Similarities Between Startups Angel Investing and Collecting Art
Is it strange to think that angel investing in startups and collecting art as being similar? I guess for many of us the link between the two is not that clear. Though, I believe there is a link.
Recently I listened to Carter Cleveland, founder, and CEO of Artsy. The conversation reminded me of Zeev Holtzman’s quote. Mr. Holtzman is a famous Israeli venture capitalist and a big art collector. Holtzman said that:
As an art collector, I find that focusing on young contemporary artists is strikingly similar to startup investing. In both cases one looks to the future and encounters unknowns and uncertainties. A long term view is needed and hopefully success will come. The market will ultimately decide if a decision was reasonable. There is one key difference, however: The paintings – contrary to Israeli entrepreneurs – never talk back, no matter what I say to them.
They both discuss the similarities but what are these similarities exactly?
Don’t Do it if You Are Not Passionate About it – Both art collecting and angel investing involve risks, ups, and downs and require patience and commitment. When investing in startups, many times you “gamble” on the next big thing. However, the majority of the startups will fail – to be more accurate statistics show that one out of ten will succeed – nine will fail. So you have to be passionate about doing it. While venture capitalists use OPM (other people’s money) angel investors use their personal resources – so you must be passionate about it. The same goes for collecting art – especially contemporary and especially from young artists. Many of them won’t make it to be important and influential artists – they, like many startups won’t “Make It”. So when you buy artwork make sure you love the artwork first – be sure to love what you see and love the way it makes you feel. So in case, the artist does not become well known and their artwork does not increase in significance or financial value, at least you earned the satisfaction, emotional and spiritual value of the artwork.
Long Term – Entering the world of investing means you are there for the long run, for the large amounts, and in order to make it big. It’s a commitment that requires long-term thinking – patience, vision, compromising, and others. Think about the most well-known long-term investor Warren Buffett. Buying art is the same. You buy an artist’s piece that may take two years to become known, but most likely it will not become significant for 20 to 30 years’ time. It takes time for an artist to develop their technique, agenda, and influence. True art collectors buy the artwork with no intentions to sell it.
Risks – art and angel investing involve risks and uncertainties. Frequently angel investing requires investing in ideas – before any product or market validation -the very early stage in the startup’s life. These angel investors are important to the startup ecosystem because they are taking big risks with their personal financials in order to take the small chance to make the idea a successful company. Brave art collectors are quite similar. They are willing to take the risk and invest their money, effort, and many times reputation on new artists. Think about Paul Durand-Ruel the art collector and gallerist. Durand-Ruel is the one who invested in and supported Edgar Degas, Édouard Manet, Claude Monet, and Camille Pissarro just to name a few. He is considered to be the man who invented impressionism and one Monet said that “Without him, we wouldn’t have survived.”
Who You Invest In – The quality, passion, commitment, and integrity of the entrepreneur or the artist is something that is important both to the angel investor and for the art collector. They both want to invest in someone that is passionate enough about what they are doing and are willing to take all the required steps to succeed. They want to know they are giving 110% of themselves. Artists and entrepreneurs are similar in this sense – they are both motivated by passion – to state something to the world or to solve something important. That is why you want to invest in someone committed to what they are doing.
Support – both angel investors and art collectors cultivate relationships with people – the entrepreneurs and the artists. Beyond money, angel investors help entrepreneurs meet other smart people, open doors by introducing them to other investors, suppliers, and customers. Art collectors will introduce the artists to other collectors, gallerists, and art professionals. Both the angel investor and the art collector care about their people and normally they will consult, mentor, and teach them in order to help them succeed.
Access to Startups and Artists – when you start as an angel investor you are the one who is actively looking for investments. Your deal flow might be limited and you need to build your reputation. Slowly you build your name in the industry so entrepreneurs start to approach you – your deal flow becomes “automatic” in certain ways. Art collectors are the same. When you start collecting you are going to galleries, art fairs, art schools, meeting artists and curators – you are seeking the information and knowledge. The more you become known as an art collector the more exposure you will receive: galleries start to invite you to private events, artists approach you to get your attention and you get exposed to new trends and new artists – you build your artistic “deal flow”.
So I guess it’s no wonder that many investors becoming art collectors as well?