Masterworks, a NYC-based tech startup that lets users make fractional investments in fine art, announced this week that it raised $110 million in fresh funding. Left Lane Capital led the Series A, with participation from Tru Arrow Partners and others.
The round brings the four-year-old company’s pre-money valuation to more than $1 billion, signaling the massive growth potential of the burgeoning alternative investment space.
Indeed, alternative assets have become a busy business in the last couple of years as more folks seek out money-making opportunities outside of the traditional public markets, and investors have taken notice. For instance, Rally, a platform that lets users buy fractional shares of everything from the Declaration of Independence to a $350,000 lunar meteorite, scored a $30 million investment led by Accel last spring. Soon after, Yieldstreet, a similar startup, closed on a $100 million Series C.
And, of course, the flavor of the month right now is NFTs — non-fungible tokens or pieces of code that live on the blockchain and act as sort of certificates of authenticity for digital and physical valuables. Everyone from Visa to Lil Nas X has gotten into the NFT game.
Meanwhile, Masterworks occupies a more traditional segment — fine art — touting itself as the only art investing company of its kind. The members-only platform allows users to buy and sell shares in “blue-chip” works of art by iconic artists like Banksy and Picasso, which Masterworks has already bought up and securitized with the SEC. The company then holds onto any given piece for three to ten years, during which time people can trade its shares, and then it sells it.
Up until recently art collecting, trading and selling was largely reserved for the mega-rich. These are the kind of people who could afford to blow millions of dollars on a piece only to sell or trade it soon after. But, Masterworks’ model and its use of fractional shares makes the practice more accessible, says Glenn Fuhrman, a co-founder of Tru Arrow Partners and a prominent art collector.
“[Masterworks has created] a scalable online model that, for the first time, gives any investor the opportunity to invest in a major artwork,” he said in a statement. “We believe this model unlocks significant unmet demand, allowing access to art as an asset class for all investors.”
Founder and CEO Scott Lynn said in a statement that art is among the largest asset classes remaining that has never been securitized (converted into marketable securities), claiming that there are more than 9,000 firms that help investors allocate to venture and private equity, but none other than Masterworks that enables fractional investments in art. This has presented a golden opportunity for Left Lane Capital and the other round participants to get in on what is projected to be a very lucrative space.
“While many of our peers in the venture capital community have deployed capital into other alternative investment spaces — ranging from sports memorabilia, Pokemon cards, vintage sneakers and the like — we were keen to pursue an investment into a company playing in an asset class that was fundamentally much larger, more unique, and with proven appreciation rates over decades,” Left Lane founder and managing partner Harley Miller said in a statement. “Masterworks is democratizing an asset class that is an order of magnitude larger than all of the aforementioned combined, and has a meaningful head start building a framework that can potentially raise billions of dollars a year in capital.”
Indeed, the freshly minted unicorn says it is profitable and, up until this latest funding round, it was entirely bootstrapped. And Lynn still seems to think there’s a lot of runway ahead.
“Despite our strong traction, Masterworks is still in the very early innings of building out a seminal company seeking to provide outperforming and non-correlated art investment products to all types of investors,” he said in a statement.
Now, the company will use this fresh capital to accelerate its recent growth, with a potential global expansion on the horizon.
