Can a major auction house also become a force in venture capital? The leap from decorative baubles to tech startups may seem like a stretch, but that depends on how you define Christie’s core business. Are they an art purveyor or risk manager?
Christie’s announced this month that it was moving into venture capital with the launch of Christie’s Ventures. The idea is to back tech startups that are related to the art business, loosely defined. Its first investment is LayerZero Labs, a Canadian company that helps different blockchains communicate to each other. The angle, apparently, is to figure out how buyers can interact with the auction house efficiently when purchasing that $20 million non-fungible token or $45 million masterpiece painting.
Art tech is a general term, reaching beyond the digitalization of art collections. It may include authentication technologies, approaches to art creation, or ways to monetize these illiquid assets. Although not rigidly quantified, the field is likely a smaller, nascent cousin to other technology groupings, such as edtech or travel tech.
Christie’s did not announce the size of their venture-capital war chest at this time, in part because they probably have yet to complete a shopping expedition for limited partners. We suspect there will be a waiting list, given the luminous standing of most of their auction, private-sale, and real-estate clients. Christie’s relationship officers have an embarrassment of riches when it comes to lead generation.
Among startups, If the average pre-money valuation by seed round is somewhere around $6-to-$8 million based on current market upheaval, then it will not take a lot of cash to have a material impact on the fast-evolving art-tech industry. Christie’s may quickly discover that it needs to go farther afield to align its capital heft with sensible opportunities. Hypothetically, a portfolio of 20 seed-round companies with a 40% ownership stake would require near $60 million. Christie’s could have funded this effort just from the premium on 2017 sale of Salvator Mundi, the most expensive painting ever sold at auction.
With the non-fungible token business collapsing, one must wonder what Christie’s is thinking. They just announced that their NFT sales totaled some $5 million in the first half of 2022, down from $93 million in the same period a year ago. Venture capital, though, is a long game; investors were spoiled with fast exits during the recent cycle. Certainly, the firm understands that their business is driven by the ebb-and-flow of economic trends. Christie’s was founded in 1766.
Between 1973-1998, Christie’s was a publicly-listed enterprise. That experience did not serve the company well because it limited their ability to act confidentially, while being subject to reporting pressures. Christie’s is now owned by French billionaire François-Henri Pinault, both a deal maker and art connoisseur. His holding company Groupe Artémis donated some $113 million to help restore Notre Dame after the catastrophic fire in 2019. ■
Our Vantage Point: Multinationals are well-suited to exploit niche venture opportunities. Their core businesses afford deep pockets at a time when traditional venture-capital funds are recoiling from their boom years.
Learn more at The Art Newspaper
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