Strange Success

How 4 guys created a $56 million website for women

John Levisay has an MBA from the University of Michigan, and he used to work at GE and Ebay. He talks the talk, peppering his conversation with phrases like "asynchronous consumption," "delivery modality" and "cross functional matrix."

He says such things while sitting in a room surrounded by skeins of brightly colored yarn and samples of quilting fabric. It's as if Martha Stewart has taken up with IBM's Watson.

How did this happen? "It's a long story," he laughed.

Levisay is co-founder and CEO of Craftsy, a website of more than 1,300 well-produced online classes that teach people a variety of crafts, from quilting to cooking, knitting to photography. Customers pay on average $20 a class, and 80 percent of Craftsy "members" are women.

The four Craftsy founders: Todd Tobin- CTO, Bret Hanna- VP of Engineering, Josh Scott, and CEO John Levisay.
Source: Craftsy
The four Craftsy founders: Todd Tobin- CTO, Bret Hanna- VP of Engineering, Josh Scott, and CEO John Levisay.

Meanwhile, all four founders of the company are men, and it's not clear if any of them know the difference between a knit and a purl.

Besides Levisay, there is co-founder and former COO Josh Scott, plus Chief Technology Officer Todd Tobin, and VP of Engineering Bret Hanna. All four founders used to work at home improvement site ServiceMagic (now HomeAdvisor).

The site they've created goes beyond Pinterest because it actually teaches you how to make things, and with five professional production studios, Craftsy classes are better than most of the how-to videos on YouTube.

How Craftsy came to be

Quilting is a $3 billion industry in the U.S.
Jeniece Pettitt | CNBC
Quilting is a $3 billion industry in the U.S.

Levisay learned at Ebay that "niches" can be huge, and he and his partners were looking to start something new. They saw a void in online education. Crafts became their focus after Levisay received a quilt from his aunt.

"These are not Play-Doh or macaroni art type hobbies, they're highly skilled," he said. They soon came to realize that women who make things are an underserved community online. "The average investor might not know that the quilting industry is over a $3 billion domestic industry."

However, raising money from venture capitalists was hard. "We ran into this with some of our early meetings with investors," Levisay said. "They asked us flat out, 'What are you going to do for men?' My answer was, 'Well, we'll see, but right now we're in categories that address over 50 percent of the population and a demographic that controls 80 percent of the internet wallet.'"

The CEO and co-founder of Craftsy, John Levisay, was inspired to start Craftsy after he received a quilt from his aunt.
Jeniece Pettitt | CNBC
The CEO and co-founder of Craftsy, John Levisay, was inspired to start Craftsy after he received a quilt from his aunt.

They initially raised $1 million. "We started with five of us in a room and five laptops, and the engineers began building the site experience." Levisay said the rest of the team then started figuring out how to produce content.

During the first full year of operation in 2011, Craftsy brought in $6 million in sales. Last year that jumped to $56 million.

"We sell over 4,000 classes a day," the CEO said. "We've got a little over 10 million registered users from 180 different countries."

A behind-the-scenes look at a vinyl decal making course.
Jeniece Pettitt | CNBC
A behind-the-scenes look at a vinyl decal making course.

Quilting classes became an early hit, and Levisay remembers flying to the International Quilt Festival in Houston sitting next to a woman who had taken 135 classes on his site. "My instinct was just to lean over in the plane and give her a big hug, but that could have been deemed inappropriate."

Craftsy is also now selling about 2,000 supply kits daily to provide all the materials needed to complete certain classes. "Our customers, our 'members' as we call them, kept asking for supplies," he said.

After the initial reluctance to invest, Craftsy has since raised over $100 million in funding, according to Crunchbase. "So far, all of our investors have been men," Levisay said. When asked what the long-term plan is for the company — sell it, go public, stay private — the CEO said it's too soon. "Build a great company and those questions will answer themselves."

Craftsy videos are more highly produced than a typical "How To” video on YouTube.
Jeniece Pettitt | CNBC
Craftsy videos are more highly produced than a typical "How To” video on YouTube.

The company is also feeling new pressure to create videos in other languages, after it became apparent that 30 percent of revenues are coming from overseas. Levisay has put the brakes on that for now. "We still haven't scratched the surface domestically in a lot of our categories. Focus on that."

As for his own passions, Levisay said he and his daughter are starting to get into cake decorating, and he personally would like to see Craftsy provide music classes. "I would love to be able to take guitar lessons from home."

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Correction: This story has been updated to reflect that Josh Scott is a former COO and that all of the founders previously worked for the website ServiceMagic, now called HomeAdvisor.