The art sector enjoys over £40 billion in annual revenues, with assets under management worth over £3 trillion – but other than by starting their own collections, it remains difficult for investment professionals and their clients to access this market.
Enter Sferiq, a venture helmed by Ulvi Kasimov, recently recognised by Forbes magazines as one of Russia’s ten most successful venture capitalists. As an investor at the forefront of growth markets, the firm has identified an opportunity to open the art market to investors, by leading the transformation of the sector through new technologies.
The art market is ripe for internet-based disintermediation. Even today, the vast majority of art sales occur privately through specialist dealers, with little in the way of transparency, market data, third party validation, regulation or liquidity, making it difficult for new entrants to join the market and for investors to trade in art the same way they would in other assets.
Only a handful of art-related businesses are listed on the world’s stock exchanges, and of those only Sotheby’s has a market capitalisation in the billions of pounds. This is despite the size of the investment opportunity and the growth of the market, with recent figures revealing that auction houses such as Sotheby’s and Christies (held privately by French luxury goods and art magnate Francois Pinault) reported growth during the first half of 2014 amounting to 29 per cent and 22 per cent respectively.
In response, Sferiq is blazing a trail in digital art technologies, seeking to identify and champion companies using the internet to make the art-world more investor-friendly. As part of these initiatives, GrowthBusiness has partnered with Sferiq to create a new category in the Investor Allstars awards – the Sferiq Award for Digital Innovation in Art.
The accolade will recognise a company or individual in the art industry who has used digital technology or the internet to disrupt and innovate within their field. It will target inventors, entrepreneurs, dealers, financiers and other parties involved in using digital technology in the visual arts, with the accolade ultimately awarded based on the disruptive potential of ideas, product or services, and their revenue growth potential. The award will be presented at Investor Allstars, the yearly evening which celebrates the best in entrepreneurship and investments.
The award will be judged by a distinguished panel on the forefront of art market technologies, including Ben Crawford, founding president of global art world news site artinfo.com, founding CMO of the aggregation site MutualArt.com and currently CEO of AIM-listed technology innovator CentralNic. He will be joined by Adriano Picinati di Torcello, a director at Deloitte Luxembourg specialised in art consulting; and Anders Petterson, managing director of ArtTactic, provider of art market research, analysis and advice for art collectors, art professionals, art institutions and art funds.
For the finalists, the award represents a new level of recognition among international technology investors. For the investment community, the new award creates an opportunity to be exposed to early-stage innovators that have been pre-qualified by experts in the field as potentially disruptive and successful in claiming a share of a £40 billion market.
Investors are likely to pay close attention to this space, as Sferiq’s Kasimov has a proven track record of success with venture fund IQ One, which has long been focused on the technology infrastructure that underpins various industries, whether it is e-commerce or software-as-a-service or art.
As well as its tech investment pedigree, the firm has a proven track record in opportunities around digital initiatives and investment opportunities in the art market.
Kasimov and Sferiq saw an opportunity in the art and Domain Name System (DNS) area and came up with a way to innovate both in a disruptive way, through the creation of a .art Top-Level Domain name, now being launched through the same gTLD programmme of the Internet Corporate for Assigned Names and Numbers (ICANN) which has recently seen the launch of .london.
Multiple other companies also applied for the .art gTLD, in competition with Sferiq’s special purpose vehicle company UKCI. Which entity is successful in winning the rights will be determined by an ICANN-run auction in 2015.
As further evidence that the time has come for investors and their advisors to look seriously as the increasing overlap between the art and digital worlds, it was recently announced that Sotheby’s and eBay were forming a partnership whereby the 145 million users of the online bidding site will gain access to Sotheby’s auctions. Going forward, the duo will create a web platform allowing viewers to bid on and buy art. This is all on the back of news that shows the number of lots purchased online through Sotheby’s grew by 36 per cent in 2013.
While there is no doubt that the Jeff Koons and Francis Bacon pieces will continue to attract their high prices in the auction houses of Sotheby’s or Christie’s, new entrants using the internet will offer opportunities to new and emerging artists, dealers, collectors and entrepreneurs the world over, as well as the new breed of investors backing them.