1000 Markets is an Etsy rival with backing from PayPal founders

The Founder's Fund, a San Francisco venture firm created by PayPal co-founder Peter Thiel and others, is bankrolling a tiny Seattle Internet startup called 1000 Markets that is trying to transform the way artisan goods are bought and sold online.

There's already some hefty competition in that arena, including Etsy and eBay. But 1000 Markets co-founder and CEO Matthew Trifiro believes there is room to operate against the bigger rivals by creating a more effective way for small merchants to sell jewelry, fabrics, soaps, specialty foods and other goods online.

1000 Markets quietly launched last month and now has about 75 specialized marketplaces where artisans are selling everything from steampunk jewelry to to handmade hats to crafts associated with The Day of The Dead.

Trifiro compares 1000 Markets to the rise of blogging software tools. Just as WordPress and TypePad made it dead simple for anyone to create a blog, Trifiro said 1000 Markets will make it equally easy for small merchants to set up and run e-commerce marketplaces.

"The idea is that anybody could push a button and say: 'create a marketplace.' And suddenly, you've got a marketplace where you have merchants who are listing products and customers who are signing up and you have carts and transactions processing," said Trifiro, a former executive at Wink Communications and Geoworks.

Etsy, which raised $27 million in financing last year, and eBay, with a market value of more than $20 billion, certainly have bigger audiences.

Etsy, the most direct rival, claims more than 250,000 sellers who last year sold $87.5 million worth of products through the site. There are more than 3.6 million products currently listed on Etsy, with a search for silver jewelry returning more than 300,000 results.

But Etsy's vast collection is actually problematic, according to Trifiro. Because there are so many products and merchants, Trifiro says it can be difficult to find what your are looking for. The quality suffers as a result, he said.

In an effort to avoid that problem, Trifiro said that more than half of the merchants who apply to open a shop on 1000 Markets are turned away. The merchants also must build their marketplace in private, and then submit for approval before going live.

"We end up creating an extremely high quality set of products and merchants for building the initial marketplaces," he said. "I challenge you to find a bad product on our site."

Each marketplace sets its own rules on 1000 Markets, with members determining when new new shops are added, how goods are promoted on the home page and other factors.

Because each marketplace is controlled by members of that community, Trifiro said most problems get resolved quickly since it is in everyone's interest to have a functioning selling environment.

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