Q&A With Artsy CEO Carter Cleveland: The ‘Dorm Room’ Startup That Charmed the Art World

Carter Cleveland, co-founder and CEO of Artsy.

Carter Cleveland, co-founder and CEO of Artsy. Artsy

Exactly a decade ago, a Princeton senior named Carter Cleveland started a company called Artsy in his dorm room. In its simplest form, Artsy is a website that facilitates the buying and selling of artwork.

Like many of his fellow college entrepreneurs, Cleveland’s academic training in computer science lent him a convenient skillset to start a company of just about any type in the digital age. And his passion for art, thanks to family influence, naturally steered him toward the idea of building something to serve art lovers like himself.

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What Cleveland didn’t know back then, though, was the fact that plenty of people had thought of the same idea before him, had tried it in the market and had failed.

“If I’d done the research and found out how hard it was, I probably would never have gone down that path,” he told Observer.

Considering that context, Artsy’s success is miraculous. Not only did Cleveland manage to break the curse that no one could convince the art world to go online, but he has also built Artsy into the largest online art marketplace globally with no visible challengers.

Since its inception in 2009, Artsy has raised a total of $100 million in venture funding and was most recently valued at $275 million. (Artsy declined to comment on that number.) Although Artsy is not comparable in size and general public influence to other “dorm room” startups you might think of immediately, such as Facebook or Reddit, its impact on the art industry is no less than Facebook on social networking (or really, advertising) and Reddit on news aggregation.

And it has plenty of room for growth. The total size of the existing art market is about $67 billion, Cleveland said, which is just “a small fraction of what it could be” if Artsy proves to be a viable mode for the future of art transactions.

Last month, Observer chatted with Cleveland at Artsy’s New York office about how he cracked open the notoriously stubborn art community despite all odds and why Artsy isn’t one of those “tech disrupters” whose only goal is to kill an industry and make it their own.

In college, you first studied physics and then switched to computer science. What prompted you to start a company focused on art? That seems like quite a departure from your academic background.
I had a very lucky childhood. My dad and mom are both very passionate about art. My dad is an art writer. I was taken to galleries and museums and even auction houses as a child, and my dad always talked to me about art and nurtured in me a passion for it.

But as I got older, I realized that for the vast majority of people art is kind of an inner world where there are many barriers. I went to school for physics, but I took a lot of art history courses on the side. As I looked online for sites where I could deeper research about art and buy artworks for my room, I was shocked to discover that there was no single website that had all the world’s art in one place for people to learn about art or buy and sell.

So that was the initial impetus for Artsy. It was sort of this naive idea like, “Oh well, I guess no one has thought about that before.”

Is it true that no one had thought of this idea before you?
There was no single comprehensive site that had all the world’s art on it. But as it turned out, many people had tried doing this before. Because I didn’t come from a business background, I didn’t do the traditional competitive analysis and survey the landscape. I just thought that this would be really fun and a great way to combine my passion for art with my excitement for algorithms and recommendations, so I just sort of dove in.

But thank god I took this approach, because if I had done the research and found out how hard it was, I probably would never have gone down that path.

That’s incredible. What’s so hard about this business, then? Why did all those who had attempted the idea fail?The reason no one had ever done this successfully before is that no one had been able to convince the art world to come online.

Getting those first clients was the hardest part. It’s like that Woody Allen quote, “I’d never join a club that would allow a person like me to become a member.” If someone says, “Hey, join this cool club!” You might say, “Well, what makes it cool? Who’s already a member?”

I wasn’t cool. I was just a 22-year-old straight out of college. When I went out to pitch Artsy, literally my dad would take me to galleries that he had written about, and I’d show them the website and the recommendation algorithms, all excited. But the galleries were basically like, “Why would I want to associate my artists with some 22-year-old and his website?”

There was this uphill battle where no gallery wanted to join Artsy until we already had a gallery on the platform. It’s this chicken-and-egg challenge, as in many markets.

Carter Cleveland (M) with his mother, Patricia Cleveland and father, David Adams Cleveland at an Artsy event in December 2013.

Carter Cleveland (M) with his mother, Patricia Cleveland and father, David Adams Cleveland at an Artsy event in December 2013. Mireya Acierto/Getty Images for Soho Beach House

How did you break that curse eventually?
Long story short, we managed to get two of the world’s largest galleries, Gagosian Gallery and Pace Gallery, onto our platform. We got in front of them and said, “Listen! The future of the art industry is going online. If you guys join our platform, we’ll be able to bring the whole industry online.”

Gagosian and Pace joined the platform and later became investors in Artsy’s series C. And, all of a sudden, a bunch of other very influential players in the art and tech world invested in us, including galleries that wouldn’t even take our phone calls.

What do you think distinguished Artsy from all those failed art startups aside from the mercy of your dad’s industry connections? Is there a secret sauce to success when you look back?
As I think more broadly for Artsy, It think it’s the fact that we have taken a partnership rather than a disruption approach [which has made us successful].

Many of our competitors in the early days wanted to disrupt the art industry, so they would either compete directly with galleries by bringing artists on to their online gallery or compete with auction houses by running their own auction site.

These companies were able to generate revenue a lot faster than us, because they went straight to that transactional model. But ultimately, the amount of inventory they could get was very limited, because the rest of the industry didn’t want to work with them.

For us, art is about unique objects of cultural and emotional significance; they’re not commodity items. You can’t just take a batch of artworks from one small part of the market and present a compelling value proposition to an art buyer.

And because these are special and unique objects, buyers want to see the full range of works. For example, if I’m a David Hockney collector in South America, I’m never going to be satisfied with a South American marketplace that only has David Hockney works from that region. So it makes sense for the winner in the space to be a global platform that has access to as much inventory as possible. That’s why that partnership approach is so important.

What we find really interesting is that our average transaction distance is about 3,000 miles. It’s the highest average transaction distance of any website on the internet, or at least that I’m aware of. I think that really speaks to this global international appetite for art.

How do you vet artworks and artists on your platform? Do you have an in-house authentication team or something like that?
The partnership model we adopted very early on champions our gallery and auction partners’ art expertise and ability to price the artworks and verify their provenance—a highly specialized skill that takes years of professional experience and relationships to develop—as well as nurture artists’ careers. We provide our partners with an unrivaled global platform with best-in-class technology that connects them with our 1.4 million users across the globe, providing a frictionless buying and selling mechanism for our sellers and buyers.

Is that the reason you don’t work with individual artists?
Exactly. If we were to do that, we would essentially be taking a competitive approach with galleries, and we would essentially be another online art gallery, as opposed to being the largest and leading platform for all the world’s art galleries.

The digitalization trend you described about the art industry sounds a bit similar to the digitalization of the retail market, where the highest-end players tend to be the last to go online. Even today, luxury retailers at the tip of the pyramid (like Chanel and Hermes) still don’t want to expose their products online so as to retain that sense of exclusivity. Did you have the same challenge when talking to galleries and auction houses?
That’s exactly right. There is this thinking that goes, “If my art is exposed online, it’s somehow less valuable.”

It’s also a bit like the early days of online dating. People didn’t want to say that they were dating online, because there was a negative stigma around it like, “Are you going online because you can’t find people in the real world?” But as time went on, people gradually realized that it’s just a more efficient way for people to meet each other.

I believe that there are so many people on the sidelines who want to bring nice and meaningful things into their homes, but they simply don’t know how to enter the market right now because of its high entry barriers.

The total size of the art market is about $67 billion currently. We believe that that’s a small fraction of what it could be if that market became more accessible, frictionless and transparent.

Wendi Murdoch (L), ex-wife of media lord Rupert Murdoch, is a founding board member of Artsy.

Wendi Murdoch (L), ex-wife of media lord Rupert Murdoch, is a founding board member of Artsy. Andrew H. Walker/Getty Images

What kind of buyers is Artsy attracting that could expand the existing art market?
We definitely have a lot of professional buyers who know exactly what they want. For them, Artsy provides very convenient access to the world’s largest art inventory.

In the meantime, what’s growing the fastest is an emerging class of millennial buyers. For this new generation of buyers, what they are looking for is not having to download a separate app for every gallery, art fair or auction house. They just want one app where they can find things based on their preferences and buy with a simple click. That’s exactly what Artsy is.

What are millennials interested in buying?
As you might imagine, they tend to skew toward contemporary art on the lower price end, as well as secondary-market works, such as street art or Andy Warhol prints. Also, millennials want to buy things that not only match their tastes, but also hold some investment value.

Is contemporary and secondary-market art a very risky investment, though?
Well, if you’re buying a new work by an emerging artist, it’s like making a seed stage investment in a company. That is very risky. But some secondary-market works by well-known artists are much more likely to hold value because they are traded often at auctions or online sales.

You mentioned that Artsy had no option but to be a global company from day one. What does your global presence look like? What are your biggest markets by country?
The U.S., then the U.K. Continental Europe would come after that, and obviously Asia is the fastest-growing market.

We have a healthy number of the top galleries and art fairs in Asia on Artsy. At Art Basel in Hong Kong in March, we launched the Artsy City Guide app. It was a demonstration of our commitment to the Asia region.

Because art is a form of media, I’d imagine it can be a sensitive subject in countries that have different free-speech rules than the U.S. How do you handle markets that have strict censorship rules, for example, such as China?
We have a presence in Hong Kong. In mainland China, our presence is growing. We have an office in Shanghai and a team member permanently based there.

China is a very important market for us over the next 10 years. It’s obviously a tricky one to enter, but in the long run we’re very committed to it. In March last year, we launched a WeChat channel in China that has our editorial content.

And our Artsy co-founder and one of our board members, Wendi Murdoch, has been very active with our China presence and our WeChat account.

What does Artsy mean for the broader consumer landscape? Where do you see the company going in the long term?
I believe that art purchasing is part of a huge movement towards conscious consumption.

We’ve seen luxury spending go from being very niche to being something that every household with disposable income participates in. And once people have moved in one direction, it’s very rare they go back. For example, once people start eating healthy, locally grown and ethically sourced food, it’s very rare that they go back to eating fast food.

I believe that art will go through the same evolution. As people become more conscious about what they put into their bodies, we believe people are also becoming more and more conscious about what they bring into their homes.

A lot of the people who have invested in Artsy or joined Artsy’s board believe that art is really the last major consumer category to be brought on to the internet.

Observer’s inaugural Business of Art Observed on May 21st in New York is the premier event for art industry professionals. Join us for a half-day of talks, live debates and networking sessions with key industry players. The world’s leading art firms, galleries, museums and auction houses will converge to share what’s disrupting the industry today. Don’t miss out, register now!

Q&A With Artsy CEO Carter Cleveland: The ‘Dorm Room’ Startup That Charmed the Art World