NY Art Exchange What Do We Do? | Apply a Fractional Model to the Art Market | Aggregate Demand | Create Comprehensive Index of Supply | “Meta-Market” Indexed Supply | Enable Cooperative Purchase and Enjoyment of Works Why are We Doing it? | $60 Billion + Market | Fractional model has proved successful in analogous markets | Nobody else is doing it | Capital efficient | Smart people have confirmed various components of thesis | Art is interesting Who Are We? | Jordan Cooper – founder (outward) z General Catalyst Partners z SPP Capital Partners z Dartmouth College | Andy Lawrence – founder (inward) z McMaster-Carr z Dartmouth College Geographic Distribution of Global Art Market UK 27% Rest of EU 27 8% France 6% China 5% Germany 3% Sw itzerland 2% Rest of World 3% Unites States 46% Source: Art Economics (2007) | Total Market = $68.5B | U.S. = $31.5 Billion z NY = 42% of Domestic Transactions z More than 42% of Domestic $ Volume (NY > $15B due to concentration of high ticket sales) Pricing and Target Market Art Economics 2007 | Avg. Fine Art Transaction z Dealer = $136,834 z Auction = $75,655 | Auction/Dealer is 48/52 % of $ Volume Fine Art Dealer Channel 52.30% 33.60% 12.10% 2.10% 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% $0-15K $15-150K $150K-1.5M >$1.5M Price Buckets Tranactions (Not $ Volume) | Target Transactions z $150K - $1.5M is target z % $ Volume in Segment is higher than % of transactions, but no data available Go To Market Strategy | Start in New York (~$15B market), then expand z Physical customer acquisition: art fairs, auctions, gallery openings, charity events • manual acquisition and brokerage while we scale z Market to existing fractional buyers: NetJets, Marquis, etc.. z Focus on getting thought leaders onto platform: collectors will follow z Business development with galleries: acquire as many customer lists as possible, cross market z Traditional ad buys in High Net Worth channels | Key Issues / Challenges z Branding/Positioning: tension between co-ownership and prestige z Chicken and egg: better then most marketplaces, mitigated by manual brokerage z Staying ahead of inventory in the dealer channel may require substantial BD effort How Do We Do It? Competitive Landscape Auction Houses Fractional Companies Art Funds Dealers The Art Trading Fund Artvest The Collector’s Fund Key Partner Pipeline PARTNER STATUS COMMENTS / NEEDS Mei/Moses Index Moses advising Not an investor, good resource on art as investment Sotheby’s - Extensive discussions with # 3 at Sotheby’s and Head of New England - First contact with head of Los Angeles Christie’s VP level contacts, need better No contact yet Relationship with CEO - Extensive contact - Employee #1 interested in a job Relationship with CEO - First contact with multiple dealers - Extensive contact with 1 Phillips NetJets Marquis Jet Ebay Dealers They’ll likely give us a feed, explore BD Need warm intro at higher level 1 degree of separation from CEO Convert into syndicate Convert CEO to syndicate Convert into syndicate Need to find more business savvy in this group for BD NTM Planning QTR Product Hiring Bus Dev Marketing / PR | Product spec, hire engineers, and go | Develop backbone | Develop initial front- end | Launch Full Beta in NY with front-end, back-end data mgt | Close funding | Dealer discussions | Feeds from auction houses | Take customer feedback, add/modify features | Pool customer lists | Marketing deals with fractional companies | Name / brand | Corporate presentation | Warm press channels within industry | Beginning planning PR | Word of Mouth through physical channel | Blog push around Beta | PR launch – aggressively in New York Q2’09 | Customer Support | Develop exclusive relationships with Auction Houses, exclusive inventory, etc... | Raise VC round | Add new dealers | All auction houses on platform | Significant online market testing | Start testing traditional ad channels Q2/Q3’08 | Senior Engineer | Board Q3/Q4’08 | Jr. Developer Q1’09 | Controller | VP Marketing | Sr. Sales Budget: May – Dec 2008 NY Art Exchange Year 1 Monthly Build ($ in thousands) Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Year 1 Revenue Total Transaction Volume $0 $0 $0 $0 $0 $0 $0 $0 $137 $137 $137 $137 $547 Average Transaction Fee % 0% 0% 0% 0% 0% 0% 0% 0% 10% 10% 10% 10% 10% Total 0 0 0 0 0 0 0 0 14 14 14 14 55 Cost of Sales Insurance 0 0 0 0 0 0 0 0 2 2 2 2 8 Shipping 0 0 0 0 0 0 0 0 2 2 2 2 8 Total 0 0 0 0 0 0 0 0 4 4 4 4 16 Gross Profit 0 0 0 0 0 0 0 0 10 10 10 10 38 % Margin N/M N/M N/M N/M N/M N/M N/M N/M 70% 70% 70% 70% 70% Operating Expenses Sales $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Marketing 0 0 0 0 0 0 1 1 1 1 1 1 6 Technology 0 0 0 0 0 22 27 22 22 22 22 22 159 G&A/Overhead 0 0 0 0 0 34 22 27 19 19 19 20 159 Total 0 0 0 0 0 56 50 50 42 42 42 43 324 EBITDA $0 $0 $0 $0 $0 ($56) ($50) ($50) ($32) ($32) ($32) ($33) ($286) Margin N/M N/M N/M N/M N/M N/M N/M N/M N/M N/M N/M N/M N/M Cash Flow EBITDA $0 $0 $0 $0 $0 ($56) ($50) ($50) ($32) ($32) ($32) ($33) ($286) Less Capex 0 0 0 0 0 (30) 0 0 0 0 0 0 (30) Cash Flow $0 $0 $0 $0 $0 ($86) ($50) ($50) ($32) ($32) ($32) ($33) ($316) Cumulative 0 0 0 0 0 (86) (136) (186) (218) (251) (283) (317) (316) Revenue Projections NY Art Exchange Projected Five Year P&L ($ in thousands) 2008 2009 2010 2011 2012 Revenue Total Transaction Volume $547 $7,339 $40,955 $122,864 $327,637 Average Transaction Fee % 10% 10% 10% 10% 10% Total 55 734 4,095 12,286 32,764 Cost of Sales Insurance 8 110 614 1,843 4,915 Shipping 8 110 614 1,843 4,915 Total 16 220 1,229 3,686 9,829 Gross Profit 38 514 2,867 8,600 22,935 % Margin 70% 70% 70% 70% 70% Operating Expenses Sales $0 $261 $689 $1,298 $2,375 Marketing 6 659 978 1,343 2,616 Technology 159 303 473 492 512 G&A/Overhead 159 809 1,030 1,235 1,349 Total 324 2,031 3,170 4,368 6,852 EBITDA ($286) ($1,517) ($303) $4,232 $16,082 Margin N/M N/M N/M 34% 49% Cash Flow EBITDA ($286) ($1,517) ($303) $4,232 $16,082 Less Capex (30) (45) (60) (60) (60) Cash Flow ($316) ($1,562) ($363) $4,172 $16,022 Cumulative (316) (1,878) (2,241) 1,931 17,954 Fundraising | Raising ~$500K z $ toward headcount, legal, platform development, sub-lease space | Milestones for seed round z Completion of web platform z Completion of legal structure z 3 rd party insurance, crating, shipping relationships in place z Launch of Beta in NY z Single digit transaction volume | Who we need z Smart investors like you z The more active the better