Scott Lynn is best known these days for moving art investing access from select wealthy circles to everyday investors. His company Masterworks is the most successful fractional art investing platform, boasting over 811,000 members and over $880 million in artwork under management.
While Lynn’s journey to growing Masterworks from a fledgling startup to a unicorn is compelling, few know that he is a serial entrepreneur and that Masterworks isn’t his first rodeo. In fact, after examining his story, his founding of Masterworks seems almost pre-ordained.
Gaming At 15
Lynn’s entrepreneurial journey began when he was 15. In the late 1990s, the internet was new and there weren’t many games online. Lynn channeled his enthusiasm for gaming by creating a sweepstakes game, titled Treeloot, with a friend.
“Everyone from that time remembers these ‘punch the monkey’ banner ads,” he says, “and we became the number one advertiser online. We became a top 17 website.”
Treeloot’s premise was simple. Players clicked a tree to unlock prizes that the company would physically deliver to their addresses. While the number of winners was low, Lynn’s website raked in cash thanks to banner ads and the mountain of traffic that the game generated.
Treeloot’s success spurred another interest. “My mom always loved drawing and I guess I was an artistic kid,” Lynn says. His entrepreneurial spirit pushed him to seek non-traditional ways of investing his cash, pushing him toward the art market.
“I remember the first great painting I bought, which was a Marc Chagall painting titled Le Pont Neuf. That was the first great painting that I bought,” he says. “I think I paid $325,000, which was a big number for me back then.”
Lynn eventually moved on from Treeloot. The game’s advertising-driven success opened possibilities in the internet’s nascent digital advertising space, and Lynn was primed to make an impact there.
Ad Marketplace Giant
“I think we definitely made an impact on the early days of digital advertising,” Lynn opines. In the early 2000s, Lynn rode the dotcom boom and bust cycles to his advantage by founding AdKnowledge. His competitors were some of the biggest names of the time.
Google (still a startup), Yahoo, and MSN occupied the top three spots in the rankings, with a whole host of companies battling for the fourth spot. Lynn’s company eventually occupied that spot, growing to $300 million in revenue.
Looking back, Lynn attributes this success to a good strategy. “I think the thing that’s most important in any business is fundamental strategy. I used to think it was about execution, but strategy matters much more,” he says. “I still think the ability to move quickly is critical, but you have to have a strategy that’s pointing you in the right direction to get there.”
As AdKnowledge grew, Lynn’s passion for art grew with it. Aside from his interest in art, he now had the resources to build his collection. “I was buying art when I was as young as 19, 20 years old,” he says. “I kept buying and lots of collectors know this, but you know, your taste sort of evolves, just like anything.”
He did make some mistakes though. Lynn points out an example of buying Picassos basing his
purchase on the artist’s name alone, something he feels is a common mistake. “Picasso, during his lifetime, made 65,000 objects,” he explains. “So just buying a Picasso in itself isn’t really significant. You really have to buy the right object.”
In his business life, Lynn acquired and sold several companies in adtech and martech, and by 2012, he was ready to tackle another challenge.
Tackling Ecommerce Merchant Payments
Ecommerce exploded worldwide in 2011. Worldwide sales stood at $144 billion in 2008 and exploded to $317 billion in 2013, a rise of 120% in just five years. Accompanying this rise were small merchants selling on marketplace websites like Amazon.
While these channels generally yielded sales, cash flow was an issue. Amazon famously delays payments for 60 days, 90 for some product categories, creating major cash flow holes for small merchants. Lynn spotted an opportunity, and with Keith Smith and Alberto Simon, launched Payability.
The company grew steadily as ecommerce continued to grow and has paid out over $6 billion to Amazon sellers to date. In the background, Lynn channeled a significant portion of his wealth into art and traditional opportunities.
“I’ve always followed a barbell principle when I have extra capital,” he says. “I put it in super conservative stuff, and then I try to make bets where I can control the outcome or where I have domain expertise. That’s usually how I still think about investing.”
By this point, Lynn had been investing in art for close to 20 years. He had built connections in the market and realized he was in a unique position.
Masterworks
“Most people who have that experience from the art market, just don’t understand finance generally,” Lynn says. “They don’t understand how to run a retail platform, kind of the customer acquisition dynamic associated with that.”
Given its trillion-dollar size, Lynn figured the art market was too good an opportunity to pass, and Masterworks was born.
Lynn sat at the intersection of the art market and investing and recognized ordinary people had plenty of issues he faced when he began collecting art. “The art market has never had this price database where you could figure out whether what you’re paying for something is a good deal or not,” he says.
The proprietary data collection and analysis methods of Masterworks’ acquisitions team are among the platform’s biggest draws. As other fractional art investment platforms have begun entering the market, it’s Masterworks’ use of data that continues to set the company apart.
Masterworks is on pace to have $1 billion in assets under management in 2024, a staggering achievement.
A Successful Entrepreneurial Ride
Lynn credits his success to adapting to changing conditions and learning on the go. As Masterworks continues to grow, there’s no telling where Lynn will turn his attention next. Wherever he goes, he certainly has the entrepreneurial chops to succeed.