How This Company Raised $34M Selling Art




More and more people today are flocking back to online auction sites, but with all of the extra fees they generally charge it’s important to find the right one. You want good selection a low fee, and a proven site that people actually go to. What you need to check out is Paddle8. The art and luxury item auction site has raised yet another round of funding and are showing no signs of slowing down. With items starting as low as $200, this site is for anyone who wants a nice new piece of art no matter how you use it.

Cofounders Aditya Julka, Osman Khan and Alexander Gilkes tell us about their 4th round of funding and how they plan to expand.

Who were your investors and how much did you raise?
Paddle8 raised $34M in Series C funding by an array of investors from the worlds of technology, art and luxury, bringing our total funding to $44M. Investors included newest Paddle8 board member and acclaimed gallerist David Zwirner (recently named no.3 on the ArtReview Power 100 list); German collector and investor Rolf Sachs; Eric Fellner, co-chairman of Working Title Films; and Edgar Berger, Chairman and CEO International of Sony Music Entertainment. This round also saw participation from existing investors including Mousse Partners, Damien Hirst, Jay Jopling and Stavros Niarchos.

Tell us about your product or service.
Paddle8 is the leading secondary marketplace for art and luxury collectibles. We break down many of the pre-existing barriers to art dealing and collecting and offer aspiring collectors a seamless, trusted online environment to discover, sell and purchase collectibles across a number of different categories including art, furniture, jewelry, accessories, design and memorabilia, to name a few. Our community is currently comprised of more than 500,000 collectors in 90+ countries around the world.

What inspired you to start the company?

When former biochemical engineer and serial entrepreneur Aditya Julka was working in New York and wanted to buy art to decorate his apartment, he quickly ran into unexpected hurdles, from long gallery waitlists to simple logistical issues, as most auctions took place midday. With this in mind, his former Harvard MBA roommate Osman Khan introduced him to Alexander Gilkes, who at the time was auctioneer and worldwide head of marketing at Phillips de Pury auction house.  After some discussion, all three acknowledged that there was a huge market opportunity to create a solution that would serve the middle market – the white space that existed between Sotheby’s and Christie’s, and eBay and Amazon – something that no one else was doing at that time. And so, Paddle8 was born.

Bringing three uniquely valuable perspectives together—a logistics expert with experience in alternative asset classes, an auctioneer with a deep knowledge of the worlds of art and luxury, and a trained scientist with a penchant for disrupting staid industries—the trio decided to create a company that leveraged technology to provide a truly seamless way of buying and selling art and collectibles online. Tackling the complex challenges of streamlining logistics and providing a truly end-to-end solution head on, Paddle8 has now become a trusted online platform for industry experts and novices alike, and is introducing a whole new generation to the world of collecting.

How is it different?

Paddle8 is really the only natively online, peer-to-peer auction house for art and luxury collectibles. The two closest competitors are Christie’s online and Auctionata. While Christie’s online offers a similar solution, it remains an ancillary part of their overall business, resulting in the transfer of some of the traditional auction house costs to the buyer, as opposed to Paddle8’s digital offering. And the German Auctionata live streams physical auctions, as opposed to fully translating the experience and optimizing it for a digital audience. They also outsource much of the pre- and post-sale logistics, whereas Paddle8 offers a truly holistic, end-to-end solution, incorporating valuation, shipping, marketing, insurance, etc.

Until now, art has been one of the last industries to have remained somewhat untouched by technology, so it’s been exciting to see how we could open up an industry that seemed resistant to change. In this vein, alongside our online platform, we’ve also launched a mobile app that allows people from all over the world to buy and sell art and collectibles on-the-go. On the sell side, you can snap a photo of an item, submit it online or via the Paddle8 app, and receive a quote in 3-5 days, which doesn’t happen anywhere else. We’ve been pleased to see a really positive reaction to the mobile app from experienced collectors and novices alike, on both the buying and selling side.

What market are you targeting and how big is it?

Paddle8 operates in the low to mid market that is unserved by brick-and-mortar houses.  We’ve found our sweet spot in the $1,000 – $100,000 range for auctions and we start our bids as low as $200. We do also serve the higher tier market, with works selling in the $500k+ range. As an example, we started an auction of a Jeff Koons’ sculpture at $500 and it ended up selling to an online bidder for $990,000. Additionally, we’ve found that our largest demographic is 18-34 years olds, comprising 42% of our overall sales this year.

Why are transactions in high-end art and luxury items well suited to be done online?

Currently, the luxury and auction markets are booming (the auction market has rebounded with sales reaching a pre-financial crisis rate of c. $40bn in 2014), and collectible luxury goods are rapidly attracting a new global audience. This provides an opportunity to connect with a whole new generation of collectors who are interested in entering this world, but aren’t always sure how to approach it.

Technology not only lowers the barriers of entry—eliminating the need for industry insider knowledge or contacts—but also makes the experience more accessible to those who might be intimidated by having to attend an auction and/or do not have the time to do so. By expanding the overall collecting market, and increasing demand, Paddle8 is able to bring many more items into circulation, so that collectors can more easily track down and buy/sell their items. For example, a current auction of ours features Steve McQueen’s sunglasses, which would not have been easily sourced or sold before a trusted platform like Paddle8 came along.

What’s your business model?

Like traditional auction houses, Paddle8 earns a percentage on each sale. However, we take significantly less than traditional auction houses because of the innovation we’ve brought to the process. Paddle8 earns 8% commission from the seller, and 20% from the buyer once the deal has completed. This is roughly half that of a traditional auction house and offers the added advantage that you can buy or sell a piece in a matter of weeks, as opposed to months.

What was the funding process like?

This was our fourth fundraising round, so many of the investors that we reached out to this time were already aware of the company and the general excitement around our industry.  This allowed the process to move much more quickly than ever before. Additionally, unlike in our earliest rounds, we now have a proven product market fit and revenue traction, so the focus of our discussions wasn’t on proving that our business model works – it was more focused on the right amount of capital and at what valuation.

What are the biggest challenges that you faced while raising capital?

One of the biggest challenges we faced was managing the day-to-day aspects of running the business while simultaneously handling the demands of raising external capital, because—to an extent—both are full-time jobs. Fundraising requires a considerable amount of travel and poses a heavy meeting load, which can be incredibly tricky while also running a rapidly growing business—but mastering this balancing act is all part of being an entrepreneur.

What factors about your business led your investors to write the check?

It’s clear that market statistics speak to an increase in the art world’s popularity, but outside of the numbers, it’s hard not to pick up a magazine like Vogue, or a copy of the New York Times, or scroll through Instagram without being confronted by references to contemporary art and collectibles. For so long, art was perceived as a luxury that was only of interest or attainable by the very wealthy; however, there’s been a clear shift  in the past few years, with more and more people showing an interest in art, and an enthusiasm for collecting. Paddle8 is ideally placed to capitalize on this new and rapidly increasing interest, while also providing a premium service for well-seasoned collectors, dealers and investors.

What are the milestones you plan to achieve in the next six months?
The next six months are poised to be a time of significant growth for Paddle8 and we are looking to use this new financing in three main areas. First, we intend to use this new influx of capital to fuel our ongoing international expansion, particularly in the UK and across Continental Europe. Second, we will be scaling up our backend infrastructure to ensure we can continue to deliver a premium service to all our customers as we extend our global footprint.  And finally, we’ll be continuing to branch out into new collecting categories, such as fashion, vintage accessories and wine.

What advice can you offer companies in New York that do not have a fresh injection of capital in the bank?

We would urge companies to consider starting the fundraising process now, as it’s a great time for entrepreneurs to raise capital. A lot of well-respected investors are forecasting a general slowdown in venture funding over the next few months—that’s why even if companies feel that they don’t need capital until further down the line, we wouldn’t recommend waiting until then.

Along with beginning your raise at the right time, it’s also important to have a clear plan as to why you need the funding, how the business is going to grow based on the funds raised and what are some key growth metrics. These three proof points are vital to securing capital and will come up in every funding meeting.

Where do you see the company going now over the near term?

We plan to continue to grow our global audience, so we’re going to hire more engineers and further build out our backend technology to offer premium service to all regions and further improve our mobile bidding experience. Additionally, we’re continuing our category expansion and are hiring specialists in vintage collectibles, accessories, and design.

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