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The news this morning that e-commerce marketplace Etsy will buy Depop, a startup that provides a second-hand e-commerce marketplace, for more than $1.6 billion may not have made a large impact on the acquiring company’s share price thus far, but it provides a fascinating look into what brands may be willing to pay for access to the Gen Z market.

First, a few details: Per Etsy, the Depop deal is worth “$1.625 billion consisting primarily of cash, subject to certain adjustments for Depop’s working capital, transaction expenses, cash and indebtedness, and certain deferred and unvested equity for Depop management and employees.” So, $1.625 billion, plus or minus. We’ll use that number this morning.

Because Etsy is a public company and the transaction is material, it provided a good deal of information on the acquisition. The key facts that relate to the scale of Depop’s business are as follows:

• 2020 gross platform spend, revenue: “Depop’s 2020 gross merchandise sales (GMS) and revenue were approximately $650 million and $70 million, respectively, each increasing over 100% year-over-year.”
• Historical gross platform spend trend: “Depop’s GMS grew at a compounded annual growth rate of nearly 80% from 2017-2020.”

At $70 million in 2020 revenue, Depop is being valued at a multiple of 23.2x of the previous year’s top line. That’s rich, but not impossibly high for a company that just had a huge pandemic year. (Though it is somewhat notable that Etsy is valuing Depop as if it was a high-growth SaaS business and not a consumer marketplace.)

The category of e-commerce performed well during the pandemic, implying that Depop’s non-pandemic growth rate would have been lower than what it ultimately recorded. How can we tell? The company’s historical GMS spend figure of “nearly 80%” from 2017 to 2020 is inclusive of the 100%+ GMS growth it recorded last year. We can infer, then, that in 2017, 2018 and 2019, GMS at Depop grew at a slower pace, namely one that is under the 80% mark.