Your Startup Probably Won't Change the Art World

New stARTups are making bold claims. But can they deliver on their lofty promises?

What about the art world is so tantalizing to nouveau entrepreneurs? Every week, I read yet another new start-up is looking to "revolutionize," "disrupt," and "streamline" the art world.

The storied auction house Christie's recently started an internal venture capital fund to invest in "emerging technologies and fin-tech companies related to the art market."

Something is brewing here…

Is Silicon Valley Saviour Complex coming for the art world? Do any of these start-ups have a chance to establish a long-lasting foothold? Let's start by exploring the reasons why they could:

The Art Market has a shit ton of problems

The goals of any new company should be A) create a kickass product or service AND B) solve a real problem.

Goal A is becoming increasingly accessible, given the tools available to entrepreneurs today. We have the "no-code" platforms that allow anyone with basic computer skills to create applications that can be deployed into a viable product. For those applications that need a bit more human intervention, software engineers are widely available, although increasingly expensive. But that doesn't matter when Venture Capital is still pouring millions into the earliest early-stage companies. Also, we're in the opening innings of the artificial intelligence revolution, and the possibility of creating world-changing tools seems more and more plausible.

Goal B is more elusive.

The art world struggles with a myriad of problems. Significant issues like access, inequality, education, and representation persist and are so difficult to tackle for a start-up.

But there are the mundane and routine annoyances that every art world participant struggles with. These are potentially solvable.

There is probably a better, more reliable, and, most importantly, affordable shipping solution. Same with business tools for galleries and artists, like inventory management and customer relationships. Payments? Marketing? Accounting? Contracts? All theoretically on the table.

These functions find plenty of start-up solutions in industries outside the art world. So, they should work inside. Some have tried and found niche levels of success.

I've heard from gallerists that the inventory management software, Artbase, is quite good. Artbase and peers like Artlogic help galleries manage their inventory, generate invoices, and do many operational things that keep the gallery's lights on. I'll chop this up to a win.

UOVO, a relative newcomer in the Art Shipping space, has significant traction. Based on reports, they are growing rapidly, hiring like crazy, and diversifying their business into different revenue channels. All signs of a thriving company.

Inventory management and shipping have benefited from fresh approaches. Inroads are being made with the other functions mentioned. But…

These marginal and ancillary activities are dwarfed by the real meat and potatoes of the art world: transactions.

Of all the economic activities in the art world, the physical act of buying and selling artworks is the greatest creator of economic value. Particularly the buying and selling of secondary market works of art by blue-chip artists.

Think about it: a market-rate fee for buying or selling on behalf of a client starts at 10% and goes up. When the work of art selling is in the millions or tens of millions of dollars, one can clearly see the huge economics.

In this arena, the tech disruptors have yet to find traction compared to the entrenched auction and gallery competitors.

Artsy, the most visible digital-first marketplace for artworks, has raised over 100m in venture capital since its beginnings in 2009. The company has done an excellent job marketing itself, as it's nearly a household name brand within art circles.

Is it a profitable endeavor? No one knows, but my guess is not.

All of this to say: start-ups have seen varied success (aka failure) in tackling the art market.

Here are a few potential reasons why:

Limited Market Size: Though a $67.8 billion industry per UBS, the art market is relatively small when put into perspective. The art market is roughly the same size as Wedding Services, Fantasy Football, and the Adhesives and Sealants industries. Not the most thrilling peer group.

Further, the yearly growth for the art market is moving at a snail's pace: 3% from 2021 to 2022. It will be a long time before the art market materializes into a mass consumption industry.

Complex Relationships: The art market relies heavily on personal relationships, trust, and reputation. Start-ups, being new entrants, need help to establish the necessary credibility to convince established players, like blue-chip art dealers, to adopt their tech-enabled solutions. After all, we all know that the art world is like a members-only club. And outsiders are the subject of skepticism by default.

Resistance to Change: The art world is known for its traditions and longstanding customs (albeit unregulated and reliant on handshakes), which could make it resistant to technological disruption and innovation. This resistance makes it difficult for start-ups to gain traction or find willing collaborators. The established players have their own way of doing things they've defined over decades to great success. An old mantra comes to my mind: if it ain't broke, don't fix it.

I'd be remiss if I didn't mention the players in the emerging immersive and augmented reality art genre. New ways to view art by the public are being created and heavily invested in. The most visible of these companies is SuperBlue, which, if recent reports of board coups and Succession-esque turmoil are true, hasn't had the smoothest ride in its nascent run. Augmented reality start-ups promised artists a new way to connect with the public. But, as Meta is finding out the hard way, the current offers for augmented and virtual reality just aren't compelling enough for consumers.

There are some marginal ways for disruptors to build better mousetraps for the ancillary activities related to the art market. These tamed, small-scale operations could even do it profitably. But all of this might be window dressing.

So far, the 800-pound gorilla of buying and selling artwork remains unimpressed and unmotivated to change.

The next time Artnet or Artnews releases a puffy profile of the latest art-trepreneur wunderkind promising to “disrupt the art world,” ask yourself:

That’s cool, but what if we solve the problems in climate, healthcare, and education first?