all right so I am excited today I've Scott Lynn the CEO of Masterworks on and
we're gonna talk a little bit about Crowdfunded Fine Art which is kind of a
new unique thing that was new to me and you know and Scott's team reached out and
anyway so we get to kind of chat about this and I'm trying to think of the best
way to kind of start this conversation so I've done a review about Fundrise
and I think people can understand or you know the Crowdfunded Real Estate thing
has been around you know for a few years and I think some people have gotten that
but you guys are doing Crowdfunded Fine Art so maybe do a compare and contrast
if you will between the two sure yeah so Fundrise is actually a very comparable
company to Masterworks and it was one of the founders of Fundrise that's actually an
advisor for Masterworks but we're doing a very similar model of what they are
except that we're using Blue Chip Art rather than real estate as the main
assets that investors can invest gotcha okay all right so this begs like just
tons of questions so let's start with you I'm assuming you have some sort of
background in investing in art is that true yeah so my background has really
been in starting technology companies as well as investing in art for maybe the
past 15 20 years so I think it's this really interesting unique asset class
that has historically outperformed the S&P is uncorrelated but the only way to
invest in it is if you have a couple million dollars to buy a painting so it's
this it's it's a it's a very interesting asset class but also very inaccessible
at the same time all right okay so let's talk about the thing that a lot of
people are interested in so you mentioned the has beaten the S&P for
last ten or fifteen years I don't know we said specifically I read on the site
that you guys was it was it was a Wall Street Journal or somebody was talking
about in 2018 this is the best performing asset class what yeah so I
mean as a new new investor to this I mean me this is a new idea to me I'm
thinking all right what can I expect in terms of returns
now I know very very little about art but I know that that seems like a
generally wildly volatile market am i incorrect in that or their averages to
kind of assume well I think I think I think it's think about the art market
very similar to any other market so very high level the way to think about art
today is that there's approximately 1.7 trillion dollars in assets and these are
really paintings that sit between ultra high-net-worth collectors homes and
that's a number that's that's published by Deloitte out of that this year
somewhere between 60 and 70 billion dollars in art will sell so there's
different there's different segments within the art market what we like to
focus on is something that we refer to as the blue-chip segment and we very
narrowly defined the blue-chip segment is art created by the top 100 most
selling artists so if you look at just the top 100 artists and Picasso's at the
number one the number one of those 100 but if you look at the top 100 artists
approximately 62 percent of the market overall from from a dollar perspective
is related to those those top 100 artists if you have a very few number of
artists that control the majority of the value and within that segment we
actually think the volatility is reasonably low so if you invest in a
Monet today our data shows the likelihood of that painting selling for
less than what you you purchase it for at some point in the future is less than
10% yeah so you have this very very interesting asset class that does
appreciate quite well with reasonable low levels of volatility yeah okay so I
would liken that to you know saying that stocks are wildly volatile is you
have penny stocks that are and then you have blue chip stocks like your your
reference that are much more stable and the likelihood of you losing all your
money on them is very slim okay so that makes sense to me because yeah like in
my mind I've always just thought of you know
investment art is you know you have no idea what's gonna happen and a lot of
people think of that about stocks until they actually under
stand you got to sort them into different categories and treat and such
right yeah you don't know and a lot of people asking the question which I don't
have any data to support this but this is just sort of a hunch but they say you
know when does art start becoming investment-grade and I think the price
point that that are generally starts becoming investment-grade in today's
market is somewhere around a million dollars for painting so to your point
you know if you're purchasing a painting for less than a million dollars it's
probably somewhat of a you know a potentially risky risky decision
somewhat speculative yeah okay that makes sense all right so let's talk
a little bit about the platform you know and for people who maybe aren't familiar
with the crowdfunded thing you know and I'll go ahead and give you my dummy downed
version of this and you can fill in any mistakes and things I'm missing here but
the gist of it is is that you guys go out and buy this million five million
dollar painting and me and a whole bunch of other investors who are maybe in for
a thousand dollars or something we are part owners of this painting and then
you know we share in the profits of that as well is that simplified and accurate
yeah that's correct so we so may be to use a real specific example so we go out
and we purchase a five million dollar painting your example we then turn
around and we sell that painting to investors in our cost plus management
fees our management fees are between 150 basis points and 200 basis points per
year depending on the painting plus 20% of future profit or carries so very
similar to to how a hedge fund structures with fees but that's how we
structure our fees all right so that leads another question are you required to be
an accredited investor to participate with you guys yeah well you're not
required to be an accredited investor to invest in in this painting so these are
these are reggae paintings very similar to the Fundrise concept that we talked
about where anyone can invest in them all right so I'm trying I'm thinking
through a lot of this and in light of my experience with Fundrise so we
so if I go sign up today and I invest $1,000 is that that's just one painting
and that's it correct practice yeah so you so so really what we encourage
investors to do is to think of this as a longer-term process where you're
building a portfolio or diversification amongst a number of blue chip paintings
mm-hm as we as we launch paintings gotcha okay okay
and then I'm assuming in you know you're pretty much locked in until you guys
sell that painting correct yeah that's that's the way that the
again we encourage people to think about it I mean we we do have plans to launch
trading markets and other mechanisms to help get investors liquidity if they
need in whatever investor should assume that they're locked in for the the life
of that painting until the painting is sold okay and then I take the question
that follows is is there a general timeline that you guys want to turn it
over with it I mean do shoot for five years you know what yeah so we so we
guide people to think of the whole the whole period is somewhere between three
and seven years okay so those are right after seven years where investors can
force us to start a sale process okay so we you know for a whole bunch of
different reasons the probably aren't worth going into it's hard to sell a
painting within the first three years after purchasing a publicly at auction
so we really think of that whole period is somewhere between three and seven
years all right so when I was just over in your website and when I go over there
and I see it says like you know you have a piece of art sitting up there that I
guess presumably you guys are trying to get so it's a Andy Warhol over there and
it says 95% reserved so does that mean that you guys are waiting until you get
enough investors to participate and then you guys go out and buy it is that
correct no sorry so we based on how regulation works in the US we have said
to purchase these paintings with their own balance sheet capital and then we
filed them with the SEC to qualify them and then we turn around and we sell the
painting to investors at that point in time so these two paintings here have
been filed with the SEC the Warhol has actually been qualified
we're waiting on a letter from FINRA called a no action letter but as soon as
that happens we didn't process payments for all of those investors that are
preserved okay so the way to think about that reservation is those are people
that have committed to reserve added a payment method but we haven't yet
charged them because we have a pursuit clearance from SEC or FINRA alright so
if I'm going over there and investing over to site and investing $1,000 today
you know I click the get started button or whatever is that what's gonna happen
do I get to choose whether I want to be part of this Monet or Warhol in this
case yeah so you could choose either those paintings you can reserve shares
and or a payment method speak to a sales person if you like and then as soon as
we've received clearance from the SEC and FINRA we will send you an email
you'll click a link and we'll the final agreement and we'll process your payment
cool all right man well this is a fascinating idea I really do like it I
like I mean really I love all the different ways that are coming out to
invest these days and this is a unique one I haven't heard of and excited what
you guys are doing so anyway thanks for taking a few minutes and anybody
watching definitely go check out their site Masterworks.io right it's a correct
yeah www.Masterworks.io yeah all right anything else you want
to add anything I missed no I think that's it I think that's it I
appreciate appreciate you having me on and you know if there's any questions
were always available for for people to answer them cool all right appreciate it
Scott thanks for taking time okay thanks Bob