income taxes, internal-use software and website development costs, business combinations, goodwill and intangible assets, leases and stock-based compensation have the greatest potential impact on our consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates. For further information on all of our significant accounting policies, see Note 1 of the accompanying notes to our consolidated financial statements.

We operate a platform for third-party sellers. Our business model is based on shared success: we make money when Etsy sellers make money, and we offer services to help Etsy sellers be more successful. We do not compete with Etsy sellers, hold inventory or sell goods. Our revenue is diversified, generated from a mix

of marketplace activities and the services we provide Etsy sellers to help them create and grow their businesses. Our revenue consists of Marketplace revenue, Seller Services revenue and Other revenue. Our revenue is recorded net of actual and expected refunds. Marketplace revenue includes the fee an Etsy seller pays for each completed transaction and the listing fee an Etsy seller pays for each item she lists. Seller Services revenue includes fees an Etsy seller pays for services such as prominent placement in search results via Promoted Listings, payment processing via Direct Checkout and purchases of shipping labels through our platform via Shipping Labels. We deduct our cost of shipping labels and estimated refunds from gross shipping fees to determine net shipping fees. Other revenue includes the fees we receive from a third-party payment processor.

We recognize revenue when all of the following conditions are satisfied: (1) there is persuasive evidence of an arrangement; (2) the service has been provided to the Etsy seller; (3) the collection of fees is reasonably assured; and (4) the amount of fees to be paid by the Etsy seller is fixed or determinable. We evaluate whether it is appropriate to recognize revenue on a gross or net basis based upon our evaluation of whether we: are the primary obligor in a transaction, have inventory risk and have latitude in establishing pricing and selecting suppliers. Based on our evaluation of these factors, revenue is recorded net of merchandise values associated with the transaction.

Marketplace revenue. Marketplace revenue consists of the 3.5% fee that an Etsy seller pays for each completed transaction on our platform, exclusive of shipping fees charged. Marketplace revenue also consists of a listing fee of $0.20 per item that she lists in our marketplace. Although revenue from completed Wholesale transactions is included in Marketplace revenue, revenue from Wholesale enrollment is included in Seller Services revenue. Transaction fees are recognized when the corresponding transaction is made. Listing fees are recognized ratably over a four-month listing period, unless the item is sold or the seller relists it, at which time any remaining listing fee is recognized.

Other revenue. Other revenue includes the fees we receive from a third-party payment processor. Other revenue is recognized as the transactions are processed by the third-party payment processor.

We account for income tax benefit (provision) based on (loss) income before income taxes, and we use the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. We assess the need for a valuation allowance on an annual basis to reduce deferred tax assets to the amounts we expect to be realized.

We account for uncertainty in income taxes using a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by the taxing authorities. The amount recognized is measured as the largest amount of benefit that has a greater than 50% likelihood of being realized upon ultimate audit settlement. We have no unrecognized tax benefits at December 31, 2012 and 2013 and have an unrecognized tax benefit of $0.4 million as of December 31, 2014.

We recognize interest and penalties, if any, associated with tax matters as part of the income tax provision and include accrued interest and penalties with the related tax liability in our consolidated balance sheet.

We capitalize certain costs incurred in connection with software developed for our platform and software developed for internal use. In accordance with authoritative accounting guidance, we begin to capitalize our costs to develop software when preliminary development efforts are successfully completed, management has authorized and committed project funding and it is probable that the project will be completed and the

software will be used as intended. We also capitalize costs related to upgrades and enhancements when it is probable the expenditures will result in additional functionality or will extend the useful life of existing functionality. These costs are amortized over the estimated useful life of the asset, typically three years.

We periodically review these assets to determine whether the projects will be completed, placed in service, removed from service or replaced by other internally-developed or third-party software; if an asset is not expected to provide any future benefit, the asset is retired and any unamortized cost is expensed.

Costs related to the design or maintenance of software developed for our platform and software developed for internal use are expensed as incurred.

We have completed a number of acquisitions of other businesses in the past and may acquire additional businesses or technologies in the future. The results of businesses acquired in a business combination are included in our consolidated financial statements from the date of acquisition. We allocate the purchase price, which is the sum of the consideration provided and may consist of cash, equity or a combination of the two, in a business combination to the identifiable assets and liabilities of the acquired business at their acquisition date fair values. The excess of the purchase price over the amount allocated to the identifiable assets and liabilities, if any, is recorded as goodwill. Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates, including the selection of valuation methodologies, estimates of future revenues and cash flows, discount rates and selection of comparable companies.

When we issue stock-based or cash awards to an acquired company’s stockholders, we evaluate whether the awards are contingent consideration or compensation for post-acquisition services. The evaluation includes, among other things, whether the vesting of the awards is contingent on the continued employment of the acquired company’s stockholder beyond the acquisition date. If continued employment is required for vesting, the awards are treated as compensation for post-acquisition services and recognized as expense over the requisite service period.

We carry intangible assets at cost, and we amortize them on a straight-line basis, which approximates the pattern of the benefits derived, over their estimated useful lives, typically three to five years. When circumstances indicate that the carrying value of these assets may not be recoverable, we review our identifiable amortizable intangible assets for impairment.

Goodwill is not amortized but is tested for impairment annually in the fourth quarter, as well as when events indicate that the carrying amount of this asset may exceed its fair value. The assessment is performed at the reporting unit level using the two-step goodwill impairment test to identify potential goodwill impairment. The first step is to compare the fair value of the reporting unit to the book value including goodwill. If the fair value of the reporting unit exceeds the book value, goodwill is not impaired. If the book value exceeds the fair value, the second step of the process is performed to measure the amount of the impairment. The accounting guidance also allows for a simplified approach to testing for impairment, in

which a company can assess certain qualitative factors (referred to as “step zero”) to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If that is the case, the entity must perform the quantitative analysis.

We lease office space and certain computer equipment in multiple locations under non-cancelable lease agreements. The leases are reviewed for classification as operating or capital leases. For operating leases, rent is recognized on a straight-line basis over the lease period. For capital leases, we record the leased asset with a corresponding liability. Payments are recorded as reductions to the liability with an appropriate interest charge recorded based on their outstanding remaining liability.

We consider the nature of the renovations and our involvement during the construction period of newly-leased office space to determine if we are considered to be the owner of the construction project during the construction period. If we determine that we are the owner of the construction project, we are required to capitalize the fair value of the building as well as the construction costs incurred on our consolidated balance sheet along with a corresponding financing liability (“build-to-suit accounting”). Upon occupancy for build-to-suit leases, we assess whether the circumstances qualify for sales recognition under the sale-leaseback accounting guidance. If the lease meets the sale-leaseback criteria, we will remove the asset and related financial obligation from the balance sheet and treat the building lease as an operating lease. If upon completion of construction, the project does not meet the “sale-leaseback” criteria, the leased property will be treated as a capital lease for financial reporting purposes.

Stock options awarded to employees, members of our board of directors and non-employee third parties are measured at fair value at each grant date. We consider what we believe to be comparable publicly-traded companies, discounted free cash flows and an analysis of our enterprise value in estimating the fair value of our common stock. Options generally vest over a four-year period with 25% of the shares underlying the options vesting on the date that is 12 months after the vesting commencement date and thereafter 1/48th of the shares vesting each month, subject to continued service with us through each vesting date.

Stock-based compensation cost is measured on the grant date, based on the estimated fair value of the award using a Black-Scholes pricing model and recognized as an expense over the employee’s or director’s requisite service period on a straight-line basis. We expect to continue to grant stock options in the future, and, to the extent that we do, our stock-based compensation expense recognized in future periods will likely increase.

We account for stock-based compensation arrangements with non-employees using a fair value approach. The fair value of these options is measured using the Black-Scholes option-pricing model reflecting the

same assumptions as applied to employee options in each of the reported periods, other than the expected life, which is assumed to be the contractual life of the option. The compensation costs of these arrangements are subject to remeasurement over the vesting terms as earned.

We account for stock-based compensation arrangements in restricted shares, subject to a put option that allows the holder of the shares to put the shares back to us for cash, as liability-classified stock awards. These awards are re-measured at each reporting period, with changes in fair value being charged to the statement of operations. Compensation expense is recognized using a graded vesting methodology for each separately vesting tranche of the award as though the award were, in substance, multiple awards. Unless the put option is exercised, the restricted shares will be reclassified from a liability to an equity classified award upon the termination of the put option.

Our Black-Scholes option-pricing model requires the input of highly subjective assumptions, including the fair value of the underlying common stock, the expected volatility of the price of our common stock, risk-free interest rates, the expected term of the option and the expected dividend yield of our common stock. These estimates involve inherent uncertainties and the application of management’s judgment. If factors change and different assumptions are used, our stock-based compensation expense could be materially different in the future.

In determining the fair value of stock options granted, the following weighted average assumptions were used in the Black-Scholes option-pricing model for awards granted in the periods indicated:

The fair value of our common stock underlying stock options has historically been determined by our board of directors, with assistance from management, based upon information available at the time of grant. Given the absence of a public trading market for our common stock and in accordance with the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately Held Company Equity Securities Issued as Compensation, or the Practice Aid, our board of directors has exercised reasonable judgment and considered numerous objective and subjective factors to determine the best estimate of the fair value of our common stock at each grant date. These factors included:

The per share estimated fair value of our common stock in the table below represents the determination by our board of directors of the fair value of our common stock as of the date of grant, taking into consideration the various objective and subjective factors described above, including the valuations of our common stock. There is inherent uncertainty in these estimates and, if we had made different assumptions than those described below, the fair value of the underlying common stock and amount of our stock-based compensation expense, net loss and net loss per share amounts would have differed. Following the closing of our initial public offering, the fair value per share of our common stock for purposes of determining stock-based compensation will be the closing price of our common stock as reported on the applicable grant date.

The following table summarizes by grant date the number of shares of common stock subject to stock options granted from January 1, 2013 through the date of this prospectus, as well as the associated per share exercise price and the estimated fair value per share of our common stock on the grant date:

Based on an assumed initial public offering price of $ per share, the midpoint of the offering price range on the cover page of this prospectus, the intrinsic value of stock options outstanding at was $ million, of which $ million and $ million related to stock options that were vested and unvested, respectively, at that date.

In valuing our common stock, our board of directors determined the equity value of our business using the income approach. The income approach estimates the fair value of a company based on the present value of such company’s future estimated cash flows and the residual value of such company beyond the forecast period. These future values are discounted to their present values to reflect the risks inherent in such company achieving these estimated cash flows. Significant inputs of the income approach (in addition to

our estimated future cash flows themselves) include the long-term growth rate assumed in the residual value, discount rate and normalized long-term operating margin. The terminal value was calculated to estimate our value beyond the forecast period by applying valuation metrics to the final year of our forecasted revenue and discounting that value to the present value using the same weighted average cost of capital, or WACC, applied to the forecasted periods.

For valuations through February 10, 2014, the equity value determined was allocated to the common stock using the Option Pricing Method, or OPM. The OPM treats common stock and preferred stock as call options on an equity value, with exercise prices based on the liquidation preference of the preferred stock. Therefore, the common stock has value only if the funds available for distribution to the stockholders exceed the value of the liquidation preference at the time of a liquidity event such as a merger, sale or initial public offering, assuming the enterprise has funds available to make a liquidation preference meaningful and collectible by the stockholders. The common stock is modeled to be a call option with a claim on the enterprise at an exercise price equal to the remaining value immediately after the preferred stock is liquidated. The OPM uses the Black-Scholes option-pricing model to price the call options. The OPM is appropriate to use when the range of possible future outcomes is so difficult to predict that forecasts would be highly speculative.

Beginning with the March 31, 2014 valuation, we changed the methodology for allocating our equity value to our common stock to a probability weighted expected return method, or PWERM. We made this change as greater certainty developed regarding a possible liquidity event. The PWERM methodology relies on a forward-looking analysis to predict the possible future value of a company. Under this method, discrete future outcomes, including initial public offering, non-IPO scenarios and a merger or sale are weighted based on our estimate of the probability of each scenario. We applied a hybrid method of the PWERM where the non-IPO scenario is modeled using an OPM to reflect the full distribution of possible non-IPO outcomes. The hybrid method is useful when certain discrete future outcomes can be predicted, but also accounts for uncertainty regarding the timing or likelihood of specific alternative exit events.

Under the JOBS Act, we meet the definition of an emerging growth company. We have irrevocably elected to opt out of the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act.

In March 2013, the Financial Accounting Standards Board, or FASB, issued new accounting guidance clarifying the accounting for the release of cumulative translation adjustment into net income when a company either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. The new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2013. The adoption of this guidance did not have an impact on our consolidated financial statements.

In May 2014, the FASB issued an accounting standards update that will replace existing revenue recognition guidance. Among other things, the updated guidance requires companies to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new guidance will be effective for us beginning January 1, 2017. We are currently evaluating the effect the guidance will have on our consolidated financial statements.

In August 2014, the FASB issued an accounting standard update under which management will be required to assess an entity’s ability to continue as a going concern and provide related footnote disclosures in certain circumstances. The new guidance is effective for annual periods beginning after December 15, 2016 and for annual and interim periods thereafter. The adoption of this guidance is not expected to have an impact on our financial statements or disclosures.

We have operations both within the United States and internationally, and we are exposed to market risks in the ordinary course of our business, including the effects of interest rate changes and foreign currency fluctuations. Information relating to quantitative and qualitative disclosures about these market risks is described below.

Cash and cash equivalents and short-term investments as of December 31, 2014 were held primarily in cash deposits and money market funds. The fair value of our cash, cash equivalents and short-term investments would not be significantly affected by either an increase or decrease in interest rates due mainly to the short-term nature of these instruments. As of December 31, 2014, no amounts were outstanding under our credit facility. Any future borrowings incurred under the credit facility would accrue interest at a floating rate based on a formula tied to certain market rates at the time of incurrence (as described above). A 10% increase or decrease in our current interest rate would not have a significant impact on our interest expense.

Most of our sales are denominated in U.S. dollars, and therefore, our revenue is not currently subject to significant foreign currency risk. Our operating expenses are denominated in the currencies of the countries in which our operations are located, and may be subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the Pound Sterling and Euro. Fluctuations in foreign currency exchange rates may cause us to recognize transaction gains and losses in our statement of operations. A 10% increase or decrease in current exchange rates could result in additional income or expense of $1.8 million.

Since inception, Etsy has challenged conventional ways of thinking about commerce, business, individuals and communities. I intend to keep our unconventional operating philosophy as we become a public company, and I welcome new investors into our community.

When I joined Etsy almost seven years ago, Etsy was an online marketplace for handmade goods, vintage items and craft supplies that connected sellers and buyers. Even in my early days at Etsy, it was clear to me that the vision for Etsy could extend far beyond the founding idea of the company and have even more potential to impact the world for good.

Vision is just the starting point. I believe Etsy can truly change the world when our vision is met with strong culture, a powerful team and disciplined execution. In my time at Etsy, I’ve put my heart and soul into nurturing a culture and building a team and company that match the ambition of our mission. Today our mission is much more expansive than when Etsy began: to reimagine commerce in ways that build a more fulfilling and lasting world.

The reimagination of commerce means transforming every aspect of how goods are made, bought and sold. We believe that Etsy has the long-term potential to transform the world economy into one that is more people-centered and community-focused—one that values and honors designers and makers and one that creates stronger connections among people who make, sell and buy goods. We see an economy that is more sustainable and transparent—and one that is more joyful. We believe in an economy that transcends price and convenience, one that emphasizes relationships over transactions and optimizes for authorship and provenance. We call this the Etsy Economy.

Building the Etsy Economy matters more than ever. For decades now, the conventional and dominant retail model has relentlessly focused on delivering goods at the lowest price, valuing products and profits over community, short-changing the future with the instant gratification of today. I do not believe that this race to the bottom is a sustainable, successful model. Our growing community has made it clear that they desire thoughtful alternatives to mass commerce and impersonal retail and products that better reflect their personal style and values. Person by person, sale by sale, we are building a new model to replace the old. With GMS of $1.93 billion in 2014, I see the Etsy Economy emerging.

Fundamentally, we believe that companies can and should use the power of business to create social good, which is reflected in our status as a Certified B Corporation. Our commitment to using business as a force of good manifests itself in the way we run our business.

People often ask me how I choose between the success of our community and the success of our business. My answer is that I don’t have to choose; we have built a business that does well when our community is successful. Making money matters to Etsy because our financial success creates long-term sustainability for our community. The more we invest in our platform, the more we enable Etsy sellers to pursue their craft and grow their businesses and the easier we make it for Etsy buyers to find unique goods. We call this Etsy’s Empowerment Loop.

At Etsy, we believe that our strength and business success rest in the interdependence among Etsy sellers, Etsy buyers, responsible manufacturers and our employees—in other words, our community.

Etsy sellers represent a diverse mosaic of needs and aspirations. Some sellers are first-time small business owners and benefit greatly from our seller support and education programs. The vast majority of sellers on Etsy are one-person shops, and we continue to embrace and develop new ways to support them. Other sellers have grown and need help scaling with the assistance of responsible manufacturers, creating opportunity for other participants in the Etsy Economy. In all cases, we empower each Etsy seller to succeed on her own terms.

I have heard concerns that by allowing our sellers to partner with responsible manufacturers, we are diluting our handmade ethos. I share our community’s desire to preserve what is special about Etsy. After all, Etsy has always served as an antidote to mass manufacturing. We still do. With our vision of responsible manufacturing, we are promoting a new, people-centered model in which artisans can preserve the spirit of craftsmanship and grow responsibly by collaborating with people at small-batch manufacturers to make their goods. This brings more hands together to build both products and

more diverse local, living economies. These local, living economies band together into a larger Etsy Economy made up of individuals with diverse roles but all sharing a collective vision of an economy based on community.

When individuals share a collective vision, the power and possibility of community manifest in profound ways. Etsy is, by design, a collection of many small things. As we grow, Etsy becomes a larger collection of individuals and communities, with compounding benefits when they connect with each other. Etsy sellers have self-organized into more than 10,000 groups around the world, known as “Etsy Teams.” They provide local support to each other and collaborate with Etsy on initiatives, such as teaching entrepreneurship to economically disadvantaged people in their communities, lobbying the government on issues important to Etsy sellers, running local craft fairs and translating Etsy’s site into other languages.

In 2012, Mayor Larry Morrissey reached out to me on Twitter asking how to build an Etsy Economy in his community of Rockford, Illinois. Rockford is a city that has faced challenges familiar to many cities in America and around the world: loss of manufacturing jobs, high unemployment and a struggling economy. We worked with Mayor Morrissey, members of the local Rockford Etsy Team, the public education system, local arts organizations and the public housing authority to launch the Etsy Craft Entrepreneurship Program. This program teaches people with a craft skill that entrepreneurship and economic opportunity are within reach on our platform. We have extended this program to 10 cities around the world and see it as an inspirational model for even deeper community involvement in the coming years.

Our concept of community includes the cities where we live and work, and we run Etsy in a way that supports our own local economy and ecosystem. At our headquarters in Brooklyn, twice a week we serve a meal that we call “Eatsy.” Our approach is to foster community and productivity through a meal, designed for employees to eat together on picnic-style benches. This meal allows employees to engage with each other, within and across teams, and increases team-building and work relationships throughout the company. Eatsy also serves as an end point for company-wide meetings, so that employees can continue the conversation on important workplace topics.

In 2014, we sourced food from over 40 local businesses with an emphasis on our health and ecological impact. We eat on compostable plates, and employees sign up to deliver our compost by bike to a local farm in Red Hook, Brooklyn, where it is turned back into the soil that produces the food we enjoy together. In this way, Eatsy goes into the very soil we live and work on. Eatsy is a metaphor for how I think about many aspects of our business and our relationship to the world around us: regenerative, mindful, interdependent, community-based and fun.

I believe the principles and resources of being a public company align well with the model of shared success that is fundamental to Etsy’s way of doing business, namely that we make money when our sellers make money. Investing in the growth of our business and increasing Etsy’s visibility will help elevate Etsy sellers and attract more buyers, which creates more opportunities for everyone.

Etsy has a long history of providing data to the community, everything from key financial metrics, to our gross happiness index, to our carbon footprint data, to our workplace diversity stats. As a public company, we will be able to provide a higher level of transparency and accountability to a broader number of people.

Being a private company means that most people don’t have an opportunity to invest in Etsy. When Etsy is a public company, anyone will be able to own a piece of Etsy, including our sellers, our buyers and anyone else who shares Etsy’s values and mission. These shareholders will be valued members of our community.

We want to be a company that spans generations. Eighty-six of the original companies in the S&P 500 index are still publicly traded after 58 years. I view going public as an important step towards providing Etsy with the capital and long-term corporate structure to achieve similar longevity.

I believe that Etsy can be a public company that holistically integrates the concerns of people and the planet, the present and the future, profitability and accountability. If we succeed, then other companies might replicate our model. We think the world will be a better place for it.

As a public company, we will continue to concentrate on the long term. Our mission to reimagine commerce is a big goal and it will take time to achieve it; success will be based on strategies that evolve over years and decades, not just quarters. We are more focused on creating long-term results for us and our community than short-term results that lack that promise.

I believe this approach will deliver the most sustainable long-term returns to investors.

When we’re public, we do not plan to give quarterly or annual earnings guidance. I think providing quantitative earnings guidance is misaligned with Etsy’s mission. For example, the pressure to hit a quarterly financial target could incent us too heavily to seek near-term gains, which could diminish our ability to fulfill our larger mission over the long-term.

We will continue to be transparent with our investors. Instead of providing guidance in the traditional sense, I plan to talk frequently with our investors about our progress, challenges and opportunities. I welcome investors who share our long-term, community-oriented philosophy.

I am intensely grateful to all of the people who have given so much of themselves to build Etsy, and I am excited to welcome new like-minded shareholders to our community.

We are entering a new era. I believe that successful businesses will be those that combine vision, execution and discipline with values, heart and conviction. That is how I plan to lead Etsy and work with our community to build a more fulfilling and lasting world through commerce. Etsy will be entering its second decade this year, and we look forward to many more in our new form as a public company.

Our mission is to reimagine commerce in ways that build a more fulfilling and lasting world.

In 2014, Etsy sellers generated GMS of $1.93 billion, up 43.3% over 2013. In 2014, we generated revenue of $195.6 million, up 56.4% over 2013. In 2014, we generated a net loss of $15.2 million and Adjusted EBITDA of $23.1 million compared to a net loss of $0.8 million and Adjusted EBITDA of $16.9 million in 2013. See “Selected Consolidated Financial and Other Data—Non-GAAP Financial Measures” for more information and for a reconciliation of Adjusted EBITDA to net (loss) income, the most directly comparable financial measure calculated and presented in accordance with GAAP.

We are a mindful, transparent and humane business. We believe that business interests and social and environmental responsibility are interwoven and aligned and that the power of business should be used to strengthen communities and empower people. To demonstrate our commitment, each year we publish a Values & Impact report to monitor and then publicly report our efforts to minimize the harm and maximize the benefit that we have on people and the planet. B Lab, an independent nonprofit organization, has certified us as a B Corporation for our adherence to rigorous social and environmental standards, and Fortune has recognized us as a great place to work in both 2013 and 2014.

Our community includes Etsy sellers, Etsy buyers, responsible manufacturers and Etsy employees.

Etsy sellers join our community to be part of a vibrant global-local marketplace that allows them to express their creativity and turn their passion into a business while connecting to thoughtful consumers locally and around the world. As of December 31, 2014, there were 1.4 million active sellers on our platform and more than 11% of active sellers as of that date had been selling on Etsy for more than four years.

We support a diverse group of artists, makers, designers and collectors from around the world—from the solo artisan to the full-time jewelry maker with staff; from the antique furniture collector to the textile graphic designer partnering with a small-batch manufacturer.

Etsy sellers range from hobbyists to professional merchants, and have a broad range of personal and professional goals. In November 2014, we conducted a survey of U.S. Etsy sellers who made a sale in the preceding 12 months, to which 4,000 sellers responded. The 2014 Seller Survey reveals a unique population of Internet-enabled creative entrepreneurs who are building businesses on their own terms—prioritizing flexibility, independence and creativity. Some Etsy sellers are looking for extra pocket money, while others depend on their shops to support themselves and their families. According to our 2014 Seller Survey, among U.S. Etsy sellers:

Etsy buyers visit our marketplace to discover a broad selection of unique goods that are hard to find elsewhere, ranging from a $5 ornament to a $50 hand-knit sweater to a $2,000 custom-made coffee table. We believe many Etsy buyers are motivated by more than simply price and convenience; we believe they also value craftsmanship, artistry, uniqueness, authenticity and sustainability. We find that Etsy buyers want to know how items were made, where they were made and who made them. In our marketplace, Etsy buyers can enjoy a personalized shopping experience and direct interactions with Etsy sellers. Etsy buyers can also purchase customized items or other bespoke goods from Etsy sellers. By buying in our marketplace, Etsy buyers are supporting creative entrepreneurs in their local communities and around the world. As of December 31, 2014, there were 19.8 million active buyers on our platform.

Etsy buyers also include retailers we have selected for our Wholesale offering, which we launched in August 2014. From local boutiques to national chains such as Nordstrom, West Elm and Whole Foods, retailers use our platform to connect with new artists and designers and to add unique and distinctive items to their store offerings. As of December 31, 2014, more than 6,500 local boutiques and three U.S. national retail chains had been invited to join our Wholesale offering.

We are committed to helping Etsy sellers who want to work with responsible, small-batch manufacturing partners to increase their production. An Etsy seller might work with a cut-and-sew shop to make clothes she has designed, a casting house that casts her wax models for her jewelry designs or a digital printing

house that prints her photographs on household items. We ask Etsy sellers to work with manufacturers who adhere to our ethical expectations: humane working conditions, non-discrimination policies, sustainability practices and no child, youth or involuntary labor. As of December 31, 2014, we had approved more than 3,000 Etsy shops for over 5,000 manufacturing partnerships. Much of this production is local: as of December 31, 2014, 86% of manufacturers partnering with Etsy sellers were located in the same country as the Etsy seller.

We too are members of our community. Whether crafting our policies, talking with Etsy sellers and Etsy buyers in our online forums or building the tools and services underlying our marketplace, our employees create lasting, authentic connections in our community. Etsy employees emphasize building personal relationships with Etsy sellers, visiting their shops, inviting them to our offices for lunch or celebrating with them at in-person events.

Etsy sellers offer goods in dozens of online retail categories, including jewelry, stationery, clothing, home goods, craft supplies and vintage items. Euromonitor, a consumer market research company, estimated that the global online retail market was $695 billion in 2013, up from $280 billion in 2008, representing a

compound annual growth rate, or CAGR, of 19.9%. This growth is expected to continue, with the global online retail market becoming a significantly larger portion of the total retail market, reaching $1.5 trillion by 2018, implying a 16.6% CAGR from 2013.

Mobile commerce is also increasingly important in online retail. comScore estimated that since the first quarter of 2013, consumers visiting online commerce sites spent more than half of their browsing time on mobile devices; however, online commerce spending via mobile devices represented only 11% of total online commerce dollars in the third quarter of 2014.

Whether motivated by economic necessity or personal preference, a growing number of people are turning to self-employment for their livelihoods.

In a 2012 survey of middle-class households in the United States by the Pew Research Center, 85% said that it was more difficult to maintain their living standards today than it was ten years ago. The erosion of middle-income jobs is not unique to the United States: we believe middle-class families in many developed countries face similar challenges. Responding to these challenges, many people supplement their incomes and support their families by becoming freelancers, and freelancers are now making significant contributions to their respective economies. A study commissioned in July 2014 by the Freelancers Union and Elance-oDesk, or the Freelancer Study, estimated that 53 million Americans are working as freelancers, or 34% of the U.S. workforce. The same study estimated that this freelance workforce adds $715 billion to the U.S. economy each year.

The Freelancer Study also found that millennials (workers under 35) represent a source of growth in the number of Americans working as freelancers. Millennials are more likely to freelance than older workers—38% of millennials are freelancing, compared to 32% of workers over 35—and many millennials have spent their entire working lives in this freelance era. Millennial freelancers are also more likely to search out work that has “a positive impact on the world” (62% of millennials vs. 54% of non-millennials) or is “exciting” (62% of millennials vs. 47% of non-millennials).

Many other people are motivated by similar personal priorities to start their own businesses. In 2012, a Harvard Business School study found that “autonomy” was a top motivation in a faculty survey of 2,000 business founders, amongst all age cohorts and for both men and women.

Women are also contributing to the trend towards self-employment. According to an October 2012 analysis by Booz and Company, by 2020, 865 million women worldwide who have not previously been part of the economic mainstream will join as producers, consumers, employees and entrepreneurs. World Bank research shows that, in certain developing nations, over half of the women in the labor force are self-employed.

In combination, these data underscore the importance of tools that help people start and grow their businesses. We believe that many of these freelancers, millennials and women have creative skills that could provide a foundation for entrepreneurship, but that they often have little or no experience running their own businesses, and they typically lack the marketing resources, the technological expertise and the manufacturing and logistics capabilities to turn their creativity into a business.

Most large retailers today follow the same formula, emphasizing efficiency and scale and pressuring their suppliers to reduce their costs in order to serve mass-produced goods at the lowest-possible prices. We believe, however, that many consumers want to purchase goods that are unique and that reflect their personality and style, not simply mass-produced, generic goods. Some consumers want their purchases to reflect their values; they want to support retailers and suppliers that have responsible and sustainable policies toward their employees, their communities and the environment. Finding these goods can be difficult, as markets for such goods have historically been highly fragmented across boutiques, consignment stores and other venues and marketplaces.

Chris and Katie Francis, Lee Goodwin, Olivia Turrell, Etsy Shop: Docksmith, Brunswick, ME

A 2014 Nielsen study reported that global consumers between the ages of 21 and 34 represent 51% of all consumers who are willing to pay extra for sustainable products. The Nielsen study also indicated that 55% of consumers worldwide are willing to pay extra for products and services from companies committed to social impact, a 10% increase from a similar study in 2011, and that 46% of those consumers identified support for small businesses and entrepreneurship as a key cause.

Still other thoughtful consumers are looking to support their local communities and prefer buying goods that they can trace to an individual person or community. According to a 2014 Havas Worldwide case study, 53% of consumers say that when possible they prefer to buy directly from an individual producer than from a store or shopping center. These consumers prefer to bypass large manufacturers and retailers when possible in favor of buying locally and independently-produced goods.

Just as the power of computing, once reserved for government and large businesses, is now available to individuals on their personal computers and mobile devices, individuals and small businesses now have the ability to manufacture goods in their homes and studios using tools such as computer-assisted design, 3D printers, computer-controlled routers and other machines at a fraction of the historical cost. We believe the decrease in the size and the cost of these tools will make it easier for creative entrepreneurs to start new businesses. We also believe that small-batch manufacturers will be able to use these new technologies to provide high-quality manufacturing services to creative entrepreneurs. According to the U.S. Census Bureau, in 2011, approximately 65% of manufacturing establishments had 19 or fewer employees. Manufacturing plants that produce items such as apparel, leather, ornamental metal, furniture, printing materials, cutlery and jewelry tended to have even smaller workforces, as 80% had 19 or fewer employees. We believe that to scale their own businesses, creative entrepreneurs can access this growing number of small-batch manufacturers.

Our Authentic, Trusted Marketplace. We have built an authentic, trusted marketplace that embodies our values-based culture, emphasizing respect, direct communication and fun. We have developed a reputation for authenticity as a result of Etsy sellers’ unique offerings and their adherence to our policies for handmade goods embodying the principles of authorship, responsibility and transparency. We establish trust in our marketplace by emphasizing the person behind every transaction. We deepen connections among our members through our direct communication tools, seller stories on our website and apps and in-person events, making a personal relationship central to the member experience. The authenticity of our marketplace and the connections among people in our community are the cornerstones of our business.

Our Passionate, Engaged and Loyal Members. Our members are passionate, engaged and loyal—not only to us, but to each other—building a strong community.

The passion and loyalty demonstrated by Etsy sellers and Etsy buyers underlies the growth and scale of our platform. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Factors Affecting Our Performance—Growth and Retention of Active Sellers and Active Buyers” for more information.

Our Innovative Technology. Our widely-respected engineering team has built a sophisticated platform that enables millions of Etsy sellers and Etsy buyers to smoothly transact across borders, languages and devices. Our team is at the forefront of the software engineering practice of continuous deployment. We update our code as often as every 20 minutes, and as many as 70 times per day, with more than 10,000 deploys during the year ended December 31, 2014. To enhance the performance of our platform, we collect and analyze a large volume of data. For example, we currently collect more than 1.8 million discrete metrics, which we expect will increase as we grow. Further, in the field of search relevance and purchase recommendations, we currently collect and analyze more than 1,200 terabytes of data to calculate search and personalization relevance signals in real time to recommend goods to each prospective Etsy buyer from a broad inventory of unique goods.

For the year ended December 31, 2014, 53.2% of our visits and 36.1% of our GMS were generated on a mobile device. We developed our “Sell on Etsy” mobile app to help the Etsy seller operate her shop and manage orders. Our mobile website and our mobile app for Etsy buyers, which we developed to keep Etsy buyers engaged wherever they are, includes search, discovery, curation, personalization and social shopping features, optimized for the mobile experience.

Our Scaled, Global-Local Marketplace. Our marketplace is global-local, meaning that we focus on building local Etsy communities around the world. Etsy sellers and Etsy buyers in these local communities, in turn, have global reach and access through our platform. Currently, Etsy sellers and Etsy buyers are based in nearly every country in the world and our marketplace is available in 10 languages. In 2014, 30.9% of our GMS involved an Etsy seller or Etsy buyer outside of the United States. We believe our global-local marketplace creates strong competitive advantages outside the United States because our success is not dependent on scale in any given country; instead, the diverse location of Etsy sellers and Etsy buyers creates the scale, and a concentration of Etsy sellers and Etsy buyers in any given region can give rise to a vibrant local Etsy marketplace.

Our Seller-Aligned Business Model. Etsy sellers are drawn to our platform because we empower them to succeed, and as Etsy sellers succeed, so do we. Our seller-aligned business model creates network effects. The more we invest in our platform, the more we enable Etsy sellers to pursue their craft and grow their businesses and the easier we make it for Etsy buyers to find unique goods. We call this Etsy’s Empowerment Loop. Some 76% of Etsy sellers consider their Etsy shops to be businesses and 90% want to grow their businesses, as indicated by our 2014 Seller Survey. We focus on offering Seller Services that help an Etsy seller spend more of her time on her creative passion and less of her time on the administrative aspects of running a business. During the year ended December 31, 2014, 46.1% of Etsy sellers used at least one of our Seller Services. Similarly, we have launched our manufacturing and Wholesale offerings in an effort to enable an Etsy seller to grow her business on our platform.

Make Etsy an Everyday Experience. The power of human connection is central to the Etsy member experience. We emphasize relationships, connecting creative entrepreneurs to thoughtful consumers around the world, and we continually strive to make those connections a daily habit for our members.

The everyday experience starts with mobile. In 2014, 53.2% of our visits and 36.1% of our GMS were generated on a mobile device:

Build Local Marketplaces, Globally. Our vision is global and local. In 2014, 28.9% of Etsy sellers were located outside the United States, and 30.9% of our GMS involved an Etsy seller or Etsy buyer outside of the United States. Although we promote cross-border transactions, our strategy is to build and deepen local Etsy communities around the world, each with its own ecosystem of Etsy sellers and Etsy buyers. To meet this goal, we plan to invest in local marketing and content and local payment and shipping solutions in countries around the world. We believe our locally-focused work will broaden the reach of our global platform.

Offer High-impact Seller Services. Seller Services, such as Promoted Listings, Direct Checkout and Shipping Labels, help an Etsy seller spend more time on the pleasures of her craft and less time on the administrative aspects of her business. Seller Services represented $42.8 million, or 34.2%, of our revenue in 2013, a 169.9% increase over 2012, and $82.5 million, or 42.2%, of our revenue in 2014, a 92.7% increase over 2013. According to our 2014 Seller Survey, for every hour that an Etsy seller spends making her products, she spends another hour doing business-related tasks, including inventory management, shipping, customer service, marketing and accounting. We intend to enhance existing Seller Services, extend their geographic reach and introduce new ones to increase the amount of time an Etsy seller can devote to her craft.

Expand the Etsy Economy. We intend to fulfill our mission to reimagine commerce by expanding the impact of our platform beyond our community. By further developing our manufacturing program, we believe we will help Etsy sellers who want to grow their businesses connect with skilled partners, while helping to revitalize small-batch manufacturing in local communities. We will also continue to focus on our Wholesale offering, which we launched in August 2014, so that Etsy sellers can sell their products to select retail partners such as Nordstrom, West Elm and Whole Foods. Finally, we plan to focus on strategic partnerships, technological advances and public-private endeavors such as our Craft Entrepreneurship program, which we believe will bring the benefit of the Etsy Economy to more people and more communities.

Invest in Marketing. We believe that the rapid growth of our marketplace is a testament to our compelling value proposition for Etsy sellers and Etsy buyers. Etsy sellers and Etsy buyers have been our best marketers, and the majority of our visits have come from direct and organic channels. Historically, we have invested relatively small amounts in marketing. We spent only $10.9 million on marketing in 2012 and only $17.9 million in 2013. In 2014, we began increasing our brand and digital marketing efforts and spent $39.7 million in marketing, up 122% from 2013.

We plan to continue to increase our marketing spending on traditional and online media to increase awareness of our brand and attract additional members to our ecosystem.

Our investment in marketing has shown early signs of success. Beginning in the fourth quarter of 2013, we strategically increased our marketing spending in the United Kingdom, our second largest market in terms of number of active sellers, with a goal of growing the number of Etsy buyers in the United Kingdom. In the following twelve months, we spent five times more on search engine marketing in the United Kingdom during the twelve months ended September 30, 2014 than we did during the same period in the prior year. During the twelve months ended September 30, 2014, the number of active buyers in the United Kingdom grew 112.9% year-over-year, compared to 89.0% year-over-year in the same period in the prior year. Additionally, Etsy buyers in the United Kingdom spent more in our marketplace, with the amount spent increasing by 114.2% year-over-year versus 64.7% year-over-year in the same period in the prior year. Our success in the United Kingdom demonstrates our ability to accelerate growth with marketing improvements and increased marketing spending. We intend to apply the key lessons from our experience in the United Kingdom into growing other local Etsy markets around the globe.

Our platform is an authentic vehicle for person-to-person commerce, both globally and locally. Our platform includes our marketplace, our Seller Services, our technology and our community, both online and offline. The core of our platform is our marketplace, which connects people around the world to make, sell and buy unique goods.

Our platform makes it easy for an Etsy seller to open an Etsy shop and operate her business. We help the Etsy seller in the following ways:

To help Etsy buyers discover and purchase items that they love, we provide a number of tools, including:

Our members rely on us to maintain a marketplace that meets their expectations for authenticity. Our policies are designed to give the Etsy buyer the comfort that she is purchasing unique goods from a small business that adheres to certain principles.

Most fundamentally, we require that goods listed in our marketplace be handmade, vintage or craft supplies. Handmade items begin with the imagination and creativity of the Etsy seller. To conform to our vision of handmade, we ask that the Etsy seller follow these three principles:

Etsy buyers enjoy a high degree of insight into Etsy sellers’ business practices. Our policies encourage Etsy sellers to be transparent about themselves, their businesses and the goods they sell. We enforce our policies through the following:

Integrity team. The job of our Integrity team is to remove items that do not belong in our marketplace. We use a combination of machine learning, automated systems and community-generated queries and flags to review items and shops that may be in violation of our policies.

Trust and Safety team. Our Trust and Safety team uses human review and sophisticated automated tools and algorithms to detect fraud. We cancel transactions if fraud is detected, and we strive to prohibit bad actors from using our platform.

Responsible Seller Growth team. Our Responsible Seller Growth team reviews the application of every Etsy seller who applies to work with an outside manufacturer. We do not review or approve the manufacturer; instead, we look to the Etsy seller to provide evidence of authorship, responsibility and transparency.

Our Case System. Etsy sellers and Etsy buyers communicate via our Case System in instances when items do not arrive or are not as expected. Disputes are often resolved without our involvement. When necessary, we intervene, and when appropriate, we may suspend or terminate the accounts of members who do not adhere to our policies.

Etsy engineering is widely known for its thought-leading approaches to software development as well as its unique engineering culture. Our engineering team coined the phrase “Code as Craft” to describe our love for building software and our melding of engineering discipline and individual craftsmanship. We believe our engineers have the skills, practices and experience needed to embrace the change the future inevitably brings. As of December 31, 2014, our engineering team consisted of 241 employees.

We pride ourselves on our values-based culture. We emphasize respect, direct communication and fun. We focus on maximizing our employees’ professional and personal well-being. We evaluate performance not just on traditional business metrics, but also on societal and environmental goals and on adherence to our mission and values.

We believe employee happiness comes from engaging and fulfilling work and from ample personal and professional growth opportunities. We invest heavily in employee development by offering coaching, skills workshops and training. We actively encourage personal education through arts and crafts workshops and employee-taught classes called “Etsy School,” covering subjects ranging from screen printing to Python programming.

As of December 31, 2014, we had 685 employees worldwide, with 430 in our offices in Brooklyn, New York. Of those employees, we had 153 in member operations, 332 in product and engineering, 89 in marketing and 111 in corporate. Our product development expenses were $18.7 million, $27.5 million and $36.6 million in the years ended December 31, 2012, 2013 and 2014, respectively.

We proactively work and recruit to improve the gender balance at all levels of our company. As of December 31, 2014, 51% of employees identified as female. As of December 31, 2014, women comprised 46% of managers and 28% of product, engineering and technical operations employees.

In January 2015, we formed Etsy.org, a Delaware non-profit organization, to focus on building innovative educational programs that reimagine how and to whom business is taught. In particular, Etsy.org will focus on educating women and other under-represented entrepreneurial populations and empowering them to build businesses that regenerate communities and the planet. In January 2015, we issued 376,471 shares of our common stock to Etsy.org, and we expect to use $300,000 of the proceeds of this offering to partially fund Etsy.org.

We compete with retailers for the Etsy seller. An Etsy seller can list her goods for sale with online retailers or sell her goods through local consignment and vintage stores and other venues and marketplaces. She may also sell wholesale directly to traditional retailers, including large national retailers, who discover her goods in our marketplace or otherwise. We also compete with companies that sell software and services to small businesses, enabling an Etsy seller to sell from her own website or otherwise run her business independently of our platform. We are able to compete for Etsy sellers based on our brand awareness, the breadth of our online presence, the number and engagement of Etsy buyers, our Seller Services, our fees, the strength of our community and our values.

We also compete with retailers for the attention of the Etsy buyer. An Etsy buyer has the choice of shopping with any online or offline retailer, whether large marketplaces or national retail chains or local consignment and vintage stores or other venues or marketplaces. We are able to compete for Etsy buyers based on the unique goods that Etsy sellers list in our marketplace, awareness of our brand, the person-to-person commerce experience, our reputation for authenticity, our mobile apps, ease of payment and the availability and reliability of our platform.

Protection of our technology and intellectual property is an important component of our success. We rely on intellectual property laws, primarily including trade secret, copyright and trademark laws in the United States and abroad, and we use confidentiality procedures, non-disclosure agreements, invention assignment agreements and other contractual rights to protect our intellectual property.

While we have obtained or applied for patent protection for some of our intellectual property, we generally do not rely on patents as a principal means of protecting intellectual property. We register domain names, trademarks and service marks in the United States and abroad. We also rely upon common law protection for certain trademarks.

Circumstances beyond our control could pose a threat to our intellectual property rights. Effective intellectual property protection may not be available in the United States or other countries in which we operate. In addition, the efforts we have taken to protect our intellectual property rights may not be sufficient or effective. Any impairment of our intellectual property rights could harm our business, our ability to compete and our operating results.

Our headquarters are located in Brooklyn, New York where we occupy approximately 104,493 square feet under a lease that expires in 2016. We use these facilities for our principal administration, technology and development and engineering activities. Our European headquarters are located in Dublin, Ireland.

In May 2014, we signed a lease for new corporate headquarters, also located in Brooklyn, which we expect to occupy in 2016. The lease covers two buildings totaling approximately 198,635 square feet and will expire approximately ten years from the later to occur of the two buildings’ lease commencement dates. We expect that our new space will allow us to grow our local staff, will be LEED-certified and will support our efforts to reduce our environmental footprint.

We also maintain offices in Hudson (New York), San Francisco, Berlin, Dublin, London, Paris, Melbourne and Toronto.

We believe that our current facilities are suitable and adequate to meet our ongoing needs and that, if we require additional space, we will be able to obtain additional facilities.

As with any company operating on the Internet, we grapple with a growing number of local, national and international laws and regulations. These laws are often complex, sometimes contradict other laws, and are frequently still evolving. Laws may be interpreted and enforced in different ways in various locations around the world, posing a significant challenge to our global business. For example, U.S. federal and state laws, EU directives, and other national laws govern the processing of payments, consumer protection and the privacy of consumer information; other laws define and regulate unfair and deceptive trade practices. Still other laws dictate when and how sales or other taxes must be collected. Laws of defamation apply online and vary by country. The growing regulation of e-commerce worldwide could impose additional compliance burdens and costs on us or on Etsy sellers, and could subject us to significant liability for any failure to comply. Additionally, because we operate internationally, we need to comply with various laws associated with doing business outside of the United States, including anti-money laundering, anti-corruption and export control laws.

From time to time, we are involved in legal proceedings and subject to claims that arise in the ordinary course of business. Although the results of legal proceedings and claims cannot be predicted with certainty, we believe we are not currently party to any legal proceedings which, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, cash flows or financial condition. There can be no assurances that we will obtain a favorable outcome. Regardless of the outcome, such proceedings can harm us because of defense and settlement costs, diversion of resources and other factors.

Our executive officers and directors, and their ages and positions as of January 31, 2015, are listed below:

The following is a brief biography of each of our executive officers and directors:

Chad Dickerson has served as our president and chief executive officer since July 2011, as a member of our board of directors since September 2011, and has served as the chairman of our board of directors since October 2014. He previously served as our chief technology officer from September 2008 until July 2011. Prior to Etsy, Mr. Dickerson was the director of the Advanced Products/Brickhouse team at Yahoo! Inc., a multinational Internet company, from December 2007 to August 2008, was the head of the Yahoo! Developer Network from June 2006 to December 2007 and was the director of platform evangelism from August 2005 to May 2006. Prior to Yahoo!, Mr. Dickerson served as chief technology officer at InfoWorld Media Group, Inc., an information technology online media business, from April 2001 to August 2005. Mr. Dickerson worked on early web-based newspapers, including Salon.com from July 1998 to March 2001. Mr. Dickerson holds a B.A. in English literature from Duke University. Mr. Dickerson should serve as a member of our board of directors because he is our chief executive officer and because he has extensive experience in media and technology companies.

Kristina Salen has served as our chief financial officer since January 2013. Prior to Etsy, Ms. Salen led the media, Internet, and telecommunications research group of FMR LLC d/b/a Fidelity Investments, a multinational financial services company, from January 2006 to January 2013. Prior to Fidelity, Ms. Salen worked in various financial and executive roles at several companies, including Oppenheimer Capital LLC,

an investment firm, from June 2002 to December 2005; Merrill Lynch & Co., Inc., a financial services corporation acquired by Bank of America Corporation in January 2009, from June 1997 to June 2001; Lazard Frere & Co. LLC, a global financial advisory and asset management firm, from April 1996 to June 1997; and SBC Warburg, an investment bank, from December 1994 to April 1996. Ms. Salen has served as a member of the board of directors of Cornerstone OnDemand, Inc., a cloud-based talent management software solution company, since July 2014. Ms. Salen holds a B.A. in Political Science from Vassar College and an M.B.A. in finance from Columbia University.

Jordan Breslow has served as our general counsel since November 2013 and as secretary since September 2014. Prior to Etsy, Mr. Breslow served as general counsel of New Island Capital Management, Inc., an impact investment advisor, from April 2011 to November 2013; as general counsel of Silver Spring Networks, Inc., a provider of smart grid networks, from May 2008 to September 2010; and as general counsel of Opsware, Inc. (formerly called Loudcloud), a provider of data center software, from February 2000 to September 2007. Prior to that, Mr. Breslow was an associate and a partner at several law firms. Mr. Breslow has also served as a Adjunct Professor at the New York University School of Law since February 2015. Mr. Breslow has also lectured at University of California-Berkeley Law School and San Francisco State University. Mr. Breslow holds a B.A. in Anthropology from San Francisco State University and a J.D. from University of California, Hastings College of the Law.

Kellan Elliott-McCrea has served as our chief technology officer and chief architect since July 2011, and previously served as our vice president of engineering from July 2010 to July 2011. Prior to Etsy, Mr. Elliott-McCrea worked as Flickr’s architect at Yahoo! from May 2006 to June 2010. Prior to Yahoo!, Mr. Elliott-McCrea served as an engineer at several start-ups. Mr. Elliott-McCrea founded his first Internet startup, Metaevents, Inc., a developer of an online calendar publishing tool, in 1997, which was acquired in 2000 by AnyDay.com, Inc., an online free calendar and scheduling service, shortly before AnyDay.com, Inc. was acquired by Palm, Inc., a mobile product manufacturer, where he served as a principal engineer. Mr. Elliott-McCrea is the author of several well-known open source libraries, including MagpieRSS which is a key component of a large number of open source applications. He is also a co-author of the IETF security standard: OAuth.

James W. Breyer has served as a member of our board of directors since January 2008. Mr. Breyer has been a partner of Accel Partners, a venture capital firm, since 1987. Mr. Breyer is also the founder and has been the chief executive officer of Breyer Capital, an investment firm, since July 2006. Mr. Breyer has served on the board of directors of Twenty-First Century Fox, Inc., a media company, since June 2013, and also serves on the boards of directors of several privately-held companies. Mr. Breyer has served as a fellow of the Harvard Corporation, a Harvard University Governing Board, since 2013. Previously, Mr. Breyer served as a member of the boards of directors of Brightcove, Inc., an online video and publishing platform, from 2005 to 2013; News Corporation, a mass media company, from 2011 to 2013; Wal-Mart Stores, Inc., a multinational retail company, from 2001 to 2013, Facebook, Inc., a worldwide social network, from 2005 to 2013; Dell Inc., a worldwide merchant of technology products and services, from 2009 to 2013; Model N, Inc., a provider of

revenue management solutions, from 2000 to 2013; Prosper Marketplace, Inc., a peer-to-peer online credit platform operator from 2005 to 2012; and Marvel Entertainment, Inc., a character-based entertainment company, from 2006 to 2009. Mr. Breyer holds a B.S. in interdisciplinary studies from Stanford University and an M.B.A. from Harvard University. Mr. Breyer should serve as a member of our board of directors due to his extensive experience with retail, media and technology companies, as a venture capitalist and as one of our early investors.

M. Michele Burns has served as a member of our board of directors since March 2014. Ms. Burns has served as the Center Fellow and Strategic Advisor to the Stanford Center on Longevity at Stanford University since August 2012. Ms. Burns served as the chief executive officer of the Retirement Policy Center sponsored by Marsh & McLennan Companies, Inc., an insurance brokerage and consulting firm, from October 2011 to February 2014; as chairman and chief executive officer of Mercer LLC (a subsidiary of Marsh & McLennan Companies, Inc.), a human resources consulting firm, from September 2006 to October 2011; as chief financial officer of Marsh & McLennan Companies, Inc. from March 2006 to September 2006; and as chief financial officer and chief restructuring officer of Mirant Corporation, an energy company, from May 2004 to January 2006. Ms. Burns joined Delta Airlines in January 1999 and served as chief financial officer from August 2000 until April 2004. She began her career at Arthur Andersen in 1981, serving ultimately as the Senior Partner, Southern Region Federal Tax Practice until December 1998. Ms. Burns has served as a member of the boards of directors of Cisco Systems, Inc., a multinational company that designs, manufactures and sells networking equipment, since November 2003; Goldman Sachs Group, Inc., an investment banking firm and affiliate of one of the underwriters of this offering, since October 2011; and Alexion Pharmaceuticals, Inc., a pharmaceutical company, since July 2014. She also serves on the boards of directors of, or as an advisor to, several private companies. She previously served as a member of the board of directors of Wal-Mart Stores, Inc., a multinational retail company, from June 2003 to June 2013. She is a member of the executive board of directors of the Elton John AIDS Foundation, where she also serves as Treasurer. Ms. Burns holds a B.A. in Business Administration from the University of Georgia and a Master of Accountancy from the University of Georgia. Ms. Burns should serve as a member of our board of directors due to her expertise in corporate finance, accounting and strategy, including experience gained as the chief financial officer of public companies. She also brings expertise in global and operational management, including a background in organizational leadership and human resources.

Jonathan D. Klein has served as a member of our board of directors since June 2011. Mr. Klein is co-founder and chief executive officer of Getty Images, Inc., a global digital media company and the premier creator and distributor of still imagery and video worldwide. Mr. Klein has also served as a member of the board of directors of Getty Images, Inc. (and its predecessor company Getty Communications) since March 1995. Mr. Klein has served as a member of the board of directors of Squarespace, Inc., a provider of web publishing products and services, since July 2010 and served as a member of the board of directors of Real Networks, Inc., a provider of Internet streaming media delivery software and services, from January 2003 to November 2011. Mr. Klein also serves as a member of the boards of directors of numerous non-profit organizations, including the Committee to Protect Journalists, the Groton School, where he serves as president, and Friends

of the Global Fight Against HIV, Tuberculosis and Malaria, where he serves as chairman. Mr. Klein holds an M.A. in law from the University of Cambridge. Mr. Klein should serve as a member of our board of directors due to his extensive experience with communications and media companies.

Fred Wilson has served as a member of our board of directors since June 2007 and has served as our lead independent director since October 2014. Mr. Wilson was a founder and has served as a managing partner of Union Square Ventures, a venture capital firm, since June 2003. Mr. Wilson also serves on the boards of directors of various private companies in connection with his role at Union Square Ventures. Mr. Wilson holds an S.B. in Mechanical Engineering from Massachusetts Institute of Technology and an M.B.A. from The Wharton School of Business at the University of Pennsylvania. Mr. Wilson should serve as a member of our board of directors due to his extensive experience with social media and technology companies, as a venture capitalist, and as one of our early investors.

Our directors hold office until their successors have been elected and qualified or appointed, or the earlier of their death, resignation or removal. There are no family relationships among any of our directors or executive officers.

We intend to apply to have our common stock listed on the Nasdaq Global Select Market. The listing rules of this stock exchange generally require that a majority of the members of a listed company’s board of directors be independent within 12 months following the closing of an initial public offering. Our board of directors has determined that none of our non-employee directors has a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent” as that term is defined under the rules of Nasdaq. The independent members of our board of directors will hold separate regularly scheduled executive session meetings at which only independent directors are present.

Audit committee members must also satisfy the independence rules in SEC Rule 10A-3 adopted under the Exchange Act. In order to be considered independent for purposes of Rule 10A-3, a member of an audit committee of a public company may not, other than in his or her capacity as a member of the audit committee, the board of directors or any other board committee, accept, directly or indirectly, any consulting, advisory or other compensatory fee from the listed company or any of its subsidiaries or be an affiliated person of the listed company or any of its subsidiaries. Each of qualify as an independent director pursuant to Rule 10A-3.

Immediately after this offering, our board of directors will be divided into three classes with staggered three-year terms. At each annual meeting of stockholders, the successors to directors whose terms then expire will be elected to serve until the third annual meeting following election. Our directors will be divided among the three classes as follows:

Directors in a particular class will be elected for three-year terms at our annual meeting of stockholders in the year in which their terms expire. As a result, only one class of directors will be elected at each annual meeting of stockholders, with the other classes continuing for the remainder of their respective three-year terms. Each director’s term continues until the election and qualification of his or her successor, or the earlier of his or her death, resignation or removal.

Our amended and restated certificate of incorporation and amended and restated bylaws that will be in effect after this offering provide that only our board of directors can fill vacant directorships, including newly created seats. Any additional directorships resulting from an increase in the authorized number of directors would be distributed among the three classes so that, as nearly as possible, each class would consist of one-third of the authorized number of directors.

The classification of our board of directors may have the effect of delaying or preventing changes in our control or management. See “Description of Capital Stock—Anti-Takeover Provisions—Certificate of Incorporation and Bylaw Provisions.”

One of the key functions of our board of directors is informed oversight of our risk management process. In particular, our board of directors is responsible for monitoring and assessing strategic risk exposure, and our executive officers are responsible for the day-to-day management of the material risks we face. Our board of directors administers its oversight function directly as a whole and through its standing committees. For example, our audit committee is responsible for overseeing the management of risks associated with financial reporting, accounting and auditing matters; our compensation committee oversees the management of risks associated with executive compensation policies and programs; and our nominating

and corporate governance committee oversees the management of risks associated with director independence, conflicts of interest, composition and organization of our board of directors and director succession planning.

Our board of directors has established an audit committee, a compensation committee and a nominating and corporate governance committee, to be effective after this offering. Our board of directors may establish other committees to facilitate the management of our business. Our board of directors and its committees meet throughout the year and may also hold special meetings and act by written consent from time to time, as appropriate. Our board of directors has delegated various responsibilities and authority to its committees as generally described below. The committees will regularly report on their activities and actions to our full board of directors. Each member of each committee of our board of directors qualifies as an independent director in accordance with listing standards. Each committee of our board of directors has a written charter approved by our board of directors, which will be posted on the Investor Relations section of our website at www.etsy.com after this offering. The inclusion of our website address in this prospectus does not include or incorporate by reference the information on our website into this prospectus. Members serve on these committees until their resignation or until otherwise determined by our board of directors.

The members of our audit committee will be after this offering, each of whom can read and understand fundamental financial statements. are each independent under the rules and regulations of the SEC and the listing standards of Nasdaq applicable to audit committee members. will chair the audit committee. Our board of directors has determined that qualifies as an audit committee financial expert within the meaning of SEC regulations and meets the financial sophistication requirements of Nasdaq.

Our audit committee assists our board of directors’ oversight of the following: the integrity of our financial statements, our compliance with legal and regulatory requirements, the qualifications, independence and performance of our independent registered public accounting firm, the design and implementation of our internal audit function and risk assessment and risk management. Among other things, our audit committee is responsible for reviewing and discussing with our management the adequacy and effectiveness of our disclosure controls and procedures. The audit committee also discusses with our management and independent registered public accounting firm the annual audit plan and scope of audit activities, scope and timing of the annual audit of our financial statements and the results of the audit, quarterly reviews of our financial statements and, as appropriate, initiates inquiries into other aspects of our financial affairs. Our audit committee is responsible for establishing and overseeing procedures for the receipt, retention and treatment of any complaints reporting accounting, internal accounting controls or auditing matters, as well as for the confidential and anonymous submissions by our employees concerning questionable accounting or auditing matters. In addition, our audit committee has direct responsibility for

the appointment, compensation, retention and oversight of the work of our independent registered public accounting firm. Our audit committee has sole authority to approve the hiring and discharging of our independent registered public accounting firm, all audit engagement fees and terms and all permissible non-audit engagements with our independent registered public accounting firm. Our audit committee will review and oversee all related person transactions in accordance with our policies and procedures.

The members of our compensation committee will be after this offering. will chair the compensation committee. Each member of our compensation committee is independent under the rules and regulations of the SEC and the listing standards of Nasdaq applicable to compensation committee members. Our compensation committee assists our board of directors with its oversight of the forms and amount of compensation for our executive officers, and the administration of our incentive plans for employees and other service providers, including our equity incentive plans, and certain other matters related to our compensation programs.

The members of our nominating and corporate governance committee will be after this offering. will chair the nominating and corporate governance committee. Our nominating and corporate governance committee assists our board of directors with its oversight of and identification of individuals qualified to become members of our board of directors, consistent with criteria approved by our board of directors, and selects, or recommends that our board of directors select, director nominees; develops and recommends to our board of directors a set of corporate governance guidelines; and oversees the evaluation of our board of directors.

Our board of directors has adopted a code of conduct that will be effective after this offering and will apply to all of our employees, officers and directors. We also expect our contractors, consultants, suppliers and agents to follow our code of conduct in connection with their work for us. Our code of conduct represents the standards by which we operate and reflects our values of being a mindful, transparent and humane business. The purpose of our code of conduct is to promote: honesty and integrity, including with respect to actual or apparent conflicts of interest; full, fair, accurate, timely and understandable disclosure in periodic reports to be filed by us; and compliance with all applicable rules and regulations. The code of conduct will be posted on the Investor Relations section of our website at www.etsy.com after this offering. We intend to disclose future amendments to, or waivers of, our code of conduct at the same location on our website. Information contained on our website is not incorporated by reference into this prospectus, and you should not consider information contained on our website to be part of this prospectus or in deciding whether to invest in our common stock.

As noted above, the compensation committee of our board of directors will consist of . During our fiscal year ended December 31, 2014, our compensation committee consisted of Jonathan D. Klein and Fred Wilson. None of our executive officers serves, or served during our fiscal year ended December 31, 2014, as a member of the board of directors or compensation committee of any other entity that has or has had one or more executive officers serving as a member of our board of directors or our compensation committee.

Prior to this offering, we did not have a formal compensation program for non-employee directors. We have granted stock option awards on an ad hoc basis to members of our board of directors who are not otherwise affiliated with us. In April 2014 we granted an option to purchase 253,294 shares of our common stock to M. Michele Burns in connection with her election to our board of directors. The option vests 25% when Ms. Burns completes 12 months of continuous service with us and then in equal monthly installments over the following 36 months of her service with us. We reimburse directors for their reasonable out-of-pocket expenses incurred in attending board of directors and committee meetings.

For services rendered during the year ended December 31, 2014, our non-employee directors received the following compensation:

In March 2015, we adopted a new non-employee director compensation program that will be effective upon the completion of this offering. Under this program, each new, non-employee director who joins our board of directors will be granted equity compensation (in the form of stock options or restricted stock units) upon the effective date of his or her election to our board of directors with a fair value (calculated in accordance with FASB

ASC Topic 718) at the time of grant equal to $350,000. Equity awards for new directors will vest in equal annual installments on the first three anniversaries of the grant date if the director has served continuously as a member of our board of directors through the applicable vesting date. In addition, equity awards for new directors will vest in full in the event that we are subject to a change in control or upon certain other events.

Beginning in 2016 on the date of our annual meeting of stockholders, each non-employee director will receive an annual board retainer equity award with a fair value (calculated in accordance with FASB ASC Topic 718) at the time of grant equal to $175,000. At the election of the director, up to 50% of the annual retainer may be paid in cash. Equity awarded as an annual retainer will vest in full on the date of our next annual meeting of stockholders if the director has served continuously as a member of our board of directors through the date of that meeting. In addition, annual retainer equity awards will vest in full in the event that we are subject to a change in control or upon certain other events. A director will not be eligible to receive an annual retainer in the same calendar year in which he or she receives an initial new director equity grant.

In addition to the annual and new director fees described above, non-employee directors will receive the following payments in cash, payable annually:

The following table provides information concerning the compensation of our chief executive officer and our two other most highly compensated executive officers, or our named executive officers.

Narrative Explanation of Compensation Arrangements with Our Named Executive Officers

In 2014, the compensation of our named executive officers consisted primarily of base salary, annual cash incentive bonuses and long-term equity incentive compensation, in the form of stock options.

For the year ended December 31, 2014, the annual base salaries for our named executive officers were as follows: Mr. Dickerson—$300,000; Ms. Salen—$300,000; and Mr. Breslow—$275,000. Historically, the base salaries of our executive officers have been reviewed on an ad hoc basis and adjusted only when our board of directors or compensation committee determines an adjustment is appropriate. In February 2014, Ms. Salen’s salary was increased from her initial base salary of $275,000 to $300,000 in light of her performance in 2013 and her responsibilities.

Prior to 2014, we did not have a regular annual cash incentive bonus program for our executive officers. In 2014, our compensation committee approved an annual cash incentive plan in which certain of our employees, including our named executive officers, participated. The bonus plan was funded based upon the satisfaction of company-wide Adjusted EBITDA margin and net revenue goals. Because we exceeded our Adjusted EBITDA margin goal, the bonus plan was funded above target. The target bonuses for our named executive officers for 2014, as a percentage of base salary, were 75% for Mr. Dickerson, 59% for Ms. Salen and 50% for Mr. Breslow, and the actual bonus payouts were 110% of target for Mr. Dickerson and 121% of target for Ms. Salen and Mr. Breslow. The individual bonus payments were approved by our compensation committee and our board of directors with input from Mr. Dickerson for the other named executive officers.

We grant stock options to our employees, including our named executive officers, as the long-term equity incentive component of our compensation program. Stock options allow employees to purchase shares of our common stock at a price no less than the fair market value of our common stock on the date of grant and are generally granted to employees in connection with their commencement of employment. Our board of directors or compensation committee from time to time also grants stock options to certain employees who have had a long tenure at Etsy, who have taken on significant new responsibilities or as a reward for superior performance. Employee stock options generally vest 25% when an employee completes 12 months of service with us and then in equal monthly installments over the following 36 months of service with us. None of our named executive officers received stock options in 2014.

In January 2015, we granted an option to purchase 600,000 shares of our common stock to Mr. Dickerson and an option to purchase 290,000 shares of our common stock to Ms. Salen. The options vest 25% upon Mr. Dickerson’s or Ms. Salen’s 12 months of continuous service from January 30, 2015 and then in equal monthly installments over his or her following 36 months of service with us.

For information regarding the vesting acceleration provisions applicable to the options held by our named executive officers, see “—Change in Control Benefits” below.

Our named executive officers are eligible to participate in our health and welfare plans to the same extent as other full-time employees generally. We generally do not provide our named executive officers with perquisites or other personal benefits. From time to time, however, we provide relocation benefits to new executive officers.

The following table sets forth information regarding unexercised stock options held by each of our named executive officers as of December 31, 2014.

For information regarding the vesting acceleration provisions applicable to the options held by our named executive officers, see “—Change in Control Benefits” below.

A summary of the material terms of the employment letter agreements with our named executive officers and other arrangements providing benefits in connection with such officers’ termination of employment or in connection with a change in control is below.

In August 2011, we entered into an employment letter agreement with Mr. Dickerson in connection with his promotion to chief executive officer. Under this agreement, Mr. Dickerson’s annual salary was set at $300,000 per year and he received an option to purchase 2,400,000 shares of our common stock, as described in more detail above under “—Outstanding Equity Awards at 2014 Fiscal Year-End.” In addition, for information regarding the vesting acceleration provisions applicable to Mr. Dickerson’s stock options, see “—Change in Control Benefits” below.

If Mr. Dickerson’s employment is terminated in an involuntary termination, he will be entitled to the severance benefits described below under “—Severance Benefits” or “—Change in Control Benefits.”

In January 2013, we entered into an employment letter agreement with Ms. Salen in connection with her appointment as our chief financial officer. Under this agreement, Ms. Salen’s annual salary was set at $275,000 and she is eligible to receive a cash incentive bonus for each fiscal year starting in 2014 if the relevant performance measures are satisfied. Ms. Salen also received a signing bonus of $175,000 and was entitled to relocation benefits to assist with her move to the New York metropolitan area.

Pursuant to subsequent letter agreements we entered into with Ms. Salen, she received a temporary living stipend, an additional relocation payment and a gross-up for taxes incurred in connection with her temporary housing and transportation reimbursements in connection with her relocation.

In addition, pursuant to Ms. Salen’s employment letter agreement, she received an option to purchase 1,521,851 shares of our common stock in 2013, as described in more detail above under “—Outstanding Equity Awards at 2014 Fiscal Year-End.” In addition, for information regarding the vesting acceleration provisions applicable to Ms. Salen’s stock options, see “—Change in Control Benefits” below.

If Ms. Salen’s employment is involuntarily terminated, she will be entitled to the severance benefits described below under “—Severance Benefits” or “—Change in Control Benefits.”

In October 2013, we entered into an employment letter agreement with Mr. Breslow in connection with his appointment as our general counsel. Under this agreement, Mr. Breslow’s annual salary was set at $275,000 and he is eligible to receive a cash incentive bonus for each fiscal year starting in 2014 if the relevant performance measures are satisfied. Mr. Breslow also received a signing bonus of $75,000 and was entitled to relocation benefits of up to $25,000 to assist with his move to the New York metropolitan area.

In addition, pursuant to Mr. Breslow’s employment letter agreement, he received an option to purchase 710,197 shares of our common stock in 2013, as described in more detail above under “—Outstanding Equity Awards at 2014 Fiscal-Year End.” In addition, for information regarding the vesting acceleration provisions applicable to Mr. Breslow’s stock options, see “—Change in Control Benefits” below.

If Mr. Breslow’s employment is involuntarily terminated, he will be entitled to the severance benefits described below under “—Severance Benefits” or “—Change in Control Benefits.”

Prior to the completion of this offering, only Mr. Dickerson was provided severance benefits. In connection with this offering, our board adopted the severance plan and change in control severance plan described below.

In 2015, our board of directors adopted a severance plan for key employees, including our named executive officers, effective upon the completion of this offering. Under the severance plan, if we terminate a named executive officer’s employment without cause or if a named executive officer terminates employment for good reason other than in the 3 months before or 12 months after a change in control, then, if the named executive officer signs a release of claims, he or she will be entitled to receive continued salary payments for 12 months, in the case of Mr. Dickerson, and 6 months, in the case of Ms. Salen and Mr. Breslow. The named executive officer will also be entitled to receive reimbursement for healthcare continuation coverage for the lesser of the number of months in the severance period or until healthcare continuation coverage ends or the named executive officer becomes eligible for substantially equivalent coverage. This severance plan supersedes Mr. Dickerson’s prior severance benefits.

Prior to the completion of this offering, Mr. Dickerson was provided severance benefits pursuant to his employment letter agreement. Under this agreement, if we terminated Mr. Dickerson’s employment without cause or if he resigned for good reason, we would continue to pay his base salary for a period of six months. The salary continuation would be subject to Mr. Dickerson’s resignation from our board of directors and the boards of directors of any of our subsidiaries and execution of a release of claims.

In 2015, our board of directors also adopted a change in control severance plan for key employees, including our named executive officers, effective upon the completion of this offering. Under this change in control severance plan, if we terminate a named executive officer’s employment without cause or if a named executive officer terminates employment for good reason in the 3 months before or 12 months after a change in control, then, if the named executive officer signs a release of claims, he or she will be entitled to receive continued salary payments for 24 months, in the case of Mr. Dickerson, and 12 months, in the case of Ms. Salen and Mr. Breslow. The named executive officer will also be entitled to receive reimbursement for healthcare continuation coverage for the lesser of the number of months in the severance period or until healthcare continuation coverage ends or the executive becomes eligible for substantially equivalent

coverage. Finally, the named executive officer will be entitled to full vesting of any outstanding equity awards then held by the named executive officer. This change in control severance plan supersedes Mr. Dickerson’s prior change in control severance benefits.

Prior to the completion of this offering, only Mr. Dickerson was provided severance benefits in connection with a change in control. Pursuant to Mr. Dickerson’s stock option agreements, in the event that we experienced a change in control and, within 12 months following such change in control, Mr. Dickerson was terminated involuntarily, his stock options would fully vest.

Our board of directors adopted the 2015 Equity Incentive Plan in , and our stockholders approved it in . The 2015 Plan became effective immediately on adoption although no awards will be made under it until the effective date of the registration statement of which this prospectus is a part. Our 2015 Stock Equity Incentive will replace our 2006 Stock Plan described below, and no further grants will be made under our 2006 Stock Plan following completion of this offering. However, awards outstanding under the 2006 Stock Plan will continue to be governed by their existing terms.

Share Reserve. The number of shares of our common stock available for issuance under our 2015 Equity Incentive Plan will equal the sum of (a) shares , (b) the number of shares of our common stock remaining available for issuance under our 2006 Stock Plan as of the effective date of the registration statement of which this prospectus is a part, and (c) the number of shares of our common stock subject to awards under our 2006 Stock Plan that subsequently expire or lapse unexercised and shares issued pursuant to such awards that are forfeited or repurchased by us (such combined number not to exceed shares). The number of shares reserved for issuance under the 2015 Equity Incentive Plan will be increased automatically on the first business day of each of our fiscal years during the term of the plan, commencing in 2016, by a number equal to the smallest of:

In general, to the extent that any awards under the 2015 Equity Incentive Plan are forfeited, terminate, expire or lapse without the issuance of shares, or if we repurchase the shares subject to awards granted under the 2015 Equity Incentive Plan, those shares will again become available for issuance under the 2015 Equity Incentive Plan, as will shares applied to pay the exercise or purchase price of an award or to satisfy tax withholding obligations related to any award. All share numbers described in this summary of the 2015 Equity Incentive Plan will automatically adjust in the event of a stock split, a stock dividend, a reverse stock split or similar occurrence.

Administration. Our compensation committee administers the 2015 Equity Incentive Plan. The compensation committee has complete discretion to make all decisions relating to the 2015 Equity Incentive Plan and outstanding awards, including repricing outstanding options and modifying outstanding awards.

Eligibility. Employees, non-employee directors and consultants are eligible to participate in our 2015 Equity Incentive Plan.

Types of Award. Our 2015 Equity Incentive Plan provides for the following types of awards:

Options and Stock Appreciation Rights. The exercise price for options granted under the 2015 Equity Incentive Plan may not be less than 100% of the fair market value of our common stock on the grant date. Optionees may pay the exercise price in cash or, with the consent of the compensation committee and as set forth in the applicable option grant agreement:

An optionee who exercises a stock appreciation right receives the increase in value of our common stock over the exercise price. The exercise price for stock appreciation rights may not be less than 100% of the fair market value of our common stock on the grant date. The settlement value of a stock appreciation right may be paid in cash, shares of our common stock or a combination of these forms of payment.

Options and stock appreciation rights vest as determined by the compensation committee at the time of grant. In most cases, they will vest over a four-year period following the date of grant. Options and stock appreciation rights expire at the time determined by the compensation committee but in no event more than ten years after they are granted. These awards generally expire earlier if the participant’s service terminates earlier. No participant may be granted stock options and stock appreciation rights covering more than 2,000,000 shares (or stock options and/or stock appreciation rights covering more than 4,000,000 shares for a new hire) in any fiscal year.

Restricted Shares and Stock Units. Restricted shares and stock units may be awarded under the 2015 Equity Incentive Plan in return for any lawful consideration, and participants who receive restricted shares or stock units generally are not required to pay cash for their awards. In general, these awards will be subject to vesting. Vesting may be based on length of service, the attainment of performance-based goals or a combination of both, as determined by the compensation committee. No participant may be granted restricted share awards and stock units covering more than 1,500,000 shares (or 3,000,000 restricted shares and/or restricted stock units for a new hire) in any fiscal year. This annual limit is in addition to any stock options and stock appreciation rights the participant may receive during a calendar year. Settlement of vested stock units may be made in the form of cash, shares of common stock or a combination of these forms of payment. The permissible performance goals to qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code are listed under “—Performance Goals.”

Performance Cash Awards. Performance cash awards may be granted under the 2015 Equity Incentive Plan that qualify as performance-based compensation that is not subject to the income tax deductibility limitations imposed by Section 162(m) of the Internal Revenue Code, if the award is approved by our compensation committee and the grant or vesting of the award is tied solely to the attainment of performance goals during a designated performance period. The permissible performance goals to qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code are listed under “—Performance Goals.” No participant may be paid more than $1,500,000 in cash (or $3,000,000 for a new hire) in any fiscal year pursuant to a performance cash award granted under the 2015 Equity Incentive Plan.

Performance Goals. Performance goals for the grant or vesting of awards under the 2015 Equity Incentive Plan may be based on any one of, or combination of, the following: budget performance, buyer acquisition, retention and/or growth, cash flow, cash flow return on investment, comparisons with various stock market indices, costs and expenses (including reduction of both), earnings or earnings per share (including earnings before taxes, earnings before interest and taxes, earnings before interest, taxes and depreciation, or earnings before interest, taxes, depreciation and amortization, including adjusted measures), employee satisfaction and/or retention, free cash flow or free cash flow per share, gross margin, gross profits, headcount, market share, net income (before or after taxes), operating income or EBIT (Earnings before Interest and Taxes) on a GAAP or non-GAAP basis, operating or EBIT margin, return on assets, investment or capital employed, return on equity or average stockholders’ equity, revenue (gross or net), GMS, seller acquisition, retention and/or growth, member satisfaction, stockholders’ equity, stock price return relative to market indices and/or peer group, total stockholder return and working capital.

Any of the above metrics may be measured either in absolute terms, compared to any incremental increase or decrease or compared to results of a peer group, to market performance indicators or to market indices.

To the extent a performance award is not intended to comply with Section 162(m) of the Internal Revenue Code, the compensation committee may select other measures of performance.

Corporate Transactions. In the event we are a party to a merger, consolidation or certain change in control transactions, outstanding awards granted under the 2015 Equity Incentive Plan, and all shares acquired under the 2015 Equity Incentive Plan, will be subject to the terms of the definitive transaction agreement (or, if there is no such agreement, as determined by our compensation committee). Unless an award agreement provides otherwise, such treatment may include any of the following with respect to each outstanding award:

The compensation committee is not required to treat all awards, or portions thereof, in the same manner.

The compensation committee has the discretion to provide that an award granted under the 2015 Equity Incentive Plan will vest on an accelerated basis if we are subject to a change in control or if the participant is subject to an involuntary termination, either at the time such award is granted or afterwards.

Changes in Capitalization. In the event that there is a specified type of change in the capital structure of our common stock, such as a stock split, reverse stock split or dividend paid in common stock, proportionate adjustments will automatically be made to the kind and maximum number of shares:

as well as the exercise price applicable to each outstanding option and stock appreciation right and the repurchase price, if any, applicable to restricted shares.

In the event that there is a declaration of an extraordinary dividend payable in a form other than our common stock in an amount that has a material effect on the price of our common stock, a recapitalization, a spin-off or a similar occurrence, the compensation committee may make such adjustments as it deems appropriate, in its sole discretion.

Amendments or Termination. Our board of directors may amend or terminate the 2015 Equity Incentive Plan at any time. If our board of directors amends the 2015 Equity Incentive Plan, it does not need to ask for stockholder approval of the amendment unless required by applicable law, regulation or rules. The 2015 Equity Incentive Plan will continue in effect for ten years from the later of its adoption date or the date of approval of the latest share increase, unless our board of directors decides to terminate the plan earlier.

Forfeiture. Awards under the 2015 Equity Incentive Plan are subject to recovery to the extent required by any law, government regulation, stock exchange listing requirement or company policy.

Our board of directors adopted our 2006 Stock Plan in May 2006, and our stockholders approved it in June 2006. The most recent amendment to the 2006 Stock Plan was adopted by our board of directors in December 2013, and we obtained stockholder approval of that amendment in January 2014. No further awards will be made under our 2006 Stock Plan after this offering. The awards outstanding after this offering under the 2006 Stock Plan will continue to be governed by their existing terms.

Share Reserve. We have reserved 48,505,935 shares of our common stock for issuance under the 2006 Stock Plan, all of which may be issued as incentive stock options. In general, if options or shares awarded under the 2006 Stock Plan are reacquired or repurchased by us or otherwise forfeited by a 2006 Stock Plan participant, then those shares or option shares will again become available for awards under the 2006 Stock Plan.

Administration. Our board of directors administered the 2006 Stock Plan before this offering, and the compensation committee will administer the 2006 Stock Plan after this offering. Before this offering, our board of directors had, and after this offering, our compensation committee will have, complete discretion to make all decisions relating to our 2006 Stock Plan.

Eligibility. Employees, members of our board of directors who are not employees and consultants are eligible to participate in our 2006 Stock Plan.

Types of Award. Our 2006 Stock Plan provides for the following types of awards:

Options and restricted shares vest at the times determined by our board of directors. Both options and restricted shares generally vest over a four-year period following the date of grant. Options expire not more than 10 years after they are granted but generally expire earlier if the participant’s service terminates earlier.

Options. The exercise price for options granted under the 2006 Stock Plan may not be less than 100% of the fair market value of our common stock on the option grant date. Participants may pay the exercise price of options, or the purchase price of shares, by using cash or cash equivalents. In addition, at the discretion of our board of directors, payment may be made by using:

Restricted Stock. We may grant or sell restricted stock to participants under the 2006 Stock Plan.

Change in Control. In the event we are a party to a merger or consolidation, outstanding options granted under the 2006 Stock Plan will be subject to the terms of the definitive transaction agreement. Such treatment shall include any of the following:

Changes in Capitalization. In the event that there is a specified type of change in the capital structure of our common stock, such as a stock split, reverse stock split or dividend paid in common stock, proportionate adjustments will automatically be made to the kind and maximum number of shares:

Amendments or Termination. Our board of directors may amend or terminate the 2006 Stock Plan at any time. If our board of directors amends the 2006 Stock Plan, it does not need to ask for stockholder approval of the amendment unless the amendment increases the number of shares available for issuance, materially changes the class of persons eligible to receive incentive stock options or is otherwise required by applicable law. The 2006 Stock Plan will continue in effect for ten years from the later of its adoption date or the date of approval of the latest share increase, unless our board of directors decides to terminate the plan earlier.

General. Our board of directors adopted our 2015 Employee Stock Purchase Plan, or our ESPP, in , and our stockholders approved it in . The ESPP will become effective as of the effective date of the registration statement of which this prospectus is a part. Our ESPP is intended to qualify under Section 423 of the Internal Revenue Code.

Share Reserve. We have reserved shares of our common stock for issuance under the ESPP. The number of shares reserved for issuance under the ESPP will automatically be increased on the first business day of each of our fiscal years, commencing in 2016, by a number equal to the smallest of:

The number of shares reserved under the ESPP will automatically be adjusted in the event of a stock split, stock dividend, extraordinary dividend payable in a form other than our common stock in an amount that has a material effect on the price of our common stock or a reverse stock split (including an adjustment to the per-purchase period share limit).

Eligibility. All of our employees are eligible to participate if we employ them for 20 or more hours per week and for more than five months per year. Eligible employees may begin participating in the ESPP at the start of any offering period.

Offering Periods. Each offering period will last a number of months determined by the compensation committee, not to exceed 27 months. A new offering period will begin periodically, as determined by the compensation committee. Offering periods may overlap or may be consecutive. Unless otherwise determined by the compensation committee, two offering periods of six months’ duration will begin in each year on January 1 and July 1. However, our compensation committee has not yet determined when to commence operation of the ESPP, so we currently do not expect an offering period to commence in July 2015.

Amount of Contributions. Our ESPP permits each eligible employee to purchase common stock through payroll deductions. Each employee’s payroll deductions may not exceed 15% of the employee’s cash compensation. Each participant may purchase up to the number of shares determined by the compensation committee on any purchase date, not to exceed shares. The value of the shares purchased in any calendar year may not exceed $25,000. Participants may withdraw their contributions at any time before the date 10 days before stock is purchased.

Purchase Price. The price of each share of common stock purchased under our ESPP will not be less than 85% of the lower of the fair market value per share of common stock on the first day of the applicable offering period or the fair market value per share of common stock on the purchase date.

Other Provisions. Employees may end their participation in the ESPP at any time. Participation ends automatically upon termination of employment with us. If we experience a change in control, our ESPP will end and shares will be purchased with the payroll deductions accumulated to date by participating employees. Our board of directors or our compensation committee may amend or terminate the ESPP at any time. If our board of directors amends the ESPP, it does not need to ask for stockholder approval of the amendment unless the amendment increases the number of shares available for issuance, extends the term of the ESPP or is otherwise required by applicable law. The ESPP will continue in effect for twenty years from its adoption date unless our board of directors decides to terminate the ESPP earlier.

Our board of directors adopted the Management Cash Incentive Plan, or the Bonus Plan, in March 2015 and our stockholders approved it in 2015. The Bonus Plan became effective upon adoption by our board of directors.

General. The Bonus Plan is intended to motivate participants to achieve performance goals through cash incentive awards and is intended to permit awards that meet the requirements of the performance-based compensation exemption from Section 162(m) of the Internal Revenue Code to the extent that it is applicable to us and the Bonus Plan.

Administration. Our compensation committee has the authority to administer and interpret the Bonus Plan, including the authority to determine which employees shall be granted awards, the terms and conditions of awards and achievement of performance goals.

Performance Criteria. To the extent Section 162(m) of the Internal Revenue Code is applicable to us and an award under the Bonus Plan is intended to qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code, our compensation committee establishes the performance goal or goals applicable to that award by the 90th day of the performance period (and no later than the date on which 25% of the performance period has lapsed). To the extent Section 162(m) of the Internal Revenue Code is applicable to us and an award under the Bonus Plan is intended to qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code, the performance criteria will be based on any one of, or combination of, the following: budget performance, buyer acquisition, retention and/or growth, cash flow, cash flow return on investment, comparisons with various stock market indices, costs and expenses (including reduction of both), earnings or earnings per share (including earnings before taxes, earnings before interest and taxes, earnings before interest, taxes and depreciation, or earnings before interest, taxes, depreciation and amortization, including adjusted measures), employee satisfaction and/or retention, free cash flow or free cash flow per share, gross margin, gross profits, headcount, market share, net income (before or after taxes), operating income or EBIT (Earnings before Interest and Taxes) on a GAAP o


Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	x (Do not check if a smaller reporting company)	Smaller reporting company	¨



Title of Each Class of Securities to be Registered	Proposed Maximum Aggregate Offering Price(1)(2)	Amount of Registration Fee
Common Stock, $0.001 par value	$100,000,000	$11,620


	Per Share	Total
Initial public offering price	$	$
Underwriting discount(1)	$	$
Proceeds, before expenses, to Etsy	$	$
Proceeds, before expenses, to the selling stockholders	$	$


	Page
Prospectus Summary		1
Risk Factors		15
Note Regarding Forward-Looking Statements		46
Industry and Market Data		47
Use of Proceeds		48
Dividend Policy		49
Capitalization		50
Dilution		52
Selected Consolidated Financial and Other Data		54
Management’s Discussion and Analysis of Financial Condition and Results of Operations		58
Letter from Chad		91
Business		96
Management		118
Executive Compensation		127
Certain Relationships and Related Person Transactions		142
Principal and Selling Stockholders		147
Description of Capital Stock		150
Shares Available for Future Sale		157
Material U.S. Federal Income Tax Considerations for Non-U.S. Holders of Common Stock		160
Underwriting		164
Legal Matters		170
Experts		170
Where You Can Find More Information		170
Index to Consolidated Financial Statements		F-1


	As of December 31, 2014
	Actual		Pro Forma	Pro Forma as Adjusted(1)
			(unaudited)
	(in thousands, except share and per share data)
Cash and cash equivalents and short-term investments	$	88,843	$	$


Convertible preferred stock:
Preferred stock, $0.001 par value; 21,165,473 shares authorized, 21,124,432 shares issued and outstanding, actual; shares authorized, no shares issued and outstanding, pro forma and pro forma as adjusted	$	80,212	$	$

Stockholders’ equity:
Common stock, $0.001 par value; 240,000,000 shares authorized, 88,361,973 shares issued and outstanding, actual; shares authorized, shares issued and outstanding, pro forma and shares issued and outstanding, pro forma as adjusted		88
Additional paid-in capital		103,311
Accumulated deficit		(32,377)
Accumulated other comprehensive loss		(3,934)

Total capitalization	$	147,300	$	$



Goldman, Sachs & Co.

	Morgan Stanley

		Allen & Company LLC


Term		Definition
Platform		Our platform includes our marketplace, our Seller Services, our technology and our community, both online and offline. The core of our platform is our marketplace, which connects people around the world to make, sell and buy unique goods.

Visit		A visit represents activity from a unique browser or mobile app. A visit ends after 30 minutes of inactivity. A mobile visit is a visit that occurs on a mobile device, such as a tablet or a smartphone. We began tracking mobile visits in 2013.


Assumed initial offering price per share		$
Pro forma net tangible book value per share as of	$
Increase in pro forma net tangible book value per share attributable to investors purchasing shares in this offering	$

Pro forma as adjusted net tangible book value per share after this offering

Dilution per share to investors in this offering		$


	Shares Purchased				Total Consideration				Average Price Per Share
	Number	Percent			Amount	Percent			Average Price Per Share
Existing stockholders				%	$			%	$
New investors

Total			100	%	$		100	%	$


	As of December 31,
	2013		2014
	(in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents and short-term investments	$	54,870	$	88,843
Working capital		57,566		88,540
Total assets		106,159		249,135
Deferred revenue		2,760		3,452
Long-term liabilities		2,725		60,382
Convertible preferred stock		80,212		80,212
Total stockholders’ equity		4,003		67,088


	Year Ended December 31,
	2011			2012			2013			2014
Percent 2011 Active Sellers		100	%		52.6	%		39.3	%		32.3	%
Average GMS per 2011 Active Seller	$	817		$	2,241		$	3,314		$	4,299


	Year Ended December 31,						Change
	2013			2014			$		%
	(in thousands, except percentages)
Revenue:
Marketplace	$	78,544		$	108,732		$	30,188		38.4	%
Percentage of total revenue		62.8	%		55.6	%
Seller Services	$	42,817		$	82,502		$	39,685		92.7	%
Percentage of total revenue		34.2	%		42.2	%
Other	$	3,661		$	4,357		$	696		19.0	%
Percentage of total revenue		2.9	%		2.2	%

Total revenue	$	125,022		$	195,591		$	70,569		56.4	%


	Three Months Ended
	Mar. 31, 2013		June 30, 2013		Sept. 30, 2013		Dec. 31, 2013		Mar. 31, 2014 Restated		June 30, 2014 Restated		Sept. 30, 2014		Dec. 31, 2014
	(in thousands)
Revenue:
Marketplace	$	17,152	$	17,741	$	19,189	$	24,462	$	23,727	$	24,777	$	26,917	$	33,311
Seller Services		8,161		8,768		9,851		16,037		15,833		16,587		19,392		30,690
Other		831		855		917		1,058		976		1,145		1,325		911

Total revenue		26,144		27,364		29,957		41,557		40,536		42,509		47,634		64,912
Cost of revenue		9,581		10,499		11,548		16,151		15,394		17,345		18,115		22,779

Gross profit		16,563		16,865		18,409		25,406		25,142		25,164		29,519		42,133
Operating expenses:
Marketing		3,004		3,223		4,148		7,475		7,468		8,766		8,808		14,613
Product development		6,690		6,754		7,056		7,048		8,042		8,792		10,077		9,723
General and administrative		6,619		7,489		7,905		9,099		9,213		11,400		13,686		17,621

Total operating expenses		16,313		17,466		19,109		23,622		24,723		28,958		32,571		41,957

Income (loss) from operations		250		(601)		(700)		1,784		419		(3,794)		(3,052)		176
Total other (expense) income, net		(159)		(254)		(158)		(104)		(669)		235		(1,144)		(2,431)

Income (loss) before income taxes		91		(855)		(858)		1,680		(250)		(3,559)		(4,196)		(2,255)
(Provision) benefit for income taxes		(408)		1,903		1,939		(4,288)		(213)		408		(2,075)		(3,103)

Net (loss) income	$	(317)	$	1,048	$	1,081	$	(2,608)	$	(463)	$	(3,151)	$	(6,271)	$	(5,358)


	Total		Less than 1 Year		1–3 Years		3–5 Years		More than 5 Years
Capital lease obligations	$	4,903	$	1,755	$	3,148	$	—	$	—
Operating lease obligations		21,044		3,870		2,699		3,523		10,952
Long-term debt		547		—		267		280		—
Interest payments		892		535		357		—		—
Facility financing obligations		90,314		—		9,684		18,858		61,772
Purchase obligations		9,824		5,154		3,734		936		—

Total contractual obligations	$	127,524	$	11,314	$	19,889	$	23,597	$	72,724


Grant Date	Number of Shares Underlying Options Granted		Exercise Price per Share		Estimated Fair Value per Share
January 22, 2013		713,810	$	2.38	$	2.38
February 4, 2013		1,521,851	$	2.38	$	2.38
May 7, 2013		460,384	$	2.79	$	2.79
July 17, 2013		236,465	$	2.79	$	2.79
September 20, 2013		157,938	$	3.01	$	3.01
October 29, 2013		2,263,295	$	3.01	$	3.01
December 11, 2013		798,467	$	3.11	$	3.11
February 19, 2014		2,203,970	$	4.13	$	4.13
March 13, 2014		121,010	$	4.13	$	4.13
April 22, 2014		501,064	$	5.18	$	5.18
July 16, 2014		1,442,401	$	5.23	$	5.23
November 5, 2014		2,132,990	$	6.19	$	6.19
November 12, 2014		12,000	$	6.19	$	6.19
January 30, 2015		2,037,490	$	8.50	$	8.50


Name	Age		Position(s)
Executive Officers:
Chad Dickerson		42	President, Chief Executive Officer and Chairman
Kristina Salen		43	Chief Financial Officer
Jordan Breslow		59	General Counsel and Secretary
Kellan Elliott-McCrea		37	Chief Technology Officer and Chief Architect

Non-Employee Directors:
James W. Breyer		53	Director
M. Michele Burns		57	Director
Jonathan D. Klein		54	Director
Fred Wilson		53	Lead Independent Director


Name	Option Awards ($)(1)			Total ($)
Fred Wilson		—			—
James W. Breyer		—			—
M. Michele Burns		629,537	(2)		629,537
Caterina Fake(3)		—			—
Jonathan D. Klein		—			—
Daniel Rimer(4)		—			—


Role	Annual Cash Payments ($)
Lead Independent Director		15,000
Audit Committee Chairperson		18,000
Audit Committee Member		9,000
Compensation Committee Chairperson		10,000
Compensation Committee Member		5,000
Nominating and Corporate Governance Committee Chairperson		6,000
Nominating and Corporate Governance Committee Member		3,000


Name and Principal Position	Year		Salary ($)		Bonus ($)		Option Awards ($)(1)		Non-equity Incentive Plan Compensation ($)		All Other Compensation ($)			Total ($)
Chad Dickerson		2014		300,000		—		—		247,500		—			547,500
President, Chief Executive Officer and Chairman		2013		300,000		—		—		—		—			300,000
President, Chief Executive Officer and Chairman

Kristina Salen		2014		297,917		—		—		211,750		70,316	(2)		579,983
Chief Financial Officer		2013		251,202		175,000		1,715,430		—		192,333			2,333,965

Jordan Breslow		2014		275,000		—		—		166,375		—			441,375
General Counsel and Secretary		2013		38,616		75,000		1,010,468		—		25,000			1,149,074


	Stock Option Awards
Name	Number of Securities Underlying Unexercised Options Exercisable(#)		Number of Securities Underlying Unexercised Options Unexercisable(#)			Option Exercise Price ($)		Option Expiration Date
Chad Dickerson		600,000		350,000	(1)		1.15		7/28/2021
		1,713,876		1,521,702	(2)		2.38		7/16/2022

Kristina Salen		697,515		824,336	(3)		2.38		2/3/2023

Jordan Breslow		192,345		517,852	(4)		3.11		12/10/2023