The online auction site eBay got its start when a Tufts University graduate wanted to help his fiancee buy and sell Pez dispensers, according to legend. Now, almost two decades after eBay’s founding, a Boston company called Invaluable thinks the next growth phase for auctions is about Picassos and Peking Glass snuff bottles.
And last week, the company raised $33 million in new funding to build more recognition among collectors of art and collectibles.
EBay has long been established as an e-commerce destination — albeit one that these days focuses more on “buy it now” instant gratification than the adrenaline rush of a real auction. But Invaluable and several other startups, including New York-based LiveAuctioneers and Paddle8, are vying for a piece of the live auction market, where bids are made in person with paddles, via phone, or with a click. And some of the biggest names in the auction business, like Christie’s and Sotheby’s, are pursuing their own strategies for bringing bidding online.
Invaluable has already attained decent consumer awareness, selling items like jade bracelets, Manet watercolors, and Orson Welles’ mink coat from “Citizen Kane” ($100,000). Chief executive Rob Weisberg joined the company last year, and he talks about turning Invaluable into a NASDAQ-like market-maker, supplying data and facilitating transactions. “This has been a very opaque industry,” says Weisberg, who previously held top marketing jobs at Zipcar and Domino’s. “It hasn’t changed for a thousand years.”
The company, originally known as Artfact, was founded in 1989, then acquired in 2003 by Adam Kirsch, who had a very successful stretch as one of the early partners at Bain Capital. Kirsch says that when he started buying art, often perusing galleries on Newbury Street, it was frustrating to try to establish what a piece was really worth. How much had similar pieces by the same artist sold for in the past?
Artfact collected auction catalogs, scanned photos, and placed phone calls to auction houses to see what items had sold for. Before long, it had an unmatched database of what people paid for art and collectibles; today, it has records of nearly 60 million sales, and subscribers such as the Museum of Fine Arts, Smithsonian, and Internal Revenue Service, which just loves to verify the value of stuff people own.
But once Artfact began proving its value to the art world, it began branching into other services, such as offering ways for auction houses to promote listings to a broader audience. Initially, that happened through a partnership with eBay, and Artfact was the behind-the-scenes player.
But when eBay decided to kill the live auctions section of its site, Artfact built its own site for bidders in early 2009. After Weisberg took over as CEO in 2013, the company adopted the name Invaluable.
Some elements of the live auction business can still feel a thousand years old. When you bid on a pair of whale’s teeth engraved with nautical scenes (estimated price: $200 - $300), there has to be an auction clerk actually in the room waving a paddle on your behalf.
If you win, you pay a commission to the auction house — often about 20 percent — and another three percent to Invaluable. Then, because most auction houses don’t ship, you have to figure out how to get it within a week, or you get hit with daily storage fees.
For auction houses like Eldred’s, which offered the whale’s teeth, Invaluable helps them reach a global audience. “Online bidding is about 30 percent of our business today,” says John Schofield, president of the East Dennis firm. “You can’t afford not to be online now.”
Schofield recalled a bronze figurine that the auction house estimated would sell for $200 to $300. But two online participants in Europe recognized the piece as far more valuable and bid up the price. “It went for $10,000,” said Schofield.
Though Invaluable’s name-recognition is still fairly low, the new funding could change that. The company has 85 employees, and plans to add about 30 more by the end of the year, Weisberg says. Sales doubled last year, and he expects a faster growth rate this year.
The company is profitable, Weisberg says. The challenge, however, remains to turn more of the site’s visitors into active bidders.
A new partnership between Invaluable and eBay will bring live auctions back to eBay, and this time, Weisberg notes, “They are reaching out to us.” Other e-commerce players also see the potential for live auctions. Amazon.com is one worth watching.
Paddle8 recently sold a giant egg painted by artist Jeff Koons for $900,000. Venture capitalist David Frankel, an investor in the company, says the startup and others are “replicating this white glove type of business online,” creating a larger market for what had been perceived as “an upper strata activity.”
What’s certain is that all this digital action is changing the dynamics in the real-world auction saleroom. “Fewer and fewer people are actually attending the auction itself,” says Schofield at Eldred’s. “It used to be that auctions were more entertaining. But you can’t really entertain or interact with the people bidding online.”
What could change that? Live-streamed audio and video. Invaluable already does some. But you may some day soon be 3D printing your own paddle, and waving it at your webcam when the auctioneer chides you for being too cheap.