How ARTA Pivoted from a Collectibles Marketplace to a Logistics API and Passed $30K a Month in Its Second Quarter (Interview with CEO Adam Fields)

Introduction and What ARTA Does

Nathan Latka

00:00Hey, folks. My guest today is Adam Fields. He's the Founder and CEO of ARTA, the Shopping Cart for Collectibles. Before joining the company, was VP at artspace.com, where he became hyper aware of the difficulties and high friction nature of transactions for collectibles and unique objects. Today, arta is used by market leaders in the collectible space across auctions, merchants, and marketplaces worldwide. He holds a BA from the University of Wisconsin Madison. Though he grew up in Downtown

00:27Chicago, he has called New York City home for the past ten years. Adam, you ready to take us to the top?

Adam Fields

00:32>> Let's do it.

Nathan Latka

00:33Alright. So what is what does it mean to be a shopping cart for collectibles? Yeah.

Adam Fields

00:38>> So the whole idea here is that the the collectible ecosystem in our mind is really one of the last segments of retail to be transformed by the Internet. And one of the core reasons for that is because the high friction nature around the transactions. So what we're really trying to do is provide marketplaces, auctions, and merchants in the collectible and high end value space. So art, furniture, antiques, jewelry, baseball cards, etcetera, the ability to build their

01:05>> businesses on our digital infrastructure. And what that really means is it allows these sellers to transact easier so that you can combine an item with the cost of shipping to have a more contained transaction. It allows customer or sellers rather to sell and reach their customers globally by automating and scaling their fulfillment function. And then what that does too is opens up post purchase visibility and order tracking for all stakeholders.

Pivot from Marketplace to Integrated API

Nathan Latka

01:29Would you call yourself I mean, you call yourself a marketplace then or no?

Adam Fields

01:34>> We started as a marketplace and pivoted pretty hard away from a marketplace more towards an integrated option as we saw people needing an end to end solution. So we really have an an integrated API that allows an online platform to go from click to inquire to click to buy.

Business Model and Who Pays ARTA

Nathan Latka

01:52So so who's paying you then? The sellers of the art or the buyers of the art?

Adam Fields

01:57>> Well, it's it's much more than art obviously, but it's really a B2B2C type transaction. So we're integrating with a merchant directly, an auction house directly, or a marketplace directly. They then can surface shipping costs, automate their entire checkout and fulfillment process, and stay in touch with their customers once orders have shipped and have been on their way. So we're being paid for our software by the merchant or the seller. And then on the transaction, we're taking

02:26>> some margin services, whether that's shipping or insurance.

Nathan Latka

02:32Yep. And these I mean, you have big brands using folks like Sotheby's, for example, use your tool to manage their their you know, both sellers, buyers, transactions, the whole the whole back end API.

Adam Fields

02:42>> Yeah. Exactly. You know, so we're having some pretty large customers and enterprises building their digital businesses on our infrastructure. So it's it's it's an exciting time.

Pricing Structure and API Call Model

Nathan Latka

02:52Interesting. Okay. So tell me a little bit. Mean, how should we think about what these customers pay you on average per month to use the tool? What and what do you price against? Is it is it number of unique SKUs processed or something else?

Adam Fields

03:04>> Yeah. So we charge based on API calls. We have a a free model for nonintegrated customers, which is mostly for smaller teams or folks without technical capabilities. For larger teams that are trying to really build a a a custom solution to automate their entire flow, we do charge based on usage, and that usage is both on API calls and then, seats as they start to scale up.

Nathan Latka

03:29How many API calls can someone use this for, like, for free? So what? A thousand a month is free or something different?

Adam Fields

03:36>> So we don't offer any any API API calls, for free. The the less less integrated you are, the less you pay. You can ship a million items a month if you're doing it on your own. If you're really trying to to to get a little bit more automated with your workflows, trying to optimize your team and overhead, We then try to transfer some of that value onto our technology, whether that's automating pre sell estimates, automating emails

04:02>> and post sale communications. We charge against a variety of calls on pricing, tracking visibility, etcetera.

Nathan Latka

04:09Okay. And I wanna go back, Adam, and get more of your backstory here, sort of how you got into this. We sort of jump right into current state of of of things, but you learned a lot early on. You moved away from marketplaces. But before we go there, I mean, so so what's sort of the sweet spot? Right? Like, what's the what's the average customer gonna pay you per month to use the technology, the API technology?

Adam Fields

04:25>> API technology, if you're a prelaunch customer and you're

Nathan Latka

04:28trying to get to market faster and don't really wanna have

Adam Fields

04:30>> to build out all this infrastructure, hire all the internal teams, etcetera, it it'll start at a couple $100 a month. If you're a a large team that might have 25 to 50 people and are really trying to change what your overhead and some costs are, that'll run higher. The more you ship, the more you transact, the more you'll pay, but the less on a unit level. And so we're quite well aligned and we wanna do well

04:56>> when our customers do well.

Nathan Latka

04:57Adam, I just have no context. I don't know the space at all. What is a team of 50 people? How many API calls might they be making per month?

Adam Fields

05:05>> It depends on how a customer would utilize the API. I mean, we're really sitting presale transaction and post sale. So sometimes an auction or a marketplace might wanna show their customers what it would cost to ship and fulfill before they buy something to try to build trust and create a more seamless transaction. Sometimes people might wanna just fold it right into the transaction themselves to make for a more seamless checkout. So it really depends on how

05:30>> customers wanna orient their businesses. But we do see a pretty clear ratio between, you know, calls to transactions that we try to articulate to our customers as we go through the purchase and evaluation process.

Nathan Latka

05:43Interesting. So so what is before we again, we'll go to the box for here in a second. But, like, I guess in November, how many total API calls did you process? Are we talking, like, hundreds of millions or, like, a million or, like, 10,000?

Adam Fields

05:53>> No. No. No. We're talking more in the in in the 10,000 range. We we launched our our new product in q two, and we launched with a pretty, you know, focused set of customers. You mentioned a few of them and are really starting to grow with them month over month. We launched in in April and have pretty much doubled, you know, quarter over quarter since then.

Nathan Latka

06:16In terms of number of API calls?

Adam Fields

06:18>> In terms of overall revenue.

Nathan Latka

06:20Oh, revenue. Yeah. No. That's great. So so and and just be I mean, one of the things I like to do before going into calls is just look at founders pricing pages and go, do these guys have a shot? Just based off pricing alone. The highest NDR companies today, they almost always have this number of API calls, right? That's the utility based metric and the number of seats. If you can align value directly to your product

06:43value directly to the subbies of the world, I gotta imagine your net dollar retention is just gonna be through the freaking roof if you're doing a good job for your customers.

Adam Fields

06:52>> I think that's right. And I think that's also I like to say the problem is the opportunity, and the opportunity is the problem. This kind of collectibles market is is so antiquated. And and really the struggle here is trying to find customers that have recognized that they need to digitize their businesses. So trying to have people understand what an API is, how they can integrate it into their business and see the benefits, not just for themselves,

07:15>> but for their customers too, is really kind of why the the the timing is starting to align in the market.

Founding Story and First Line of Code

Nathan Latka

07:22Interesting. Okay. Take me into the backstory here. You mentioned you just launched this in April, but when did you write the first line of code for the platform?

Adam Fields

07:28>> The backstory here is that I previously, as you mentioned, was part of the founding team of a of a marketplace called artspace.com, which is trying to make collectibles more accessible to a broader audience. And really, there saw how high friction and and difficult these transactions were, but also how difficult it was to build these types of businesses online. So we saw that there was a huge fragmentation across the vendor base that can allow sellers to connect

07:53>> with a vendor to ship these items. Again, we're dealing with collectible and high value items. This isn't just a I need a shipping label. Here you go. This is more specialized packing and insurance and services

08:04>> to get from point a to point b. So there's not really a consolidated solution. So what we really saw is that if you can build a consolidated solution to connect merchants or sellers with those specialized service providers, all of sudden you're taking a ton of the legwork out of the entire process. So as a marketplace, we really were aligning towards that. Over time, we kinda saw, well, people want to take that providers, but they also want

08:29>> a full integrated automated and scalable end to end solution that can really open up these digital any time.

Nathan Latka

08:34I'm just to jump in the timelines. Alright? So you left Art Space back, I think, in 2014, right, and jumped right into arta. So 2014 is sort of, like, first line of code, I guess. First experimentation started back then.

Adam Fields

08:44>> Mid twenty fifteen was first line of code in the for the marketplace model. Okay. Then we transitioned right before COVID, we said, you know what? This is this is working, but it's really not the the big, you know, high high size outcome that we want here. So we're gonna go more towards this integrated b to b platform sell.

Pre-Pivot Marketplace Revenue and Take Rate

Nathan Latka

09:04Wait. That's a bold move, Adam. I wanna dive more into that because it takes a lot of courage to move away from a whole business model. Right? So, like, let me let me dig here for a second. So it's working. Sounds like it was good, but it wasn't great. What was good? I mean, how can you share, like, what was revenue pre COVID?

Adam Fields

09:18>> Revenue pre COVID, were doing a couple $100,000 a month, you know, again, working with some of the largest, you know, more offline merchants in the space. But we saw that that it was really trending towards digital, towards e commerce. We wanted to open up these digital channels, and a marketplace model made it a little bit difficult to do that. You're dealing with people that are a little bit antiquated in how they act. So if you can

09:42>> find a way to more deeply embed yourself into these operations, all of a sudden, you're you're becoming a more scalable and sticky solution.

Nathan Latka

09:49So just to be clear, when you say, like, pre COVID in 2019, you're doing a couple 100,000 per month, was that GMV going through the marketplace or was that your cut?

Adam Fields

09:57>> That was GMV going through the marketplace.

Nathan Latka

09:59So you were making what? Five very small 10% of $200,000 or $300,000 a month, something like that?

Adam Fields

10:04>> No. We were making like 10 to 20%.

Nathan Latka

10:07That's a healthy Yeah. Take

Adam Fields

10:09>> No. It it was a good take rate for a marketplace. And and again, it wasn't that we we thought that model was super successful, but we saw the largest opportunity was really trying to align with these larger customers. And and we built a product that all of a sudden allowed us to integrate with the artsies of the world, the largest digital collectibles marketplaces, the Sotheby's of the world, the largest auctioneers in the world. So really, we

10:30>> were struggling to find that product market fit with some of these largest the largest customers. So really reoriented product and solution around that.

Nathan Latka

10:39Mhmm. Mhmm. Yeah. That's really, really interesting. I would say though, that is healthy I I I see a lot of marketplace models. It's very rare you see someone be able to get away with a 10% take rate. So the value is clearly there. What did you communicate to the team? I mean, how did you get everyone on board by saying, you know what, we're killing this $30,000 a month business in terms of gross revenue?

Adam Fields

10:58>> I mean, it it it at at the one on the one hand, it was very easy. On other hand, there was a lot of kind of transitionary period where we needed to to to really hunker down and build something without a lot of the reward. The the good news was that during COVID, there wasn't a lot going on anyways at the very early stages. So it was a very opportune time to go heads down and build.

11:19>> But I think people saw that it was the right solution, and now we're starting to really see the fruits of our labor in that decision.

Funding History: Pre-Seed, Seed, and Seed-Plus

Nathan Latka

11:25Take me back to how you chose to fund this. I don't think you've bootstrapped. You chose to raise early on. What was the first round?

Adam Fields

11:32>> The first round was we did a million dollar pre seed round. I think that was in like fifteen, sixteen area.

Nathan Latka

11:39Mhmm. And and was that sort of, you know, a million on a five cap note sort of pretty standard?

Adam Fields

11:43>> At the time, you know, the venture landscape has changed so much. I think at the time,

Nathan Latka

11:48that was, like, one on a four

Adam Fields

11:49>> or five post, which which I think was a pretty large pre seed check at the time.

Nathan Latka

11:54Big for 2016.

Adam Fields

11:57>> Now that's a one person haven't even thought about a product. I just have to founder an idea kind of.

Nathan Latka

12:03Pre revenue. Yeah. No track record. Yeah. Yeah. Keep the story going here. So you raised a million. You're experimenting the marketplace model. What what was the next round after that?

Adam Fields

12:12>> Then we we started to see some pretty solid growth on the marketplace side, raised a $3,000,000 seed off of that, and that was in about the 2017 to 2018 range. Continued to to grow pretty well. But, again, like, saw a little bit of friction in trying to really land these these larger enterprise type customers and really start to scale these these ecommerce operations.

Nathan Latka

12:37Mhmm. Take and then keep going forward. You raised additional capital, I think, recently.

Adam Fields

12:43>> Yeah. So, you know, around end of twenty nineteen and beginning of twenty twenty, we said this what is we're gonna do. We're gonna go for it. We're gonna we we we conceptualized this product. We started to build it. We started to to pre sell it, raised a a $4,000,000 seed, seed plus, whatever you wanna call it, really around this new direction, which was which was which was quite successful. That allowed us to continue to accelerate the

13:05>> build of the product, pre sign a bunch of these customers, get that product to market. And now since it's been in market, we're seeing some pretty rapid growth since we launched it in q two and see kind of that product market fit point really starting to come at us pretty hard, which is both exciting and terrifying at So the same

Nathan Latka

13:25about 8,500,000 total raise to date then? Yes. Okay. Very cool. Now talk to me today about customers. Right? So, obviously, you had a relationship with customers via the marketplace, but how many customers do you have on your new sort of API product, your seed based product today?

Current Customers and Enterprise Focus

Adam Fields

13:40>> Yeah. So we really started to focus towards people that what we called are API ready, people that have the technical capabilities to to not just know what an API is, but to integrate it into their product. So that was really digital first type sellers and marketplaces. So Artsy is a good example. They're a marketplace that I think has, like, 7,500 merchants on their platform. They needed a way to really scale and automate their business globally and

14:05>> their fulfillment and post purchase visibility side. So we we they were one of our first customers. We really focused on finding like five to 10 large enterprise API ready type customers that we went to market with. And now that we have those, our whole idea is to try to make the product more accessible to a broader audience. So we initially had just a a custom API product, then we rolled out hosted versions of that to make

14:30>> it easier for people with less technical capabilities. And now we're opening up our platform to people without the ability to integrate altogether.

Nathan Latka

14:36So, Adam, today, though, maybe about 10 to 15 sort of onboarded Artsys of the world actively using you, paying you?

Adam Fields

14:43>> Yes. That's fair.

Nathan Latka

14:44Okay. Great. And then, again, API calls, it sounds like that's a key driver for you in addition to new seats on platform. What are you charging, like, per API call on average?

Adam Fields

14:54>> It depends on the type of call. It can range for for a couple cents, you know, for for a tracking call. The the highest value call that we have are the pricing calls. I we didn't totally get into it, but the the simple ability to to show a price across multiple items, price points, commodities, geographies is one of the huge pain points that we're solving. So the the highest value calls that we have are the pricing

15:18>> and booking calls for those types of transactions.

Surpassing Marketplace Revenue with New Model

Nathan Latka

15:21Interesting. When does the SaaS business get as big as the marketplace was? So, I mean, maybe you already passed it, but when do get past $30,000 a month just on this new SaaS tool?

Adam Fields

15:32>> We we passed that in our second quarter of existence. Oh, okay. It took us it took it took us very substantially less time to get there with this new model. And and part and part of the reason being is because we can tap into these, existing customers that that are that are quite large and really start to ride that wave.

Can ARTA Hit a $1M Run Rate by December?

Nathan Latka

15:53$83,000 a month is the magic million dollar run rate number. You've got fourteen days, fifteen days left in the year. Do you guys think you can make a million dollar run rate by the end of December?

Adam Fields

16:03>> We're we're we're gonna try. We're we're gonna get pretty close, I think I think, if not this month, then January. Certainly, we're we're we're liking the way our growth and trajectory is going, but exciting times.

Dilution Through the Pivot and Solo-Founder Equity

Nathan Latka

16:15I mean, the pricing and the usage is set up so nicely. I can't wait to see where you guys end up a year from today. Talk to me a little bit, you know, going through a pivot can sometimes mean a lot of dilution, right? You've got to convince investors to stick along. Sometimes there's a very big dilutive round in the middle of there. You were sole founder at the beginning, right? So you owned 100% at the

16:31start?

Adam Fields

16:32>> Yep.

Nathan Latka

16:33Which is always nice, obviously. And you do the million seed round of maybe some fun MVP development. You didn't do the 3,000,000 sort of seed round. Most people selling 10 to 20% in the seed round. Were you sort of in that same range, or did you do something super unique?

Adam Fields

16:48>> No, we've been kind of pretty standard when it comes to dilution and venture fundraising. Being a solo founder has some benefits, some downside too, what you mentioned, one of the benefits. But I think it's really just belief in in the business belief in in in the ecosystem and really just like holding true the course. We we've been able to take a lot of the learnings we had previously and apply it to kinda this new model. But,

17:13>> you know, we we we've come too far in an industry that is just has so much inertia that we we we couldn't have to have turned back.

Nathan Latka

17:20Okay. So is it fair to say that seed round was something like maybe a three on 20? You sold 15% of the business, something like that?

Adam Fields

17:26>> Yeah. Exactly.

Investors: Notation and Corazon Capital

Nathan Latka

17:28And then how did you negotiate the seed too? New investors coming in, Notation did Notation participate in the second seed?

Adam Fields

17:35>> So when we first started, Notation was exclusively first check. They've started to grow a bit over time, participated as much as they could, but we really went on to an entirely new investor base, not because of lack of interest, just because of kind of fund construction and fund dynamics. So we've been at we've added some pretty nice new investors between, you know, Corazon Capital in Chicago and a couple of other funds that have really seen

17:58>> this new direction that we're going and wanted to help accelerate our growth into the go to market of the product.

Nathan Latka

18:04You've got a great group. We both share investors, and Gaingels is an investor

Adam Fields

18:08>> in in our company nice.

Nathan Latka

18:10In Founderpath. So we share we share investors. I'm trying to give you some love here, you know, let you let you put us up a little bit.

Adam Fields

18:16>> Gaingels is great. Go Gaingels.

Nathan Latka

18:18They're incredible. Yeah. So that 4,000,000 in seed two, fair to say that was sort of 10 to 20% dilution there or something different?

Adam Fields

18:26>> Yeah, exactly. Pretty much 10 to 20% dilution all along the way here.

ESOP Advice for Solo Founders

Nathan Latka

18:29Yeah. Yeah. So you've sold again 10 to 20% effectively three times. Now did you set up an ESOP pool? And if so, what would you recommend to other solo founders trying to incentivize their employees? How much should they dedicate to that pool?

Adam Fields

18:41>> I think 10%. I mean, I know you've asked this to other people before. I think 10% is usually a good way to start. I think I think what people don't realize is that for the people that that do stick around and grow, you wanna continue to layer on and incentivize them. For the people that that don't and move on, a lot of that goes back into the pool too. So just because you grant it doesn't mean

18:59>> that it's always gone forever.

Team Size and Structure

Nathan Latka

19:02No, that's right. Very cool. All right. Well, healthy growth rates scaling nicely. Flush up the team here before we wrap up with the Famous Five. How many folks today full time?

Adam Fields

19:10>> We're we're 20 folks, about half of which is devoted to to product engineering, the other side to, you know, logistics account management, customer support, customer success, marketing, finance, etcetera.

Famous Five: Books, Tools, and Personal Life

Nathan Latka

19:22There you guys have it. Adam, let's wrap up with the famous five. Number one, favorite book.

Adam Fields

19:27>> I would say High Output Management by Andy Grove.

19:31>> Yep.

Nathan Latka

19:32Number two, is there a CEO you're following or studying?

Adam Fields

19:35>> I I like to follow the startup CEOs generally. I think there's a lot to learn from different CEOs with different focuses of products. So I I don't tend I tend not to focus on one in particular.

Nathan Latka

19:44Number three, what's your favorite online tool for billing ar building arta?

Adam Fields

19:49>> We we kinda have a crush on Stripe across the product, the the marketing, the docs, the just the design, everything about it. Stripe Stripe for us is kind of the gold standard.

Nathan Latka

19:58Number four. How many hours of sleep are you getting every night?

Adam Fields

20:02>> I try to get eight. It doesn't always work that way. I don't have a problem falling asleep, but but staying asleep is is difficult when you get your mind churning all the time.

Nathan Latka

20:10Fair fair enough. And what's your situation, Adam? Married, single, kiddos?

Adam Fields

20:14>> I am recently married. I got married this past summer during during kind of the height of COVID. It's nice to nice to have someone who can support me throughout this journey.

Nathan Latka

20:23Any kiddos or none yet?

Adam Fields

20:25>> Not yet. Hope hope that changes soon. I got arta. I got arta as a kiddo, but not not any human kiddos, obviously.

Nathan Latka

20:31We'll call it a half baby or maybe a 1.5

Adam Fields

20:33>> Yeah. Exactly.

Nathan Latka

20:34Last question here, Adam. How old are you?

Adam Fields

20:37>> I am 37.

Nathan Latka

20:39And what do you wish you knew back when you were 20?

Adam Fields

20:42>> I wish I knew everything back when I was 20. I think that you learn so much in kinda how to prioritize time, how to how to be confident in in yourself, what's important. And I think in terms of running a company, you kind of double in age every year. So I feel a lot older than 37 with what I've learned in last couple of years.

Nathan Latka

21:00Guys, arta.io, they started off back in 2016 as a marketplace, grew it to about $300,000 a month in GMV going through the platform a 10% take rate. A healthy model, but they'd raised about 4,000,000 up to that point. Adam said, You know what? This isn't growing how we want it to grow. Let's pivot. They moved to a different model now, not a marketplace, actually selling sort of an API tool into the artsies of the world, Sotheby's

21:20of the world to manage showing pricing, bidding, shipping, auctions, all of that for luxurious items, artwork, and things of that nature. They grew from $30,000 a month, again, pre COVID on marketplace model to about, call it, $75,000 to $80,000 a month today as they continue to scale. Again, Adam, sole founder trying to preserve equity, but also incentivize employees by the pool. Adam, thanks for taking the stop.

Adam Fields

21:40>> Thank you.

Nathan Latka

21:43One more thing before you go. We have a brand new show every Thursday at 1PM Central. It's called Shark Tank for SaaS. We call it deal or bust. One founder comes on, three hungry buyers. They try and do a deal live and the founder shares back end dashboards, their expenses, their revenue, ARPU CAC, LTV, you name it, they share it and the buyers try and make a deal live. It is fun to watch every Thursday one

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