The largest art buyer in the world is now…an investing app?

Fintech companies have been taking the startup world by storm for years now, but adding fine art to the mix sets Masterworks apart from most competitors. And as of early October, they’re the first art-startup unicorn.

Masterworks managed to bootstrap its way to profitability, which is an impressive feat in itself. On October 5, 2021, the platform announced that it raised $110 million in a Series A funding at a valuation of more than $1 billion. For reference, popular robo-app Betterment just raised $60 million in a Series F round and is valued at $1.3 billion. This is an app that’s been around since 2008 and has roughly 700,000 users.

On the other hand, Masterworks was just founded in 2017. And while over 200,000 people have signed up for the platform, only about 15,000 have actually invested. Still, with $200 million in assets under management, an expected $400 million in art acquisitions this year, and a projected $1 billion in 2022, Masterworks is on track to be the biggest art buyer in the world. 

What’s more, the average investor on the platform invests a whopping $30,000, and the business model Masterworks employs is ripe for generating profit (which it’s already achieved). The company charges an initial premium of 10% on all new artwork it buys and another 20% of profits when it sells artwork, plus a 1.5% management fee. That said, if you were to buy fine art at auction, the purchase fee alone is typically around 20%. Masterworks investors also don’t have to worry about things like appraisal, restoration, framing, taxes on purchase, transportation, insurance, and storage—once you add those costs into the mix, the fee load on investing in fine art independently can reach up to 45%. As the largest art buyer in the world, Masterworks has the leverage to negotiate lenient payment terms on art sales that often allow it to make payment for artwork only after the company has securitized and sold shares of it. In other words, they can make back the cost of the artwork before they even pay for it.