* Investor Education
  + 
* Art & Collectibles
# Masterworks -- Fractional investing in Fine Art
Masterworks offers fractional investments in fine art from prominent painters like Banksy and Andy Warhol. Notably Masterworks also offers a secondary market, potentially offerings some liquidity to investors prior to the expected 3-10 year hold time. The website and investor resources are excellent, though prospective investors should note the substantial fees that may reduce their return.
#### Our Rating
 Very Good
### Masterworks
* **Founded:** 2017
* **Investment Types:** Art & Collectibles
* **Sectors:** Fine Art
* **Minimum Investment:** $10,000
* Open to all investors
###### Pros
* Secondary market
* Services available across the entire US, catering to various property types.
* Low investment minimums
* Low market correlation
###### Cons
* Opaque fee structure
* Short track record
## Overview
*This Masterworks Review will help you learn more about Masterworks's investment offerings,
including how the alternative investments on Masterworks are structured, and what your potential returns might be.
You can read more about the criteria we use to review investment platforms
.*
Masterworks offers fractional investments in fine art, often from well-known painters like Andy Warhol and Banksy. Masterworks was founded in 2017 by Scott W. Lynn, previously the founder and chairman of Payability. According to Masterworks:
> [Lynn] has been an active collector of postwar and contemporary art for more than fifteen years and has built an internationally-recognized collection of Abstract Expressionism that has included works by Clyfford Still, Barnett Newman, Mark Rothko, Willem de Kooning, and more.
Fine Art has long been a popular alternative investment among the wealthy, and as with many other asset classes, is now much more accessible to everyday investors.
As is common with many private investment funds, Masterworks (specifically the network of related entities owned and controlled by Mr. Lynn), is entitled to substantial fees (some tied to performance, some not) associated with investment on Masterworks. Before investing, you will need to decide whether those fees are reasonable compensation for strong performance. Put another way: if you trust Mr. Lynn and his team to acquire paintings that will appreciate by more than enough to cover the sizable fees and still deliver a strong return, then Masterworks may be a good option for adding fine art to your portfolio.
### Is Masterworks legit?
Yes, Masterworks is “legit” in the sense that it is a legitimate US business offering a legitimate alternative investment option to any investor. Fine art is a legitimate alternative investment asset class, and there is .
## Types of investments Masterworks offers
When you invest on Masterworks, you’re investing in fractional ownership of a specific work of art. According to Masterworks they intend to hold the art works for 3-10 years and then resell at a profit, though they also offer their own secondary market where you can buy and sell individual shares.
Masterworks has  such as Andy Warhol, Banksy, Monet, and Jean-Michel Basquiat.
## What do you get when investing with Masterworks?
When you invest in an offering on Masterworks, you’re investing in fractional ownership of a specific collectible or work of art. As an investor, you receive a membership interest in an LLC, which is what actually owns the underlying art work.
## How does Masterworks make money?
There are no direct fees charged to investors on Masterworks. That said, under the hood Masterworks is a complex web of interrelated entities, many of which earn compensation from others. For example, “Masterworks Gallery LLC” is paid 11% of the purchase price of any artwork, “Masterworks Administrative Services, LLC” receives the equivalent of 1.5% of the shares in the LLC annually (with existing shareholders diluted accordingly), and Masterworks itself also earns 20% of the profits when a painting is sold. Notably all of these entities are owned and controlled by one person, Masterworks founder Scott Lynn.
Prospective investors should review the details of the specific offering () to be sure they understand all of the fees associated with the offering.
## Potential returns and cashflow
There is no ongoing cashflow on investments made with Masterworks. Investors receive a return (if any) when the painting is sold, which according to Masterworks is expected after a 3-10 year hold period.
Masterworks publishes a  showing performance for a number of artists, and their home page references contemporary art appreciation of 14% compared with 9.5% for the S&P 500 for the period from 1995-2020.
## Breadth of offerings on Masterworks
As of this writing, there are 3 current offerings available on Masterworks, and they have previously offered 52 paintings. The “price appreciation for similar works” for the current offerings ranges from 17-22%.
Investors should note that their actual return will likely be quite a bit lower than the raw appreciation of the painting at auction because of various fees and expenses paid to Masterworks entities, as well as the 20% profit share that Masterworks earns when a painting is sold.
## Regulatory framework
According to Masterworks, “Year to date, less than 2.2% of artworks we reviewed passed our diligence process.” Art selection is heavily driven by the founder, Scott W. Lynn, including “various outside consultants and advisors that Mr. Lynn has worked with in his personal collecting”.
Investments on Masterworks are offered through , “Tier 2”. Reg A+ offerings must be registered with the SEC, including detailed offering circulars, and offering firms are subject to a number of financial disclosure requirements.
*This review was first published on 13 September 2021.*
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* Venture
# MicroVentures Review
Founded in 2009, MicroVentures was among the very first online venture-investing platforms. They offer  crowdfunding investments open to anyone (via First Democracy VC), as well as several additional investment options for accredited investors, including shares in late-stage private companies like Dropbox, Redfin and Docusign. With an emphasis on due diligence and personal outreach to every investor, Microventures is an excellent choice for someone looking at startup investing.
### MicroVentures
* **Founded:** 2009
* **Investment Types:** Venture
* **Sectors:** B2B, Cleantech, Entertainment, Gaming, Media, Mobile, Social Media, Software, and Technology
* **Minimum Investment:** $100
* Strong track record (founded in 2009)
* Emphasis on due diligence and curation of investments
* Registered broker-dealer and Title III Funding Portal (via First Democracy VC)
* Wide selection of investments
* Number of open Reg CF opportunities can be low (only 3 at time of this writing)
* Sheer breadth of choices can be overwhelming (lots of types of offerings, partnerships, funds, etc.)
* Startup investments are already inherently risky and illiquid, and additional uncertainty around cannabis industry adds to that risk
*This MicroVentures Review will help you learn more about MicroVentures's investment offerings,
including how the alternative investments on MicroVentures are structured, and what your potential returns might be.
MicroVentures was among the very first online venture-investing platforms. Founded in 2009, they started by offering traditional angel and venture investments to , but in smaller dollar amounts and exclusively online. They now also offer  investments which are open to all investors, and generally have lower minimum investment amounts.
They have a strong track record and history, including having offered investments in Facebook, Twitter, and Yelp before each went public. They’ve done more than $100M in transactions, and the MicroVentures platform also powers FirstDemocracy VC, the new equity crowdfunding feature of IndieGoGo (all Reg CF offerings on MicroVentures are also offered via First Democracy VC).
## Types of investments MicroVentures offers
Microventures offers investments in startups. Most are for early-stage startups, but some investments (most open only to accredited investors, and offered under ) are for later-stage companies that have arguably outgrown the “startup” moniker (eg, Dropbox) but are still private companies. They have an admirable portfolio of funded companies, including Birchbox, Bonobos, Cloudera, Instacart, and Lyft.
Microventures also periodically offers some investment funds, which offer a good value for accredited investors to gain exposure to a diverse portfolio of venture-backed companies for a relatively low investment amount. ( is also worth a look if you’re looking for a low-minimum way to invest in a venture fund).
## What do you get when investing with MicroVentures?
The specific security an investor will receive depends on the investment, and varies quite a bit among the investments available on MicroVentures. For example, among the the 3 Reg CF offerings open at the time of this writing, one was for common stock, another for a revenue share, and a third for a promissory note to be paid back out of future revenue. Other investment types offered include equity, debt, and convertible notes.
With Reg CF investments, investors always receive a security directly from the company (whether it’s a promissory note, common stock, or some other variation). With Reg D investments (the ones open only to accredited investors), the investment may be through a special-purpose vehicle such as an LLC.
Influenced no doubt by the affiliate with IndieGoGo, many of the Reg CF investments offered via First Democracy VC, their Title III funding portal, also include various rewards at different investment levels (for example, one active investment for a film offers red-carpet access to a premier to those investing $2,500, whereas $100,000 will get you an Executive Producer credit on the film).
## How does MicroVentures make money?
MicroVentures takes a 5% fee from investors from each successful raise (plus 5% from the issuing company), and charges 10% in carried interest.
Investments on MicroVentures are high-risk investments in startups. While some debt and revenue share investments may offer some ongoing cash flow, most of the investments have no explicit expectation of payments, dividends, or other cash flow. Except under very limited circumstances, Reg CF investments must be held for at least 12 months, with minimal expectation of any secondary market for the investment after that. Most startup investments lose some or all of their value. While some investors achieve excellent returns from startup investing, that is a rare outcome and requires substantial diversification over time combined with very careful investment selection.
## Breadth of offerings on MicroVentures
MicroVentures offers something for almost anyone. (Indeed, the array of choices can be dizzying to a newcomer to the site). Their featured offerings are their Reg CF investments (offered through First Democracy VC, their partnership with IndieGoGo), which are open to anyone. They also offer various investments via Reg D, which are only open to accredited investors, including secondary offerings in companies like Dropbox and Docusign.
MicroVentures also occasionally offers investment funds (I personally invested in one targeting a number of late-stage startups expecting a liquidity event on a 1-3 year time horizon).
MicroVentures is an SEC registered Title III Funding Portal, which means they are subject to a range of rules and obligations around investor education and due diligence. All companies offering Reg CF investments on MicroVentures will have been through background checks of key officers and owners, and there are links provided to the relevant SEC filings made by the offering company. Prospective investors also have access to online forums to talk with other investors, and an online channel for asking questions of the company raising funds (and viewing answers of prior questions from others – see screenshots below).
MicroVentures is also a registered . Broker-dealers are subject to specific due-diligence requirements to ensure an investment is “suitable” for their registered customers, or they can face fines and civil action. (That does not of course provide any guarantees about investment return or performance!)
Overall they place a major emphasis on their curation role in evaluating and selecting companies to offer as investments. When you first register with MicroVentures, they will schedule an initial phone call to discuss your situation and objectives.
*This review was first published on 25 March 2017.*