Dragon Innovation

Grand St. aims to become 'Etsy for electronics' with new marketplace

February 19, 2014: 9:36 AM ET

Gadgets store expands to offer pre-orders, beta testing, and indie electronics.

A telepresence robot from DoubleRobot, available on Grand St. for $2,499

A telepresence robot from DoubleRobot, available on Grand St. for $2,499

FORTUNE -- Amanda Peyton estimates there are tens of thousands of independent hardware startups out there, making cool new consumer electronics and gadgets that can't be found in stores. She calls this burgeoning little sub-industry "creative electronics." It includes everything from Everpurse, the bag that charges your phone, or "smart" dog collars, to modular robotics kits and hackable alarm clocks. Notably, it does not include TVs or phones, the two big commodity items of the electronics world.

That makes sense: There are plenty of places to buy phones and TVs. For everything else, there is Grand St. The New York-based company, co-founded by Peyton, launched its e-commerce site last July, offering a handful of highly curated new products each week. The company accumulated 200,000 sign-ups. Revenue crossed the million-dollar mark after just six months in business, with 40% of sales coming from repeat buyers.

Now, Grand St. is expanding to be more than a home for interesting electronics. To do so, it is launching Marketplace, which is exactly that -- a marketplace.

In this way, Grand St. becomes a bit of an Etsy for electronics. Indie designers can use Marketplace to sell their goods, and in turn, Grand St. will be aligned with the indie hardware movement just like Etsy with the crafting and maker movement.

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Grand St.'s Marketplace will have a few key features. Companies with consumer-ready products that are functional and ready to sell can list their items in Grand St.'s store. The companies will handle the fulfillment, and Grand St. will take an 8% cut of any sales. Companies with products that aren't quite ready to ship can list their items for pre-order up to six months in advance. All pre-order products must be funded and have proof that manufacturing has begun. (Peyton says the first batch of pre-order companies is limited to those who have previously been crowdfunded to avoid bad actors and long wait times.) To compete with Kickstarter and other sites that offer pre-ordering as a feature, Grand St. is not charging a fee for these sales. Lastly, companies with hardware that's available but seeking customer feedback can list products under "Beta," where they send products to customers in exchange for feedback.

The marketplace will be curated and vetted, similar to Grand St.'s own store, based on creativity, reliability, user experience, design, and the "delight factor." Marketplace launches with 150 products available, like solid wood speakers for $799.

Until recently, consumer electronics hasn't had much of an indie market. It's been too expensive for a small three-person startup to create a prototype, prove out its demand, market it, get it placed in stores, and then manufacture and ship it in mass quantities.

That is, until Kickstarter flipped the whole industry on its head. Crowdfunding can now solve most of those issues, and where Kickstarter leaves off, other hardware-focused groups like Dragon Innovation and HWTrek have picked up. Besides, the costs of prototyping gadgets have fallen dramatically for indie hardware hackers and designers. Those two phenomenons have led to a whole movement around independent hardware.

Solo actors like Chris Johnson, a former postal worker who started a simple Shopify store called BiteMyApple.co to sell Apple accessories he found on Kickstarter, have prospered. Last year Johnson was on track to do half a million dollars in sales working from a Manhattan apartment.

Likewise, e-commerce site Anvil has a dedicated marketplace for electronics that it calls an "App Store for hardware."

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With its marketplace, Grand St. hopes to foster community in the indie hardware world while also dramatically increasing the number of items it carries in its store. Peyton says the marketplace has been part of the plan since day one, but Grand St. couldn't start a marketplace without a dedicated audience of customers. Peyton says Grand St.'s curated goods will continue to play a role, but the marketplace is a much bigger potential business and will have a bigger impact on the hardware ecosystem. (This should also be music to the ears of Grand St.'s investors, First Round Capital, Collaborative Fund, Betaworks, and David Tisch.)

Meanwhile, Grand St. will focus on educating consumers about the burgeoning world of indie electronics. The biggest challenge most indie hardware companies face is the confusion gap, Peyton says. "For example, 'What does it mean to have sensors as a part of your life, and why would you want to?'" she says. "Getting consumers to understand what something does or why they need it (is a challenge). When you have this explosion of new products in the market, you have that process over and over again."

Peyton welcomes the Etsy comparison, because she essentially wants to do the same thing for electronics. "DIY has always been a well-known category, but (Etsy) has really, really defined the category," she says. "It's something we certainly aspire to -- take this nascent category and show people this is not just a bunch of niche products, but that this is the future of electronics."

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