How art dealers are like venture capitalists

By Felix Salmon
August 10, 2009

Until now:

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There’s one thing that art dealers and venture capitalists have in common: a severe allergy to “down rounds”. A dealer will never sell an artist’s new paintings for less than the cost of the paintings in the last show, and a VC-backed company will never raise funds at a lower valuation than in the last round of funding.

Until now:

We analyzed the terms of venture financings for 89 companies headquartered in the Silicon Valley that reported raising money in the second quarter of 2009.

Down rounds exceeded up rounds 46% to 32%, with 22% flat. This was slightly better than 1Q09 when down rounds outpaced up rounds 46% to 25%, with 29% flat. The past two quarters are the only quarters since 4Q03 in which down rounds have exceeded up rounds.

The Fenwick & West Venture Capital Barometerâ„¢ showed an average price decrease of 6% for companies receiving venture capital in 2Q09 compared to such companies’ prior financing round.

I don’t know how you’d even begin to do this kind of analysis for primary art-market prices, but it would be fascinating. Have art dealers finally capitulated and started cutting their list prices from boom-era levels? Or are they just offering much larger discounts these days?
(Via Stone)

Comments
2 comments so far

perhaps both focus on moving the smaller/newer stuff instead:

“…For every $100 in auction sales in the second quarter of 2009, Sotheby’s picked up $21.30 in commission revenue – up 41 percent from a year earlier. This increase occurred because there were fewer sales of high-priced lots…” http://www.luxist.com/2009/08/05/sotheby s-cfo-calls-the-bottom-of-the-art-market  /

“US venture capital (VC) investment in cleantech companies in 2Q09 reached $572 million, an increase of 73% in terms of capital, with 48 financing rounds, a 100% increase in number of transactions compared to 1Q09… The Energy Efficiency category grew 168%…” http://www.reuters.com/article/mnGreenIn vesting/idUS115469084520090801

Posted by ac | Report as abusive

This assertion is not accurate.

Art dealers are just as interested in cash flow as other professionals.

In many instances, an art dealer is able to resell a work for less than the what had been quoted the year before and more than he/she had paid for the work.

Posted by starpower | Report as abusive
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