Blockchain-Based Fractional Ownership Used To Sell High-End Art (#GotBitcoin)
A Korean start-up will be fractionally selling two works by David Hockney in September. Blockchain-Based Fractional Ownership Used To Sell High-End Art (#GotBitcoin)
Gangnam, Seoul-based Artbloc this month acquired Focus Moving, 2018 and Pictured Gathering with Mirror, 2018. It will be issuing 8,500 tokens for the former and 5,000 for the latter and offering the tokens during an event to be held at Lounge K in Gangnam on September 19.
Each token will be priced at 9,900 won ($8.18).
The tokens will be recorded utilizing ethereum and will be tradeable privately or via a platform for exchange to be set up in Hong Kong early next year. They will not be listed on crypto exchanges as each work will have its own token.
Jun Kim, CEO of Artbloc, says that the idea is to bring high-end works to regular investors and customers. With galleries and auction houses serving the rich and with the middle class only able to buy cheaper works, he saw an opening.
“Artbloc will sell high-end art to the public,” Kim said.
He keyed in on Hockney because the artist is extremely popular in South Korea. An exhibition was held from March through August this year at the Seoul Museum of Art. It was a popular show and well covered in the local press, so much so that Hockney is now almost a household name.
His Portrait of an Artist (Pool with Two Figures) sold for $90 million in 2018, the most ever for a painting by a living artist and 5,000 times the original price.
“It was so hot,” says Kim of the exhibition in Seoul. “We can sell factional ownership to normal people.”
Kim would not disclose the price he paid for the first two paintings he acquired, but he did say that he was in the market for more works. He is especially interested in paintings by Roy Lichtenstein.
“This is just the pilot,” he says. “It’s just the first step.”
Fractionalization Of Finance (#GotBitcoin)
A hot trend within the fintech world in 2021 was what is known as fractionalization. All sorts of startups are allowing investors of all kinds to invest in asset classes that once would have been inaccessible.
Want to put money into farmland, sports memorabilia, fine art or music royalties? No problem: Blockchain technologies give startups the tools to make that less risky and more liquid.
Performing artists like rapper Nas are turning to fractional ownership to sell royalty interests in their songs via Royal, a music marketplace, while Alt offers investors a way to own and trade tokens that represent an interest in collectible sports cards and other memorabilia.
Both saw big jumps in valuation last year: Royal’s first funding round last summer raised $16 million in seed capital, while Alt launched with $31 million in startup funding.
The enthusiasm for these models among early-stage backers is such that both companies announced new funding rounds and big jumps in valuation only months later. (Royal pulled in $55 million in November; Alt scooped up $75 million in December.)
Indeed, many venture-backed payments companies that haven’t yet followed Affirm to the IPO market still see eager interest from investors in new private funding rounds.
Bolt, a San Francisco company offering one-click checkout, appeals to shoppers by promising fraud protection, and to retailers like Brooks Brothers and Forever 21 by facilitating the process of placing orders.
The company is now worth an estimated 30 times what it was only 30 months ago, according to the details of its just-announced series E funding round.
Deloitte’s Mr. Uhl points to other fintech areas that are attracting funding. Among them: the back office.
A company called Lithic, for instance, tackles back-office problems that historically have made it time-consuming and costly for developers to launch debit and credit-card programs. It closed on two rounds of new funding last year as interest in its technology grew. (Investors include Mr. Nof’s Tusk Ventures.)
Another emerging hot spot might be the financial-advisory business. While Robinhood Markets has shaken up the trading universe, services offered by financial planners and other advisers tend to depend more on personal relationships than on, say, apps.
But that, too, is changing, says Samuel Deane, an Atlanta-based financial adviser and co-founder of WealthTech Ventures.
“There are so many new tools out there that may help advisers keep their clients on track,” Mr. Deane says. For years, he has beta-tested tools being developed for advisers.
The logical next step, he says, is to put money into the best ones. Some address behavioral finance concerns—for instance, prodding clients to review asset allocation in the wake of market movements.
Others, Mr. Deane says, offer new and sophisticated ways for advisers to factor in tax considerations when providing investment advice or discussing the way a client’s compensation package is structured.
Mr. Deane says he is evaluating a company that would use blockchain technology to facilitate contracts and billing between advisers and clients.
As regulators establish new rules and guidelines (a year-old special office at the Securities and Exchange Commission, known as FinHub, is one group working on just that), market watchers expect last year’s explosive growth in investing to continue.
Mr. Uhl agrees, saying, “An incredible amount has happened in a very short period of time, but I expect we’ll see fresh waves of activity as technological evolution keeps pace.”
With so many startup investors now being drawn to fintech companies, and as that enthusiasm filters through to the public market, there’s always the risk that some businesses will disappoint or that investors, in their rush to grab a share of the latest trend, won’t do adequate due diligence. “But,” says Mr. Deane, “I think there are still so many opportunities out there that we won’t see a fintech bubble emerge for a while.”
Other Areas Of Fintech Sectors That Are Attracting Startup Funding
At The Top: Consumer Payments.
To those watching the funding of new financial-technology companies in 2021, the headlines were dramatic.
Funding for fintech startups soared to $131.5 billion last year from $49 billion in 2020, according to CB Insights. In 2020, investors created 27 fintech “unicorns,” or private companies with a value north of $1 billion; in 2021, the number of new unicorns reached 157.
The number of exits, whether in the shape of an IPO or a merger or acquisition by a special-purpose vehicle, jumped 73%—giving early investors in those businesses fresh capital to redeploy in new fintech startups.
The Bank for International Settlements, meanwhile, calculates that in the decade between 2010 and 2020, fintech companies attracted more than $1 trillion in new backing.
“We are in the first innings of a revolution,” says Jordan Nof, co-founder and managing partner of Tusk Venture Partners, a New York-based investment firm that is focused on new fintech opportunities. “The best deals I’ve ever done in my life are the ones that are solving problems you never knew you had.”
One reason for Mr. Nof’s optimism is that many new business concepts have encouraged engineers in financial services to look for entrepreneurial opportunities, finding problems or inefficiencies in the ways their segment of the market operates. “Now, they are getting the backing to solve really big problems,” he says.
So far, a handful of business categories continue to capture the lion’s share of fintech funding. One of the most visible has been consumer payments, where companies like Affirm Holdings, Block (the parent company of Square) and Klarna are shaking up the retail landscape. Want to buy a Peloton bike or the latest Apple device?
These days, buy-now-pay-later businesses are teaming up with established brands to help shoppers spread payments over a few months. This model appeals to consumers because it is less costly and more transparent than store credit cards; businesses like the fact that it fuels sales growth.
“This area—focusing on retail investors and retail consumers—produced clear winners last year,” says Joshua Uhl, New York-based head of the fintech practice for Deloitte. “There is more evolution and upside to be had in these segments.”
Kim has incorporated an entity in Hong Kong—Artbloc Marketplace—but he says that the works themselves will be kept and displayed by galleries in Seoul so that the public and the fractional owners can view them.
He mentioned Platform L in Gangnam and ART 247 in Itaewon as possible locations for display.
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