At In4Art we developed five building blocks that influence the valuation and future potential of artists. The building blocks provide the outline of our reasoning and are inspired on business valuation analytics and start-up growth theories. It provides insight in career development opportunities.
Building Block 1: Solid Base
Artists leaving art academy are much like start-ups. They have started to present themselves to the outside world but are, in fact, still in the process of developing their ‘solid base’: the style, vision and consequently work they want to create. In this phase, the artist must build up credibility meaning a focus on distinguishing oneself from peers in the direct surroundings who are in the same development stage. An artist’s credibility is build up by being selected for post academic education and residencies. Start-ups build up credibility by showing dedication, persistence and the ability to form a potential winning team. Main investors in this period are Friends, Fools and Family.
Building Block 2: Signalling
At a certain point, it is time for the start-up to reach out to potential angel investors or early stage seed investors. They are still in the process of setting up the company. Little is formalised until the first investor has stepped in. Their success depends on a few moments, where they can pitch their business to reach the right audience. Think of pitch events or network gatherings.
For artists, this period is very similar. The pitching phase for artists is, as it is for start-ups, relatively short. During this period, it is all about signalling: getting attention on different platforms. This leads to putting the artist in the spotlights by actors (media, ambassadors, etc.) not having a direct benefit. Awards are essential in this period, as are online and offline visibility during exhibitions, fairs and being featured in articles or events. It is about reaching out to those who could become stakeholders soon. The focus lies on reaching the (national) ecosystem for supporting talents.
Building Block 3: Acceleration
Here the artist should be accelerating and growing fast. In this phase, the seeds planted in building block 2 must be harvested. All is aimed at getting stakeholders on board. For businesses, the start-up phase is over and profitability should be growing, preferably exponentially. The angels and seed capital investors have put their weight behind the company and are accelerating towards the moment to hand over to series capital investors. For artists, the angels and seed capital investors are their first gallerist or representative who have made sure their name is recurring within the home market.
Within this phase, the artist should make the jump from the national reach towards international market development. Getting the right representation and access to network and international fairs is crucial to completing this building block. For contemporary art, finding stable representation in the main markets will provide the opportunity to get access to the ecosystem of major private collectors and institutions. For the young company, this phase is also about penetrating international markets and holding ground to prove the stability of growth.
Building Block 4: Closing the Gap
The art market is a market with a large information gap. This means that it is hard, if not impossible, to determine value objectively. Within such a market it is essential for artists to close the information gap around their practice leading up to a broadly supported agreeance on the relevance and quality of one’s artistic practice. This way the risk is reduced and stakeholders get confidence, that their investment will be a wise investment on the long-term objective. Closing this gap can be done by building a strong exhibition performance track record consisting of multiple consecutive years, obtaining regular press attention, being the subject of professional publications and becoming part of so called ‘branded’ collections. These branded collections are considered opinion leading and have a high influence on the actions of many other investors in the art market. In business practice, this stage is only relevant high information uncertainty sectors (for instance business services).
Building Block 5: Market Leadership
The last and final building block will lead up to the top of the rankings. Market leadership is mostly measured through turnover. Companies have the option to list on the stock exchange to generate capital so they can invest in strengthening their positions in undeveloped markets.
Artists growing into building block 5 are equally ranked based on sales performance. Important pieces leaving the studio are those considered to become relevant in art historical terms. Ideally these pieces are ‘placed’ within major institutional collections. All the other pieces are used to lower the uncertainty in decision making for investors. This is done by bringing the works to auction (like public listing) once demand has outgrown supply and gradually pushing up the price levels making the artists increasingly attractive for regular investors.
Career Development Canvas
These building blocks form the basis for the career development approach at In4Art. We use the In4Art Career Development Canvas during our masterclasses and coaching sessions to strategically discuss with artists where they are and what will be their next step.
This is a story on talent development, on the importance of focus and on getting the timing right for internationalisation. It highlights the growth cycle of an artist’s career, while showing various decision moments for investment.
An extra article draws on the parallels between company valuation and artist’s valuation, the parallels between the worlds of business and art. This appeared as ” Investing with a Radar” , based on an In4Art Features developed for a strategy meeting of MBCF Corporate Finance on the 23rd of March 2017 in St. Anton, Austria.