How Orangenius Seeks to Bind the Fractured Art Universe

selling-art-online

The world of art is fragmented and unstructured. Artists and artist organizations often have to deal with a lot of operational, financial and legal challenges. Grace Cho, a marketing executive who has worked for GE Capital and Nielsen, saw an enormous business opportunity in this market — as did Denis Nayden, former chairman of GE Capital now with private equity firm Oak Hill Capital Partners. They realized that by providing artists access to online tools and processes, they could make the “creative economy” efficient, transparent and user-friendly.

This led to the launch of their start-up, Orangenius, which is a platform that supports artists and artist organizations. Cho is the CEO and Nayden is founding sponsor. While Orangenius offers a series of tools and resources to help support various challenges that artists face, it is also a platform to help them showcase their work and connect with others in the art market.

In a conversation with Knowledge@Wharton, Cho and Nayden talk about their vision of “uniting the creative economy” and how it can benefit both producers and consumers of art.

Below is an edited version of the interview.

Knowledge@Wharton: What is Orangenius and what inspired you to start it?

Grace Cho: Orangenius is a platform to support artists and artist organizations. It offers a series of tools and resources to help support the various challenges that artists and artist organizations face, such as operational, financial and legal. But at the very fundamental level, it’s a platform to help showcase yourself, your work, take good inventory of the creative works that you’ve done, recording all the details, and connecting with others in the market.

Knowledge@Wharton: What was the inspiration? What was the problem you were trying to solve through the creation of Orangenius?

Cho: I could answer that from a personal standpoint and from a market standpoint. Personally, there were two forces at work. Art has always been my savior. It has always come to the rescue and taught me the skills of imagination and creativity, which have served me very well in my career. The ability to problem solve all came from art, I believe. A few years ago, I painted something and I sold the painting. I thought, wow, this is great; I’m going to quit everything. I’m going to become an artist. And I figured out that it is really hard, even for a 25-year veteran of the business world. I was trying to figure out how to navigate through all the complexities. I didn’t even know where to begin. I thought if somebody doesn’t have that business background, how would they even figure that out? I knew firsthand how difficult that was.

And then from a market standpoint, over the course of probably two, almost three years, I interviewed hundreds of artists, organizations and educational institutions, as well as my own friends and had them tell me their challenges. I got a surge of information about the lack of connectivity, outdated technology, lack of integration, how extraordinarily expensive everything is, just a whole barrage of problems that I thought were extreme as compared to some of the verticals that I had worked in already.

“The professors spend a lot of time working with students making sure that they have the right portfolios, but they don’t have the tools to support that.” –Grace Cho

Denis Nayden: I would have used a different word for it. Your question was about a problem that she (Grace Cho) was reflecting on. My reaction was, no, that’s not the word at all. It’s “opportunity.” This world that Grace describes is highly fractionated, lots of different players, lots of different value propositions, lots of different constituencies, completely unintegrated. So, given her training, given my training — process excellence, Six Sigma (disciplined management techniques) — together with a creative view, [I said] ‘Wow, can we create a set of solutions that ties this fractured universe together, make it more efficient, make it more transparent, make it more user-friendly?’ And so as she described her vision of what this was all about, that’s the picture that unfolded.

Cho: From a business leader’s perspective, given my GE training, one of the first things I tried to do — this was two or three years ago — the first question I asked myself was, ‘How big is this market?’ I tried to quantify it. I called my old buddies at a couple of consulting firms. No one knew the answer. Then I did some digging and it was a wide range of anywhere from $300 million all the way up to a couple of billion. I couldn’t get any definitions on what was included, how it was quantified. So I started my own back-of-the-envelope exercise and I came out with a number that was close to $1 trillion. Actually, that was confirmed by a couple of academics, depending on what you include versus exclude, because the $300 million number may only include fine arts. But when you start to include some of the others it can be a very big number.

Once you start to quantify, you see the opportunity in terms of building databases. Given my training at GE and having worked at Nielson, [I found] the databases around people, the talent, the work, the organizations, information about organizations, just weren’t there. It was an opportunity for us to simply collect that information and do something about it.

Knowledge@Wharton: How did you define the market to arrive at the size that you did? And where do you see the opportunity to make the most immediate difference?

Cho: On a macro scale, I look at the market in the following buckets. There’s the freelance market. Then you have small-to-midsized organizations, and then the very large organizations. Each one breaks down into a couple of other categories. On the freelance side you have true freelance people who are out on their own, the fine artists, the photographers. But there are a great number of creative people who belong to organizations, but they’re still individuals who are doing two careers. So I break it up into two. Then you have the small-to-midsized firms; there are a lot of design firms that are two persons to 10 persons. And then all the way up to large organizations which include universities and companies.

We decided to focus on the first bucket and a little bit of the enterprise bucket — the small-to-midsized companies as well as the freelance market. We look at the freelance market from a market standpoint; the more easily understood category is somebody who is starting out versus somebody who’s super experienced. That’s a really interesting distinction because each of them has a different set of needs. I look at those two at the moment, and then the small companies.

Knowledge@Wharton: What is the core value proposition that Orangenius wants to offer this fragmented group of artists?

Cho: Our mantra is “uniting the creative economy.” You have the financial services vertical, energy vertical or whatever vertical, but this didn’t have a name. So I actually searched around and I came up with ‘creative economy’ and it’s met with lots of praise. People like it very much.

“This market also has a love-hate relationship with technology, in part generational. A lot of them actually shunned it for a long time, but it’s now time for them to embrace it.” –Grace Cho

In the creative economy, what’s the value proposition? For me, for Orangenius, it’s not about the actual creative work, but it’s really more about the business of art and providing support and services around that. We break that down, everything from marketing your own work to pricing, evaluation and operational concerns, costs and efficiency. These are typically not spoken of in these kinds of industries. But if you actually translate that to what they’re worried about it’s absolutely on target.

Knowledge@Wharton: It would help to take an example of how Orangenius might work with someone in the creative economy or with a group of customers. Could you talk me through the issues one or more artists might face and how you work with them?

Cho: I’ll start with the educational institutions. We’ve been working very closely with one of the top art and design institutes in New York and we are in the middle of a pilot. We’re considering this for the long-term project right now. The value proposition there is that the professors came up to us and said, “The design students are leaving school, graduating with great design skills. But they have no sense of how the business world works.” So on a very basic, fundamental level, what we help with is a tool that they can provide right as the student is entering the school.

In the welcome pack, they’ll receive the Orangenius package. So from day one they’re beginning to craft their career using this as a development tool. By the time of graduation, what they have are hard assets that they can use — the resume, which we call the bio; artwork curation, which is a record of work that they’ve done and achievements and all the details around it; and, most importantly, a carefully-built set of portfolios that showcase the work that you do in your specialty and expertise.

The professors spend a lot of time working with students making sure that they have the right portfolios but they don’t have the tools to support that. We have that capability on the Orangenius platform. That model can be taken to any art school, and, lately, I’ve been talking to several liberal arts colleges, not just in the area of design, but also actively documenting achievements and building the right portfolio of achievements to go get a job. It seems to be very relevant to not only design schools but liberal arts schools as well. So if you major in philosophy, they want the same kind of discipline.

Nayden: Let me provide a little more color on this particular customer set. By putting in one place all these tools, you’re telling a student that these are all the things you have to do to tell your story, to market yourself, to have a complete picture of what you have to offer. It is in a very professional and methodical way. That’s the corpus.

The other attachment is that by virtue of being on Orangenius, you can transfer that information to everybody in the world who might be interested in taking a look. So get the body of work and the storytelling complete … and then connect depending on who you want to tell your story to. Do you have a whole series of paintings that you want to auction off? Well, there you go. Here are the galleries. Here are the auction houses.

Knowledge@Wharton: If I understand you correctly, the starting point is going to be getting the creators to share their creations on the platform.

Cho: That’s right. And after creators upload their full bio and artwork, artists will realize that they can dynamically create portfolios very quickly and share their multimedia assets with anyone outside of the platform. And of course, by joining, unlike building your own website, we help you get found.

Knowledge@Wharton: That’s the starting point. But the second question is once you have that database of assets, creative assets, how do you make sure that the right audience has access to that? I wonder if you could talk about the distribution strategy, which has to be both broad as well as narrow. How would you manage that balance?

Cho: I’ve thought about this and it’s something that I obsess about every day. Once you’ve built the scale of individuals, the members on the platform, the enterprise accounts are going to be really important. There are companies that are actually looking for talent and they resort to Google to find talent. Can you imagine? There is no formal database they can go to. So if they’re running an innovation marketing campaign or something like that, they often choose the talent that’s nearest and quickly available. They don’t know where to go.

Orangenius gives you the tools to figure out where to get a black and white photographer in the New York City area with this amount of experience. Boom, out pops talent. The schools themselves would like to use this as a database to draw employers into their graduating students and alumni database.

The other interesting conversation about the schools is they don’t have a formal database infrastructure. Many of the major ones list out the alumni and what they’ve done with their careers. This is a platform with which they could do that. It could be very useful for a variety of purposes, for development of existing students, but also for fundraising purposes. So career services folks, professors, they really see the value here.

A key value is the notion of a verified database, the registry concept, or the credit you should receive for your work. It’s very, very important. We can go into this whole legal sphere of conversations. But considering all these changes that are going on in Washington D.C., at the U.S. copyright office, creators are creating because they want credit for it. They want to know that they are verified as the creator of that creation. And when somebody infringes on that or steals that, it’s an incredibly horrible experience for them.

So the notion of us protecting, helping them to protect their work in multiple ways, and that the proper credits have been contributed or attributed, and then the proper contributors have been named against that project [is important], so that all the people involved also get proper credit for it. You could give credit or get credit from it. I think that’s an important piece that’s unique. No one else in the market offers that today.

Nayden: Another aspect is this whole notion of virtual reality. For example, in museums, they have paintings hanging on the walls but most of the records are inside and not documented. Imagine if we capture and document, museum by museum, everything that they have. That’s incredibly valuable to the museum itself. And also to people that are interested in wanting to know what’s there, before they even show up.

“One of the issues that all artists face is keeping track of where their images are — who’s using them, are they getting credit for it every single time? –Denis Nayden

The full scope of the tool is really meant to attract multiple audiences. We want the individual artists to sign up for Orangenius. We want the educational institutes to sign up. We want the enterprise companies to sign up. We are aggregating the information, the story, and the data. We had this panel. We had the soft launch in New York City recently.

Cho: [It was] transformational. Game changer. Major disruptor.

Nayden: As you look at what is available today in this space for all of these different constituents, is this unique? Absolutely. Is it transformational? Yes. Because right now they have a couple of tools that, based on what other people tell us, are completely insufficient. They really don’t do much. The technology that has been created [at Orangenius] in a very short period of time is really pretty special. But will the dogs eat the dog food?

We’re on the cusp and we have a pipeline of discussions with any number of potential partners, customers. And what we want to really zero in on is to land the first two, three notable ones. You’ve seen it in the consumer world and the business world. There are a few innovators and then there are lots of followers. So we’re trying to really conclude the first two or three deals with people that see themselves as innovators in their particular game. Then what we’re hoping is that they become reference-able. When that goes online, then hopefully all the followers will say, “Me too, me too, me too.”

Knowledge@Wharton: What’s the revenue model that will sustain Orangenius in this process?

Cho: I’ve tried to keep it very simple. It’s an annual membership fee that can be billed on a monthly basis. That’s really it. Subscription fees. There may be some additional [fees] at various levels. There’s a pro plan and there might be additional service plans as we go along. The enterprise plan is custom because the database needs integration with their existing legacy systems. It can be a bit complex. But otherwise it’s a pretty simple plan.

Nayden: It is definitely a subscription model. We are going to have different levels of service. The companies and the educational institutions have certain features they want. The [challenge] here is the danger of specializing for every one of your customers; that can get out of hand. So what we have done, at least so far, is to say, “Here’s a framework.” And what we’re trying to do is on the one hand be responsive, but on the other hand constantly push people into the framework, which by the way will evolve because one deal will have a great suggestion and we’ll use it in the next one and so forth.

Undoubtedly there’ll be a unique feature here and there. But we can’t let the custom tailoring of this overwhelm the core activity because if we’re right we’re going to have a lot of people saying “We want to sign up. We want the service. We want our private label.” And you can’t get bogged down into such specialization. I would say that’s a challenge that we’ll deal with down the road. Let’s first get the initial two or three deals.

Cho: I want to make two points that are important with regard to the membership subscription. One thing I discovered across the board, and I can’t say what percent, but this particular space is very startup happy, app happy, so there’s a single function app for everything. And so, if you’re a particular artist or a creative person, you end up signing up for eight of them. Each one does an individual thing and they don’t talk to each other and you have eight different pricing plans. So no wonder they get confused and they get frustrated. We have included all of the essential elements into one platform. So they can choose to build their virtual office, if you will. I think that’s important.

In relation to that, this market also has a love-hate relationship with technology, which is in part generational. A lot of them actually shunned it for a long time, but it’s now time for them to embrace it. They don’t have to love it, but they can at least manage it and use it to their advantage. They can’t ignore it anymore. The guys who are frustrated with this technology boom found it daunting and intimidating. We’ve spent a lot of time on the language piece of the site to make sure that it is very logical and normal logic-based so that they feel comfortable through each of the steps.

Knowledge@Wharton: Let me now turn to the investment part of it. Is this a good investment?

Nayden: Grace and I have known each other for a long time. We worked together at GE Capital and I have a lot of respect for Grace.

But to answer the question, the first point was that the person [Cho] who came to me and said, “I have an idea I’d like to tell you about,” came in very credibly. And my first question to her was, “So what?” To get to the heart of the “so what” she alluded to some of the potential constituents. And then she put in numbers of the players inside each of those constituents and I said, “Oh my goodness.” So this is not such a narrow market opportunity necessarily, although it is a specialty. So that was the second piece of, “Okay, keep telling me, let’s talk some more.”

And then we got into the fundamentals, what are the building blocks of Orangenius. And by the way, this took place over time. This didn’t happen all in one moment. We had these various building blocks. We think the value proposition has to offer artist identification, history, the registration of work. One of the issues that all artists face is keeping track of where their images are — who’s using them, are they getting credit for it every single time? We haven’t talked about it, but ultimately we’re going to have actual IDs attached to everything. This doesn’t exist [now].

We had a whole set of discussions around what are the fundamental tools, the subscription model, and how we would go about building this. Grace said she had assembled a group of advisors who were guiding her on different aspects. I was persuaded that, number one, there was a real need and if we could deliver a usable tool, then the likelihood of acceptance was high. I recognized that it was a brand new [idea] and it was always risky when you were changing the way people behaved. But nonetheless, that’s what transformational technologies do, right?

Two, the use universe, it’s big. As an investor, you look at the valuations that technology applications secure once you start proving that you are in fact getting the eyeballs and you’re getting the subscriptions. These valuations are insane. And so you sit there and you say, okay. Then you do the risk/reward [assessment]. And of course I always ask this question at the end, “What’s the worst that could happen?” And she looked at me and said, “That’s a trick question.” And I just said, “No, it’s not a trick question. The answer is the worst that can happen is that I will lose all my money. That’s the worst that could happen as an investor.”

“We think the value proposition has to offer artist identification, history, the registration of work.” –Denis Nayden

So once I got my head around saying, okay, how much risk on a relative basis is reasonable to take — because we were starting from zero, other than the personal effort that she had put in, which was not insignificant. We had the first round of funding that was meant to cover two years. And [recently,] we both funded an incremental investment each to make sure that we can get through the so-called selling period.

We know exactly what it will mean if we are successful in signing these three clients, these five clients, under these kind of terms. We have a clear view as to what that means. And it’s potentially very attractive.

Knowledge@Wharton: As you build this out, what will be your strategy to scale it up? And what will be some of the yardsticks you will use to figure out whether you’re succeeding?

Cho: I think the greater opportunity for us is really going after the aggregators of creators. That could be the institutions, the schools, the companies that hold a lot of creatives. That’s all an opportunity for us. So if you go after the company or the school you’re going to get thousands of members immediately.

On the one-to-one basis, the power of social media never ceases to amaze me. We put out something on social media regarding our soft launch, and the number of views just within days was breaking all records beyond my expectation. It was unbelievable. And the diversity of attention that we get from across the board, both from organizations as well as individual artists, is enormous. So those are the right methods for scaling.

We’re going to stick with the U.S. first. But I’m really excited about going global too. But that’s probably a year, year and a half away. I’ve already gotten interest from global organizations both in Europe as well as in Asia, Latin America too. Just got a call from Chile the other day. I said, “Not yet, we’ve got to do the U.S. first.”

Nayden: The way I look at it, based on the numbers associated with a given institution, as soon as we sign up the top, influential one in each of the constituent sectors, we reference it widely and aggressively go after [their competitors] …. It’s just the way of the world, anyone making a commercial decision doesn’t necessarily want to take the first risk. But once they know you have a proven product with the good housekeeping seal of approval from people that are preeminent, the chances are that a lot more folks will just say, “Okay, me too.” So that’s part of the rationale and logic.

But first things first. We’ve gone through the developmental stage. We’ve gone through the piloting stage. The more interaction we have with our potential customers and then our customers, we will constantly be adding tools. That will change the nature of the offering and the pricing policy. That will evolve.

Knowledge@Wharton: What is the long-term dream and vision for where you could go with Orangenius?

Cho: I want it to be the destination of all creative businesses and individuals and industries where it’s really the source of talent and information. It helps, in a multimedia way, to elevate the conversation beyond what is everyday. I’m going to get a little bit philosophical now. Art is what makes us uniquely human, in my opinion. We’re the only animals on earth who actually consider art as something. And for us to not make time for it is rejecting our potential. So I think there’s lots of beauty and creativity. I often go to the MoMA (Museum of Modern Art in New York) to solve problems. I stare at a painting and then all of the sudden I have an idea. So that escape, that sense of being in this environment, really helps to raise your level of consciousness. And I think that’s good for all human beings and it really forces you to reflect.

In the future, what I’d like it to be also is a place where regardless of economic background we can provide the insights and the tools to help you start a career and be confident about it. A confidence builder. Somebody actually described our tool as that, that regardless of your background or wherever you are, if we provide the right toolset then you can dream and make things happen. So that would be wonderful — if we could be an instigator or a catalyst for that entrepreneurial spirit.

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