The first time Josh Silverman addressed the staff of Etsy as their newly installed chief executive, he tried to connect with a work force known for its diversity, idealism and sincerity.
"Hello," he said. "My name is Josh. I identify as male. My preferred pronouns are 'him' and 'he.' Most people just call me Josh."
It was May 3, and Mr. Silverman was speaking to a roomful of traumatized employees. The day before, Etsy had fired 80 people, the first big layoffs at the online marketplace for handmade and vintage arts and crafts. Among those ousted was Etsy's beloved chief executive of six years, Chad Dickerson.
Now Mr. Silverman — an Etsy board member but an unknown to most employees — stood in the Etsytorium, trying to win over a hostile crowd. His earnest introduction was an olive branch of sorts, an effort to signal that he was attuned to Etsy's vibrant gay and transgender community, and would be respectful of the company's distinctive culture. But to many in attendance, his remarks came off as tone deaf, and his inability to read the room foreshadowed sweeping changes that would soon transform Etsy.
The drama began last November, when Mr. Silverman joined the Etsy board and began asking tough questions of management. Soon after that, an activist investor took a stake in Etsy and called for the sale of the company. Then powerful private equity firms began buying shares, stoking fears of a takeover. The board was under pressure, and in early May abruptly fired Mr. Dickerson and installed Mr. Silverman.
On the same day as the chief executive changeover, the company announced its first layoffs. Within weeks of assuming control, Mr. Silverman shut down several projects that had been in the works for months. Not long after that, he fired another 140 employees.
It was a dizzying series of events at a company that has long held itself up as a paragon of righteous business practices. Etsy's founders believed its business model — helping mostly female entrepreneurs make a living online — was inherently just. Employees shared their emotions freely, often crying at the office. Perks included generous paid parental leave, free organic food and a pet-friendly workplace. Etsy was certified as a B Corp by a nonprofit called B Lab, denoting its particularly high social and environmental standards.
But once Etsy went public in 2015, it was evaluated just like any other company traded on the stock market. By late last year, expenses were growing fast. And even as the company reported $88 million in revenues during the third quarter, it posted a net loss of $2.5 million. After a few quarters of tepid results, investors grew impatient and a classic clash of corporate governance came spilling into view — how would a company like Etsy balance the short-term demands of its shareholders with its high-minded long-term mission?
By some important metrics, Etsy appears to be improving under Mr. Silverman's leadership. Revenues are up, as are "gross merchandise sales" — the total value of goods being sold on Etsy. The company's stock has risen about 50 percent in the six months since he took over.
The Times invited Etsy sellers to share their experiences. Hundreds replied; here are selected responses.
"I've seen Etsy through all these changes, and for the first time, I'm worried."— Abby Glassenberg
By other measures, however, Etsy is barely recognizable. The "Values-Aligned Business" team, which oversaw the company's social and environmental efforts, was dismantled. A new focus on profitability has sapped many employees of their enthusiasm. A workplace that once encouraged workers to express their feelings has clammed up. Etsy is no longer a B Corp.
Today, as Mr. Silverman continues to push for change and investors keep close watch on the stock, what's most frustrating to some close observers of the company is that Etsy seems to have given up so much to gain so little.
"Etsy had the potential to be one of the truly great ones," said Matt Stinchcomb, an early employee who now runs the Good Work Institute,which was originally an Etsy charitable foundation before being spun off last year. "But it looks like they are cutting anything that's not essential to the business. This is a cautionary tale of capitalism."
Etsy was founded in 2005 by a group of friends including Robert Kalin, an amateur furniture maker who was looking for a better way to sell his goods online. To explain the power of Etsy's community of buyers and sellers, Mr. Kalin often read aloud from a children's book, Swimmy, which is about a school of fish finding strength in numbers. Mr. Kalin became the chief executive, and his sensitive affect set the tone for the company culture.
Makers and crafts enthusiasts flocked to the site, grateful that there was somewhere besides eBay and Amazon where they could buy and sell jewelry, furniture and clothing online. Abby Glassenberg was one of the site's first sellers, using it to find a market for her handmade stuffed animals, and has chronicled Etsy over the years with her popular blog and podcast. "At this point it was really hard to sell online," she said. "Etsy was a godsend."
As Etsy grew, it eschewed traditional corporate customs in favor of a more freewheeling approach. Building consensus was more important than moving fast. Employees believed Etsy could be equally beneficial to buyers, sellers, staff and the planet. The idealism was infectious, and many people turned down higher salaries from other companies to work for Etsy.
Yet for all its efforts to stand apart, Etsy followed the established playbook when it came to financing its growth. Venture capitalists poured some $85 million into the company, making a takeover or initial public offering all but inevitable.
In 2011, the board decided to replace Mr. Kalin with Mr. Dickerson, who was then the chief technology officer. As C.E.O., Mr. Dickerson oversaw dramatic growth. When he took Etsy public in 2015, the company had 1.4 million active sellers, nearly 20 million buyers and had gross merchandise sales of $2 billion a year.
True to form, Etsy found ways to make its initial public offering inclusive. It marketed shares to small investors and Etsy sellers and tried to concentrate shares in a smaller than usual number of institutional holders. Besides upholding the company's egalitarian ethos, the effort had a strategic rationale. The hope was that such a shareholder base might insulate Etsy from some of the short-term pressures of the stock market.
It didn't work. In the first nine months after the offering, the stock fell 75 percent. Etsy was still spending heavily on growth and marketing, and while revenues were up in early quarters, the company was unprofitable. Insiders were selling shares, creating more supply than demand for the stock. It didn't help that Amazon launched a competing vertical, Handmade at Amazon.
Yet even as Etsy grew to number more than 1,000 staffers, the company's unorthodox culture survived. Mr. Dickerson held weekly "Office Hours," when any employee could ask him about anything, and spoke openly about his doubts, admitting when he didn't know the answer to a question.
Etsy became a B Corp in 2012, completing a certification process that put the company on par with Patagonia and Ben & Jerry's in terms of social and environmental bona fides. Meditation and yoga classes were offered during the workday. Companywide meetings, known as "Y'all Hands," featured musical performances by employees. New mothers and fathers got six months of fully paid parental leave. The company moved into an old Jehovah's Witness building in the Dumbo neighborhood of Brooklyn, giving it an eco-friendly face-lift. Men and women shared bathrooms, which were adorned with signs that read "we believe that gender is not binary."
The emotional, individualistic culture had its drawbacks. The emphasis on go-it-alone craftsmanship meant Etsy managed its own data centers, instead of using more efficient options like Amazon Web Services or Google Cloud. With everyone empowered to express themselves, there was a lot of sharing going on. Inboxes were stuffed with unnecessary emails, which dragged on productivity.