Building ArtTech Startups: ARTERNAL

TechvangArt in dialogue with Sean Grean, CEO & Founder of ARTERNAL.

Building a startup is hard, but to ‘dare’ building in the ArtTech field is twice as difficult. Just a simple look at the market and anyone can notice that there are not that many startups. Artsy is always given as an example.
So, why is it so difficult
Why does the contemporary Fine Art Market valued at almost $50 billion continue to stay away from technology, innovation and remain locked in the traditional and ‘old-ways’?
Hard to answer this question, but what is clear is that the fine art market stayed comfortable with the mantra “in our market this is how it’s done”. And that would mean: touring art fairs, building 1:1 relations, lots of personal talks, keeping a well-guarded closed white-male environment, and being opaque about its business.
So, when we came across ARTERNAL, we thought that it is a MUST to get behind the scene and find out all about the ‘ups and downs’ of an ArtTech startup.
Discussing with Sean Green, CEO and Founder, we realised that the story is even more adventurous than we first thought, reflecting all the difficulties of entering the art market. But it also contains valuable lessons for any startup founder about hard beginnings, pivoting multiple times, the importance to get right the pain-points, and in general about the customer development process and MVP (minimum viable product) building.

TVA: Tell us about the history of ARTERNAL, how it started, how it was built? What was the motivation to start an art-tech startup in a not-so-easy niche?

SEAN : We started in 2012 focusing on the artists, initially, by creating a company called My City Muse, and it was empathy for my friend who wanted to become an artist and I was surprised: “you’re going to quit your job to become an artist full time? This is crazy! How are you going to pay your rent, how are you going to make money?” I didn’t know anything about art because I completed my degree in computer science, but I was always entrepreneurial, so I thought I was going to help my friend. And, My City Muse was about to connect collectors to artists’ studios. And then we pivoted because we couldn’t build the business model around the artists.
Artists’ revenues were unpredictable so we couldn’t charge them like a monthly fee they didn’t know when they would have money.
We decided to build a company called ARTLOCAL so we pivoted in the direction to focus on the collector.
The aim was to drive collectors into galleries.  We thought that galleries are looking for the right people and if we build an app that helps to drive people who are interested in their spaces that could be a value proposition. And so, we got accepted into the New Museum incubator in New York City. And there we were able to build ARTLOCAL, and we connected with several different collectors, artists, curators and we had 10.000+ users on the application.

TVA: So, at this point, did you start to monetize it? 

SEAN : Well, in 2015 we decided that we got to figure out a way to monetize this. We started talking with a gallery and told about our instrument that can drive people to space. But the response was: “Well, Sean, we really don’t care about foot traffic, all we care about is the sale!”. And then I talked with 10, 20, 30 galleries and I got the same response. I was just amazed, what I thought galleries are trying to do is drive people into space, I mean “what are these doors here for?”. But the response was crystal clear: “we just care about the sale. We travel internationally and we go to different fairs to be able to get people to buy”.
At that point I was really confused because we just built our product called ARTLOCAL for the last two years. I knew I needed to pivot again in a different direction. 

TVA: That is something, not to give up, but to pivot again.

SEAN: We started spending time behind the scenes at galleries, and we leveraged on museums because galleries and museums have relationships that we wanted to use as much as we could to open the doors – it’s a very opaque environment, they don’t let you in easily.
We traveled to fairs and observed how people worked. And we noticed that people are using address books and spreadsheets and as somebody told me “their memory” to store information. So, I said why not a CRM system?
I think that was the moment I said to myself this is what we need to build… From 2015 to 2016, I decided to figure out how to build a client relationship management tool that the art dealers would be receptive to. It took us 12 to 15 months to get there.
We did not know what it was going to be… But I knew the problem I needed to solve, while I got there, after failing. Building and failing, building and failing for about a year and a little bit.

TVA: How did you gather research to understand the needs of dealers, most specifically with their email communication?

SEAN : Finally, in 2016 I sat down with an assistant who was sending emails to collectors, 103 collectors.
To be honest, that seems strange and takes a lot of time, but she explained that you need a personally crafted email to communicate with billionaires, can’t do it through mass-mail instruments. I’ve noticed that she did copy and pasting and then changing names, and I said to myself that there got to be a better way to do this.
So, I decided that we are going to build an MVP to solve this particular problem. I talked to my other two co-founders to create bespoke emailing at scale.
We built it, and we gave it to one of the galleries, before a big fair.
When I showed up at the opening and asked how the software was, the answer came instantly: “what typically took us three days, now it took me three hours”.

TVA: So, finally, you have your MVP!
SEAN : Indeed! We finally have it. And from there, we started to build more and more products.

TVA: Oh My Gosh! What a journey you had! To try to innovate so you can bring more people to see art, just to realize that, galleries are not at all interested in that. And sales is the pain point you need to solve.
SEAN : Exactly, exactly.

TVA: Concretely the ARTERNAL CRM, it’s doing …I guess “everything”. But what is different in a CRM system for the art scene? Why not just use a tool that is already existing out there such as SalesForce or HubSpot or something from Oracle?

SEAN: It is because the inventory piece is the very key. You need to grab the asset for the artwork, connect it to the client, and then have an email connected, so you can communicate with your asset to the client, to many people seamlessly and track interactions around the artwork that’s connected to people, and track interactions around people that’s connected to artwork. None of these other frameworks have that capacity. And that’s where the break-in is.
And in addition, it is also the way that we’ve created the bespoke email at scale, nobody’s done that. It’s a very elegant way to get the job done.

TVA: I like the tracking system, because it focuses on data-driven decision-making, right?

SEAN : Data is the key to unlock your business as an art dealer, and nobody’s given dealers, the power of their own data and information. And one of the goals is, to empower with your own data so you can understand:

1. How your businesses functions
2. How people are engaging with your business
3. How your sales staff is performing: Are they underperforming, are they meeting goals? Are they hitting targets?
4. How do I remarket and retarget individuals?
5. How do we as a team, leverage all the information to drive our business goals further…

TVA: And the pandemic, I guess, it helped. Because the art industry was always about personal connection and relations, 1:1 meetings, and networking or sales never happened online. But, now, they all had to go online, so they needed data more than ever.

SEAN : Exactly, exactly. What’s important is that people now understand that they can’t just sit around and wait, but they have to navigate towards how the art world is actually evolving.
I remember speaking to dealers who were telling me that they sit around and wait for collectors to follow up. But, why do you not get data to understand when collectors are engaging so you could proactively follow up with them?

TVA: So, should I ask you how your sales were going during the pandemic?

SEAN : We have not been busier; this has been the busiest period. And it continues to get busier and busier. Especially as things are opening back, people are figuring out how to navigate the current landscape and what they need to do to operate in this new art world.

TVA: All sides agree that after the financialization of the art market, the next years will be about digitalization.
How do you see the future of ArtTech startups?
Will we have as in the FinTech, startups such as Revolut, coming in with a big boom and disrupting entire business models of galleries?
Or will we go softer, co-creating with galleries, collectors? Will Artsy have a challenger?
How do you see it?

SEAN : So, my focus in terms of changing the spaces is from the inside out. A lot of people who are working in this space aren’t working from the inside out. Because it’s difficult to get inside and behind the scenes of the inner workings of how dealers’ function.
Fortunately, with my sheer determination and hustle and leveraging relationships, people allowed me to understand how businesses are functioning. We’re getting a glimpse into how people are thinking about transitioning their business.
For the most part, they believed in the doctrine of global art fairs and exhibitions and running around the planet, and they were convinced that this is the only way and that’s how it is done or you can’t do another deal.
And then boom, the pandemic came and…. Nothing.
This was the moment when people started to ask themselves: “What do we do? We can’t fly, we can’t go into spaces, nobody can come to visit us. What do we do?”
And it’s through that lens we were able to have a conversation. It’s not just about brick and mortar and traveling anymore. It’s about, we wrote a blog post called, “Settling into Click-and-Mortar”

TVA: I also wanted to ask you about the investment part. Because as start-ups need: pre-seed, seed, series A, so on… Are they people, funds willing to invest in art-tech startups?
SEAN : It’s been difficult, and as a black founder, only 1% of venture capital goes to black founders, which makes it even more difficult to raise the capital.

TVA: You choose your niche market extremely well :)))
SEAN : Could I make it any more difficult on myself? :))) But I was very determined. And I knew that there was an opportunity.
So, I had to fight to have lots of conversations, build more relationships, get more introductions and there’s gonna be somebody who is going to be able to understand. We were able to get a couple of early supporters, more venture capitalists would call, but it was very slow. I was fortunate to have the right co-founders who were willing to listen to me just long enough.
But now, we evolve into a FinTech business, and there’s a lot that goes on behind the scenes when it comes to finances within a gallery and we’re going to be the first company to process a bank wire on behalf of the gallery, and that’s going to be happening, relatively soon. We’re pretty excited about it!

TVA: When it comes to fine art, there are always some suspicions around it: different scandals of art being falsified or being used for money laundering, precise manipulation, or questions around freeports. Or the eternal question “what is Art?”, especially now with the NFTs craze. I mean, it’s a world surrounded by different suspicions, questions, and bubbles. How is this affecting your business?  

SEAN: There’s a lot of things happening in the Art Market, which you mentioned, there’s NFT’s, there is fractional ownership in art, there are anti-money laundering laws and KYC, sales through digital channels.
We think about all of these things because at ARTERNAL we’re building infrastructure that the ecosystem can operate on top of. And if you have the right infrastructure, people can actually play in the game. If you don’t have the right infrastructure, they’re people who are going to be disenfranchised because they’re not going to be able to compete or play the game.
We want to be able to democratize access to the infrastructure. So, for people who are struggling to understand Anti-money laundering (AML), we brought on a compliance officer, into our team. Because, as we are going to be launching bank wire payments, we need to make sure that we’re not facilitating Anti-money laundering.
So, we said if we got to do this, why don’t we then just package this, and deploy it to the market. And tell our clients that if they are struggling to understand how to manage and store securely client’s information, we’re productizing that for them. And now, we can help galleries with the Anti-Money Laundry Law.
You want to understand your business better by helping to reconcile your finances.
In the US for example, you have Tax Obligations that you have to track based on what you’re shipping into a particular state.
So, we automated the ability to track what galleries owe to a particular state if they put your invoices through ARTERNhttps://www.arternal.com/AL. Then what’s going on with your business if we’re processing or facilitating the processing of wire payments and other aspects of payments, then we can help understand how your business is performing. And then the NFT conversation yet to be determined….

TVA: What advice would you give to somebody who wants to start the ArtTech start-up?
SEAN : There are easier, better things you could do with your life :)))) All jokes aside, I think I would recommend firstly studying the market to see what’s out there. To pick a particular niche that nobody’s focusing on and try to understand why a particular problem exists, and try to solve that. I needed to find an acute problem that we needed to solve.
I encourage every entrepreneur, but you can’t be Elon Musk today and go to Mars. That’s not the problem that you need to solve, that’s Elon Musk’s problem, he is trying to solve that.
But there are problems that you can solve if you’re looking at the art market.
How do you help galleries do x and that z is a problem that you particularly see or how do I help art professionals do X, figure out what that finite issue is or problem and solve for that?
Just continue to learn, iterate, repeat and serve your client or customer.

TVA: A good books on the topic of Art, or Art Business that you would recommend
Sean: “BOOM. Mad Money, Mega Dealers, and the Rise of Contemporary Art” by Michael Shnayerson. He has encapsulated the art world really well

TVA: Your favorite artists? (maximum five)
Sean: Derrick Adams, David Hammons, Nathaniel Mary Quinn, Amy Sherald, and Kara Walker

TVA: What was your feeling when you first attended an art auction?
Sean: “This is Theatre!”
TVA: More like an Opera or Ballet?
Sean: I would say more Opera. Everything is big and voices and so…

TVA: A personality that you would never want it to be associated with?
Sean: Miranda Priestly (played by Meryl Streep) from The Devil Wears Prada. That type of personality trait is… no.

TVA: Let’s suppose you have an unlimited amount of money; would you have considered participating in the People’s auction?
Sean: The one that just happened? I would say after looking at all of the artworks… I would say NO.

TVA: Who would you like to talk to and what would you like to ask him/her?
Sean: Muhammad Ali. And I would ask him if there was one person he could go to dinner with, within his absolute prime, who would he choose to take to dinner and why?
TVA: Why Muhammad Ali?
Sean: Because he was a political activist, he was an incredible boxer, he had morals and ethics. I just think he’s one of these individuals who I think is so powerful. I think there are people who are larger than life and really made decisions based on ethics.

NB: Last , but not least, we have a small BONUS surprise 🙂 We discovered the discussion between Sean Green (Founder & CEO) and Mary Leigh Chery (Director of Enterprise)- that joined ARTERNAL, after an impressive career as a gallerist. It is a very sincere and vivid discussion to follow about an Art World person entering and understanding Tech World, and the other way around. And in general for other interesting articles, we recommend ARTERNAL’s blog.

All visual materials were integrated with ARTERNAL consent ©ARTERNAL 

Photo Credit: ©Greyson Tarantino

links and info used for publication

video link ARTERNAL Blog^{(https://blog.arternal.com/mary-leigh-cherry-joins-arternal-leadership-team)}

About AML ARTERNAL Blog ^{https://blog.arternal.com/anti-money-laundering}

Settling into Click-and-Mortar ARTERNAL Blog ^{https://blog.arternal.com/settling-into-click-mortar-the-new-prime-real-estate}

Statistical data analysis ^{https://www.statista.com/statistics/883755/global-art-market-value/}