• Opportunities

Driven by his passion for art, Dinesh Vazirani switched from doing a course in electrical engineering to doing one in fine arts. Now, this was something quite unheard of back in 1985, especially for an Indian who had secured a seat at Stanford University. But it was this very passion that later resulted in the creation of Saffronart, the first online art auction portal for contemporary Indian art.

Saffronart was launched in 2000 by Vazirani and his wife, Minal. “I returned to India [from the U.S.] and joined my family’s manufacturing business. But one day, in 1999, I sat down with Minal and tried to figure out if we could fuse art with technology. At that time, there was hardly any information available on Indian art—no catalogues, no auctions. So Saffronart was set up in a bid to build awareness and expand the market for Indian art,” says Vazirani.

Saffronart was a part of Planet Saffron, a company that was launched by the Vaziranis to promote alternative Indian lifestyle products—clothing (Saffronstyle), furniture (Saffronspace), holistic healing items (Saffronsoul) and art (Saffronart). With an initial investment of Rs. 2 crore (mostly
borrowings from friends and family), Planet Saffron started out with 60 designers and artists associated with it.

The focus on Saffronart began with the first online auction held in November 2000, which sold artwork worth $100,000 or Rs. 50 lakh. The latest auction clocked sales of $4.3 million or Rs. 20 crore, with almost a million dollars coming from its recently introduced mobile bidding application.

The initial growth of the company was very rapid, with a marked focus on the international stage. In 2001, the year the company received its first round of funding from ChrysCapital, Vazirani and his team hired a 20,000-square-foot space in Manhattan for an exhibition, spending a stupendous Rs. 1 crore. However, what was to follow was not factored in by the Vaziranis: The dot-com bubble burst in 2001 and the online industry collapsed. And so, in 2003, their business came crashing down.

It was this failure, however, that resulted in the phoenix-like resurrection of Saffronart to a more glorified future. “It is always difficult to accept failure, especially as an entrepreneur. So, this turn of events made us think about whether our business model was right. Finally, we dissolved the other businesses and decided to focus on our core competency of art and technology.”

In 2003, with their backs against the wall, the Vaziranis decided to give one final push to try and salvage the business. They kept the buyer’s premium at a much lower 15 percent, compared to the 25 percent charged by large auction houses like Christie’s, and held a two-day auction. However, that was not enough. They also needed capital as they had bled heavy losses and had to borrow money from Vazirani’s father and banks. This was not enough, though. “Unless it really pinches you, you won’t go that last mile to make something work. So, when my father suggested that I sell the paintings that I had painstakingly collected over time, it broke my heart. But I sold part of my collection and got capital out of it. Fortunately, the art market boomed simultaneously.”

The couple opened a gallery in New York City in 2005. Between 2004 and 2005, Saffronart enjoyed five to six million monthly hits on the art website. There, of course, is a reason for this increased traffic to the web platform. “Ours is the only website that publishes the prices of art pieces. So it kind of became the only place to check art prices at. Our goal was to become a price resource and bring transparency to the art trade,” Vazirani explains.

From 2005 to 2008, the art market hit dizzying highs and fetched historical figures. In fact, art became an investment, and people started punting it. It was also time to upgrade the technology at Saffronart, as that was the crux of the platform. A new technology team was assembled and the online platform underwent an overhaul in 2006-2007. This resulted in a reserved trend—the online auctions started outperforming the physical ones.

Keeping the innovative strain alive, Saffronart introduced a jewelry auction in October 2008. This changed the way the jewelry market functions in India, in terms of the purchasing mechanism and pricing.

The average sales in 2008 were close to $40 million or Rs. 200 crore—less than 5 percent of this coming from jewelry sales. The highest sales were garnered in 2006, when Saffronart managed to sell art worth $55 million. Last year’s recession slashed sales by almost 30 percent.

There were barriers, of course, to Saffronart’s meteoric rise. To begin with, it initially wasn’t easy to convince artists to be a part of an online auction site. So the company started working in partnership with galleries and agents, operating in the secondary market. Also, Vazirani was prudent enough to stock up for tough times by raising capital from Sequoia and Bear Capital in 2007, just before the markets crashed.

Also, being an Indian company playing in the international auction arena, Saffrontart met with resistance. “The notion abroad is that if you are from India, you will not deliver. We built our credibility, therefore, by not compromising on our service and by building confidence in the brand with the help of the catalogue.” The company now has offices in Mumbai, London and New York.

Vazirani’s Dos and Don’ts on the Art Business:

• Raise capital. It comes in handy when in troubled waters—it will help you breathe.
• Be prudent in your expenses. Spending way beyond your budget will lead to getting your fingers burned.
• Be careful about entering new areas and territories. Asses
risks properly.
• Build a platform that you can scale up later.
• Focus on not overstretching too early on in the game.
• Hold your ground during difficult times.
• Try transforming a market.

©Entrepreneur February 2010

Tags:
art, artwork, Dinesh Vazirani, Minal, Saffronart, Vazirani