Etsy seller snapcrafty is swamped with orders Etsy Blog Etsy, the online marketplace for small sellers of handmade goods, just raised $40 million.

That new funding values Etsy at $688 million, according to Justin Byers at VC Experts.

In its last round of funding, $20 million in August 2010, Etsy was worth just under $300 million.

So Etsy has more than doubled its valuation in 21 months.

How did it do that?

It's beating the market. According to ChannelAdvisor CEO Scot Wingo, a longtime observer of online marketplaces, the e-commerce market as a whole is growing at 18 percent. eBay's growth is stuck there. Amazon.com is growing at 34 percent. Etsy's much smaller, but it grew gross merchandise sales—the volume its sellers moved through its marketplace—by 67 percent last year. In December, that rate ticked up to 70 percent, the first time the company saw a month-over-month improvement in growth. (Normally, you'd expect the percentage growth rate drops as sales grow.)