Feral Horses
The Art Stock Exchange.
- Location
- London, United Kingdom
Categories: Finance & Payments Mixed Digital/Non-Digital B2C
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Investment
sought: - £100,008
-
Equity
offered: - 5.26%
-
Investment
amount: - £135,342
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Valuation
(pre-money): - £1,800,000
Idea
Introduction
Our online platform allows retail investors to invest in art by buying and trading shares of artworks.
On the “Primary Market”, users can browse the pieces of art that were sourced from promising European Artists and Gallerists and get to know about each artwork’s story and each artist’s career in order to individually decide what to invest in before the end of the selling period. At the end of this period, the artworks that have reached the threshold (min target of sold shares) enter our “Secondary Market” where users can freely trade and put their shares on sale. The artworks not reaching the threshold simply exit the platform and the investors get a full refund.
Also, we manage the physical artworks. We take care of insurance and transportation of the artworks. On the top of that, we have recently launched the offering of our collection for rental to privates and businesses, with the aim of generating both visibility and a source of revenue that gets divided among the share-owners, just like a dividend.
Intended impact
The alternative asset market is booming. However, a high-profit asset like art can still be inaccessible for the majority of investors as, we believe, it has high barriers to entry, both on information need and capital.
From a social and ethical point of view, we strongly believe in the fact that the beauty of the art should be available to everyone that is interested in it, and not the few, that, till now, could afford to own it. For this reason, we have built a stock exchange for art, where we allow anyone to buy shares of premium artworks on a platform that gives investors all of the flexibility, freedom, and unbiased information that they need to diversify their portfolio.
By having a secondary market, where participants can buy and sell shares, we are also aiming to create more liquidity for an asset that is traditionally very illiquid.
On top of that, the artworks are rented out to businesses, which we estimate will generate up to 10% a year in dividends for the investors.
Substantial accomplishments to date
- Launched the beta platform (April 2017).
- Sold our 'market-test' portfolio of 17 artworks, which had total asset value of £121,000 in 63 days (Spring 2017).
- Reached 700+ registered users (November 2017).
- Reached 60 investors.
- Reached almost 6K followers on IG (December 2017).
- Put together an art festival: a two-week-long pop-up gallery showcasing our first portfolio (December 2017).
Please note that the company has taken legal advice and, based on the current regulatory environment and the structure of its business, does not believe that it requires regulation. The company will continue to monitor the regulatory requirements as it grows.
Monetisation strategy
Feral Horses' business model is commission based:
We charge Artists and Galleries a 20-30% commission on each sale on the primary market.
We charge a 1% commission on each transaction conducted by platform users selling shares on the secondary market.
We also charge a small commission for each rental client: between 3% and 7% of the total value of each rental contract.
Use of proceeds
Next year, we want to focus on consolidating our market position by developing long-term art rental and art sourcing agreements while continuously improving our product. Consequently, the funds will be allocated as shown below:
Tech 36%
Business development 26%
Growth 26%
Other 13%
Market
Target market
As of 2015, global art sales reached $63.8bn. However, we believe that the art investment market is totally inefficient as it only capitalises on major collectors and investment funds and it leaves out the majority of the potential investors. Additionally, the lack of information and the high minimum investment ticket can be huge entry barriers factors that create low volumes and low liquidity.
The target user of Feral Horses is part of a younger audience: the millennials. He or she is tech and finance and increasingly curious to discover new alternative assets to invest in.
Characteristics of target market
As of 2013, in Europe alone there were an estimated 120M Millennials, of which 45% are more willing to invest than 5 years ago (Blackrock, 2015).
However, their investment behaviour is different from past generations. One reason is that millennials mistrust traditional investment options but at the same time are in need for micro-investments as most of them still owe large amounts of student debts. Consequently, they are widely looking for new micro investment options including alternative assets that match their values and interests. Art could be the perfect asset for them if only they had the possibility to invest small amounts of money and the right tool to do so.
Marketing strategy
Feral Horses is going to capitalise on two key channels:
The Art Galleries: by collaborating with influential art galleries, Feral Horses plans to grow through these players' established online and offline presence. We think our service will allow gallerists to finally interact with art enthusiasts who are regularly visiting their physical space but cannot afford to start a collection. Additionally, we plan to conduct pre-sales with the galleries/artists offline channels to kick off the sales. To finish with, we believe art gallerists are the perfect partners to share content online and educate users about the benefits of art investments.
The Money Apps: By collaborating with diverse money apps, we hope to be able to get in touch with the most personal finance savvy segment of our target and offer our service at a key moment of the micro-investment decision-making process.
Competition strategy
Our strategic position in the market allows us to avoid negative direct competitive relationships with existing players, as we position ourselves as an enabler for artists, galleries, and small art investors. We see our platform as a tool for artist and galleries to use to reach out to the art enthusiasts who follow them online and visit their space but cannot acquire entire artworks due to the current high barriers to entry.
Nonetheless, the ArtTech space is increasingly getting attention, with more and more companies building solutions to invest in art.
We think Arthena is doing a brilliant job, creating more accessible funds with good in-depth analysis of the assets.
Maecenas is focusing on the crypto-lovers, creating a token that can be used to invest in art.
Feral Horses, however, is the only mass-market solution to our knowledge with an unprecedented minimum ticket of £5. We also combine dividends (coming from the rental) and the possibility for users to freely create their own art portfolios.
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