Tagsmart, pioneers of DNA tagging for artworks, are launching an online trading platform for trusted art.
Tagsmart is a British technology company formally launched in 2016. We pioneered the application of synthetic DNA tags to authenticate artworks and developed an online platform to generate highly secure Certificates of Authenticity. We are the go-to provider of these services in the art market and the only such business featured in the 2017 Deloitte Art and Finance Report.
We are now building a new service: a trusted trading platform that will enable artists, online retailers and collectors to buy and sell verified artworks. This free-to-access online service means that:
- Artists can submit works to multiple retailers at the click of a button.
- Retailers get instant access to trusted works.
- Collectors get trusted works with DNA tagging and Certificates of Authenticity with multiple security features.
Our objective is to unlock growth in the online art market, which we believe is currently being held back by lack of trust (as outlined below).
The global art market is worth $64bn, but only 8% is online, in contrast to comparable sectors such as physical entertainment goods; whose online sales account for 42% of purchases.
Lack of trust is deterring online buyers: 58% are afraid of buying a fake - and of those who don't purchase at all, 87% say that being offered a Certificate of Authenticity might change their minds. Hence, we see a lack of trust as holding back online art sales. It's not just the collectors who have issues. From our experience, artists struggle to submit their works in multiple formats to different sites and online retailers have to manage complex inventory.
For many, buying online is perceived as risky and selling online can be hard work.
We pioneered the application of synthetic DNA tags to authenticate artworks and developed our online platform to generate Certificates of Authenticity. We designed our Certificates to solve recurring problems of fraud, forgery and loss. Each Certificate has its own unique security profile, including holographic labelling and security stamping.
Substantial accomplishments to date
As of May 2018, we have over 23,000 artworks on our platform and have issued more than 11,000 tags and certificates for works by nearly 250 artists. We’ve built relationships with hundreds of artists, galleries and fabricators.
We have a head start with our existing artist and gallery relationships and are now extending these through partnerships with printers, art fairs and retailers. These partnerships bring us new artists and we have further negotiations under way. We've partnered with artrepublic.com, ArtSnap, IdeelArt, Metro Imaging, Own Art, K2, and Roy's People Art Fair. These agreements include contracts with three retailers for the launch of our new service.
We've achieved great market awareness, coverage on the BBC and Sky News, in the Sunday Times and Financial Times, most recently as part of the BBC Click episode "Faking It". We are the only business in our space to be listed on the Deloitte Art & Finance Report.
Tagsmart will take a commission from the retailers - a percentage of the value of the work - when the work is sold. We will not take a share of the artists' commission.
We also get tag and certification revenue as artists undertake to verify their works before sale (hence the offer of trusted art to retailers and collectors). Artists also tag and certify works that they sell through other channels. Tag costs (which include the issue, production and fulfilment of Certificates) range from £20 up to £120 per work.
We have estimated that sale values for our artists online is likely to be approximately £1,000 and our commission is planned to be 10%.
Additional revenue streams come from the sale of branded tags, concierge services for premium clients, referral fees, and other value-added services to our user base.
Use of proceeds
The funds raised will enable us to launch our trusted trading platform, to promote its benefits to UK and overseas users, and to iterate the service after launch in response to user demand.
We continue to develop our tagging and Certificate technologies so that we remain at the forefront of this area. The latter involves not just internal R&D but also partnerships with academic centres of excellence where we fund joint research projects to drive our innovation programme.
Increasing interest from overseas also emphasises the opportunity there and we plan to start operations in the US (the largest art market ahead of the UK and China), where we have already established useful relationships and identified possible partners, in Q4 2019.
To those ends, the funds we raise will be allocated as follows:
- Product Development 35%.
- Management and Admin 25%.
- Sales and Marketing 25%.
- Operations and Fulfilment 15%.
We see our market as consisting of those involved in art market transactions (artists, retailers/galleries). We focus on artists who produce editioned works in 'flat media' (e.g. print artists, photographers) and the marketplaces through which they sell (eg artrepublic.com, www.mallgalleries.org.uk/buy-art, ideelart.com).
Artists and galleries pay us for tags, certificates and concierge services (eg tagging works on their behalf). They also pay for value-added services (e.g. tag Certificate branding). Artists are also drawn to our service as it offers online artwork record management, currently subscription free.
For the new service, online retailers will pay us a commission on sales in return for for access to trusted inventory and reduced sales management effort (we will provide all the work data via systems integration).
Most of our customers are in - and our business focus is currently on - the UK although we receive a growing number of overseas enquiries (over 30% for the last two months).
Characteristics of target market
The art market is primarily driven by transactions in the US, UK and China, which together make up over 83% of total global auction sales by value. From our experience, the sector has been traditionally dominated by galleries, auction houses and dealers.
We believe it now faces significant change, creating challenges and opportunities for everyone involved. 79% of buyers under 35 now use Instagram for discovering new artists and increasingly they are buying online from sites like Artsy, Artnet and 1stDibs. Even traditional auction houses report that new buyers make up over 40% of online purchasers at auction.
In the UK the online market is largely fuelled by primary works from the artist community, the size of which is very hard to quantify but is generally reported at being between 30,000 and 40,000: a more conservative estimate would suggest around 7,500 fine artists (as opposed to illustrators and graphic designers) actively making and selling work.
We've gained good market awareness through conventional PR, resulting in national TV and specialist press coverage.
The art market is generally community-based and word of mouth travels quickly. With that in mind, we attend and/or partner with art fairs, galleries, and other events on a regular basis, meeting artists and gallerists face-to-face.
Our outreach includes workshops for artists and other potential customers (for example, see https://www.facebook.com/TagsmartHQ/posts/21883...). We also operate a reseller programme, where we partner with printers and other suppliers to provide our services direct to their artist customers, paying a referral fee for new business.
We give regular presentations at industry events and venues, from traditional art departments in higher education through to centres of expertise like the Sotheby's Institute and Art Basel.
Where appropriate, we amplify the above on social media and via mail newsletters.
We've stabilised our business, developed the required technology, and benefit increasingly from word of mouth and market awareness.
As far as we are aware, our tag technology is unique and we have further iterations planned. We have a patent application in progress and a registered trade mark. Besides these, our most effective protection against competitive threat is our experience with customers and the workflows and know-how that we have developed as a result.
To the best of our knowledge, there are currently no direct competitors, although recent months have seen a number of promised blockchain services. Our response is to develop a means of allowing our customers to submit specific data to our own and third-party blockchain solutions, for launch in Q2 2019. It should be emphasised that, while blockchain provides data audit and other advantages, it doesn't solve the problem that we address: the validity of the original data. On that basis, we believe our systems of authority management, verification, tagging and Certification remain essential.