MI356: Investing in Rare Collectibles w/ Rob Petrozzo

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23:33And for a limited time, you can use code stocks15 for a 15 % discount at checkout. All right, back to the show. I'm really interested in just how you got the whole thing going and some of the hurdles and challenges you had along the way. I want to hear about your partners, who you teamed up with, and then just, I would imagine you had some like, this is unusual, like in terms of turning a pair of shoes into what? Basically like an LLC that you're selling shares in, right? Exactly. So early on myself, my co-founders, Max and Chris, we've known each other for a while. Chris, I went to high school with these, without question, probably the smartest person I know.

24:09He was a little bit older than me. He was in tech before tech was tech. And he really understood like the mechanisms of bringing something to market as like a serial entrepreneur and just an all around like analytically smart person that knew how to build businesses. You went to high school with him? And yeah, so we both did school in Brooklyn. He graduated a little bit before me, but we had this mutual group of friends where, this is going to sound terrible, I love all my friends, but none of them understood technology or wanted to be a part of tech. They're all in sales. A bunch of them are firefighters and teachers.

24:37And they're the happiest people I know because they have to take on the nonsense stress that myself and Chris have chosen to, for some reason, of trying to continually raise money all the time and run a tech company 24 hours a day. But they were always like, you guys got to work on something together. You're like the smart kids. You're creative. He's super smart. You got to work on something together. So we've been talking from 2013 about what the future looks like more than anything else. Our third co-founder, Max, went to college with Chris at Williams. And he was at Barclays doing real private placements and M &A for a 10-year period.

25:09And all the way from the start of 2007, seven straight through the financial crisis up until 2016. So we sat down and we're all talking one day and crowdfunding was massive at that point. This is like Kickstarter, Indigo. People started to realize the community coming together to put money into something is going to work. Airbnb was starting to get a lot of attention. The sharing economy was brand new, but it was something that was clear was the future. We started talking about what we loved and all of us individually were collectors of something. And Chris was super into classic cars. Max was into baseball cards.

25:42I was into art, but was always kind of behind a little bit in terms of like getting the right stuff. So we're like, listen, if there's a way to take the things that we love and we know, and we talk about nonstop anyway, and actually own the best examples of it and do that as a community, as a group, there's probably a product there. And it's something that would solve our problem. And that's how some of the best products start. But then it was like, all right, but is that even possible? So we started talking to lawyers and they had this premise around what's called the JOBS Act, which allows for non-accredited investors, so people that don't have millions of dollars, to invest in what the government previously deemed riskier assets.

26:18Those are things like private companies and venture deals. And thanks to Kickstarter and Indiegogo, a lot of those platforms, they pushed this legislation through that really opened up and removed that red tape and the velvet rope from people who may know every single thing about an asset, but they've been held out just because they're not millionaires. And that was always for us what we needed to do. We couldn't get the best stuff because we're not in the conversation. We don't have millions of dollars. So how do we get equity in the most important things? We got to do that. We're pooling our money together as a community to do it.

26:47So in other words, you don't have to be an accredited investor to do any of this. So you bypass that. And we have no minimums on the platform. So you can invest in any of these assets. You can own a dinosaur for$10 a share. You can own the best example of a Lancia Delta Group B car for that's $120 ,000 car that there were so few exist. You can own a share of that for 20 bucks and there's no minimum. So when we talked to the lawyers about it, it took probably 18 months between legal, the SEC, and releasing the first version of product to have it actually work. Because we did have to kind of explain to the SEC something they kind of already knew, but in a way that we were doing it in a very unique way.

27:23So inevitably, when you hit these roadblocks, you have to really go extra hard in explaining something. And that's hundreds of pages of documentation and contracts. Our lawyers found that if we create LLCs for every individual asset and do that in a way that we can scale with them, that you can have every single individual asset be its own company, essentially. And then doing it through, getting to the weeds a little bit, doing it through Reg A, which is the legislation and the construct that we use to do these IPOs, those are inherently tradable. No one does it though, because it's just who's going to maintain a platform for a$100 ,000 item and maintain trading and proxy votes and all the things that go with it.

28:05With our legal team, with the SEC, we found a way to do that by having one template for every asset. We're essentially changing the name, the market cap, and then the investors fill it up. We have to do the quarterly filings, do all the things that a regular company would do that's traded on a regular stock exchange, but we're doing it at a smaller scale and they allow us to do it in bulk. So that's kind of what changed everything for us. We found a way to do it with our legal team and with the SEC. And that all is public. So now if you go to the SEC's website and look up Rally, you'll find every single thing we've ever done.

28:34That also birthed a lot of competition because you had people that can just copy and paste exactly what we did. But we had this 18-month head start. We kind of created that space and pioneered what would become fractionalization of individual assets. I had the CEO of Fundrise on as a guest, and they did that same kind of thing with real estate. and you know the hurdles with the sec it just seemed like it took forever like you said a lot of education a lot of legal fees nah that i mean this is the reason that you know we had to raise we had you have two choices when you start a company it's like do you want to build for the future you want to build for right now and a lot of the right now is like a lot of social media companies that are building something that requires immediate scale and they want to sell out as quickly as possible it means like i'll do this and in the next five six months we'll raise a small seed round.

29:21We'll try and get the profitability quick and try and sell the company. For us, we knew this was going to be like extra long game. So we knew from jump, this wasn't going to be bootstrapped because we didn't have the money to do it. We bought the first couple of assets that came on the platform, the first like three cars, but it wasn't something that was sustainable. We're going to be able to acquire assets, maintain the legal bills, do all the accounting. We had to raise tons of money. So we got to a point that once we had the first demo in hand, it was like, we had to raise a few million dollars right now for legal bills We had already been 10, 12 months in and the clock is running.

29:51I love our lawyers and our legal team early on was amazing, but they weren't going to work for free. And this was very much like pioneering new space that required lots of conversation, lots of advisors that came on board, a ton of legal work in terms of filings and just the regular contractual stuff. and then also having the conversation with the SEC where we can't call directly and say, can you help us with this? It needs to go through that legal team. So a lot of that was the massive bills early on. It paid off over time, but it definitely required a lot of lead in. And companies like Fundrise and the real estate platforms that were doing it, more of a fund model were really early in understanding how that works.

30:24It's just a little bit easier to explain real estate to the end user than it is to explain why a Pokemon card has the same type of value and same type of investment vehicle. so how do you just make the sec understand that these but like the definition of a security and passing the howey test like yeah explain all of that a little bit because i hear these terms how we test i don't know what that means yeah i mean so the long like the easy way to explain the howey test is if it seems like an investment and you see and it's a brokerage or it's some sort of something that's tradable like it's probably a security so part of the reason that crypto has gotten crypto got too big, in my opinion, for the SEC to step in and just close it.

31:03Like they let it get too big. All of those probably failed. Every single crypto probably fails the Howey test one way or the other because it's only for gain. Like you're not doing it where it has like it has any type of underlying value other than like the scarcity value that goes with it. It can be exchanged for as a cash transaction, but it's more so an investment that people put money into. They don't use it as an actual cash transaction. They just hold onto an account and hope it goes up in value and they sell it on an exchange. So like the Howey test is all these pieces that if more say this is an actual security, it's an investment, it's something that feels like people are putting money into it to make money.

31:39Then it kind of fails the how, that test means that like, that's a security at that point. And it requires SEC approval. Got it. And we were in that bucket early on where like, we could have chanced it, but our lawyers were like, you know, that's a bad idea. Cause if they say, if the SEC says no at any point, you'd no longer have a platform basically. So what could you have claimed? That it was property instead of a security? There was a world where we could have been like the marketing platform for others to list these assets. And then there's like a membership around it where it's, if you own a piece of this car, it's not necessarily for financial gain.

32:14You get access to 10 of these auctions from our platform partners and you get this type of thing and you get free coffee or whatever else. There's a way to do it where in theory, it's a membership. But for us, we're not an exchange. We're not a brokerage. We're not any of these things. We are a marketing platform more than anything else. But there are transactions that look and feel like they're happening within the app, even though they're going through a bunch of broker dealers and people that make money off us for that opportunity to be the exchange of record. But it wasn't something that we wanted to chance.

32:43And it was so early on. And the SEC, as much guidance as they gave, they were really good with us early on. They're not somebody who's ever going to tell you this is exactly right. this is exactly wrong. So you had to kind of be directionally factual and accurate with everything you do. We weren't even going to pretend that this wasn't a place where transactions were happening. That would have been stupid for us early. It might've filled the whole platform. So in the collectibles marketplace, is it, you were early to it, like 18 months, is it kind of, and you've had a lot of copiers, it sounds like, is it the case where it's like winner takes all or winner takes most of the pie?

33:17Yeah. I mean, I think it's just, I hate using like the baseball analogy of the first inning. We're in like bottom of the second, like early third. So I think that the market's still trying to find itself. I think that when we look at history and this, we've always done this here. There was a time not that long ago, you know, less than a hundred years ago, where like stocks were way too risky for portfolios. Regular people were not supposed to have those. Then things start to change, obviously, and everybody wants to raise public money. So, you know, regular investors come in. Now the stock market exists, but then there's all of a sudden REITs start coming out and like that's too risky.

33:47And now, you know, it's such a heavy weight of the S &P right now. Everybody has REITs in any 401k in any portfolio. And that became like real estate trust. And that became like the hot button issue. Now it's crypto. Crypto was too risky for so long, but now there's institutional investments and there's ETFs. Collectibles are in that space right now where now that's the one, like collectibles and these antiquities and these things that have a ton of value, but have been sort of under the radar for so long. So I think that's kind of the biggest hurdle for us really early was making people A, understand that these were investments and B, that the most trusted place to do it was Rality.

34:22So there's definitely an element of you have to reach scale. And I think we got a little bit of that scale early and we're able to sort of cement our place in the space to succeed in this space. But that said, I think there's also a lot of derivative platforms that I would have never have thought would have worked as well as they did that popped up around us for wine or for art or for any of these one pieces that have, you know, the riches are in the niches is always like the thought process for a lot of people. And you realize that these markets are way bigger than anybody anticipated. And I think that was like the big unlock for any platform that's succeeding right now is really building a community and not just followers, building a community of people who trust you and trust your underwriting standards and understand that not everything goes up, but they have conviction and you have that same conviction for either an asset class or a batch of assets.

35:06So the ones that we've seen leave, that we've seen exit the space, whether they went out of business or got bailed out or sold or whatever it is, for the most part, I think they lacked a little bit of authenticity. They weren't real collectors. They didn't care about the same way that their users cared about. They were building a community quickly because we had a little bit of a lead. So in their mind, rush features out, rush out marketing platforms, keep going without taking a step back and realizing that the assets are going to lead the conversation. Your authenticity and as much as you care about is how much your users are going to care about it.

35:36If you go full commoditization of this space and commodify everything, you're going to lose a little bit along the way. So we never, ever tried to be a hedge fund. We've never tried to be something that forces people to invest. If you go into the app right now on Rally, you'll see a lot of information, data, you'll see a lot of storytelling, you'll see videos. There's nothing that says buy until you get super deep into the... It doesn't look anything like Robinhood. It's not just numbers. It's not binary. Until you get deep into the individual asset, the buy button is the last thing. It takes four steps to get there.

36:04So I think that's where we kind of succeeded and where others maybe failed along the way. I wanted to hear if your experience in 2008, did that shape your interest in collectibles as you see this downturn, you see a lot of people, I don't know what your investment strategy in 2008 was like, but did that affect you in terms of looking to collectibles as a serious asset class to invest in? No, that moment changed my life. I had been successful as a designer. Like I said, at that point, I was saying yes to everything. I was working 20 hours a day and I was doing it where it's like, I wasn't saying no to money.

36:41I was trying to make as much money as possible off of a skill and a gift that I thought I had in terms of design and art and people started to like it. So I wanted to just double down on that as much as I possibly could. And I took almost all of that money and I was in two or three different stocks and I was starting to get really familiar with options and which is a form of gambling to a certain degree, but it was something that I thought I had an edge. Were you doing covered calls or were you - Nah, here and there, but I didn't have, you know, the thing is like I did it with Apple and this is one of those things with, I talked about this with somebody here a while ago.

37:11I have, I've owned so much Apple stock options, everything along the way over the last 20 years, it would have been way better to just leave the money in Apple as an equity instead of getting crazy. So I would sell covered calls at Apple because I didn't have a big enough position. I was buying and selling everything nonstop. I was trying to play some of the banks that started to get a little bit crazy. I lost everything basically. And it was all based on emotion. It was just a very emotional moment where the rug got pulled on me. And that was this very much introspective moment where you start thinking about like, I don't want to make more investments in things I don't care about that are just money outcome.

37:42When you're just chasing money, it never ever works. And I think that moment in 2008 into 2009 and that March moment where like the bottom came in, it blew a lot of people out of the market. Me in particular, I was scared to get back in and I watched them running up in my face. And I think that, and it makes the emotion worse. You're like, shit, I missed that moment. I lost everything. They're running it right back up and I'm not a part of it now. So the ultra wealthy are getting their money back. I'm not getting my money back. I think that you start being way more introspective. You start looking at the things that you actually care about.

38:13And it always happens in those moments. It's something that's happened over the course of history when it comes to investing and the cultural change and the shift that happens that usually the money follows there's a guy there's a line from brian eno he's a like a legendary music producer and a writer he produced like the most important u2 stuff he said something to the fact in an interview where it was like communities generate ideas but those ideas are almost always articulated and kind of executed by individuals and i think we saw it it happens so often throughout history it happened it was it was andre brand did it for surrealist movement in paris and that was you know in between world war one and world war two and it was this moment of social unrest and then you saw it with like the punk movement is such a very specific one where it's like the sex pistols did it for an entire generation on the heels of war in the 70s and this social alienation and it went from pub rock into something that spoke to this entire generation i think communities grow in size and they want to demolish the thinking of the old guard and i think in 2008 we saw that so specifically in finance and you still see the ramifications of it now how angry people get it's this eat the rich mentality.

39:14That's like one scale of the spectrum. The other side of it is like, you know, we want to stay exactly the same as is right now because that's how we make our money. There's this massive in-between that I think is more about like, all right, 2008, 2009, we're crazy. I now know that like a money's going to be made on investing over time. I could look at the S &P. I could look at Dow. I could look at all these equities markets and see even in those crazy moments where the entire economy almost collapses, there's this bounce back because people buy those dips and they buy those bottoms and that's where fortunes are made and getting into something early enough that the alpha is still there, but also having conviction to stick around.

39:47And it takes individuals to kind of have platforms to push that. I think part of what we did here with collectibles that a lot of people saw it and those communities all existed. And you realize when you go on Reddit or you go on TikTok, you go into these individual spaces that seem like really small niche markets, that there's thousands and tens of thousands, sometimes millions of people who want to be a part of it, but the information asymmetry didn't allow it. You need one or two people or one or two platforms to kind of take a stand and say, we're doing this for all of us. And if you want to be a part of it, this is a safe space for you.

40:17You can come here and do it. We're all doing the same thing. We're doing it together. We're all trying to get behind this velvet rope. We're all trying to sort of make everything better and invest in things that we care about. I think we did that pretty effectively. And now the communities that have sprung up around it and the other platforms that have sprung up around it are kind of cementing the idea that this was always going to, it was under the radar, was always going to work. It just required a few people to step up and put some money behind it. you know? So are you appealing mostly to like Gen Z and millennials primarily, or do you span generations?

40:44Because I can see where, you know, an older guy, 70 year old guy would be into a classic car and would want to invest. I can see where a Gen Z guy would want to invest in that same thing. Cause he thinks it's super cool. Tell me a little bit about your demographic that you're trying to appeal to. Yeah. So it's a little bit of everybody. The core persona was always based on us. And at that point it was like, when we started the platform, it was like early 30s, maybe has a 401k and has some equities, but isn't necessarily an active alternative investor. They want to buy a house at some point, but the American dream is very different to them than it is to what previous generations were.

41:19And people that really understood that consumer finance and retail finance is looked at in a way that it's like second-class citizen. It requires, we all have to do this, we have to put some money in, but now the lanes exist to do it because everybody was armed with that information. But that information expands. So we have certain deals where there's an 80-year-old and an 18-year-old in it, and it could be something that's like a dinosaur or NASA or something that maybe generationally has always been relevant, but maybe certain individual generations have a specific type of conviction around it.

41:51So we do like Apollo 11 stuff or Apollo 13 stuff. There's obviously a slightly older generation that was around in the 60s, 70s, and 80s paying attention to the space race that's going to have a little more conviction. And maybe that investment is a few thousand dollars but you also get an 18 or 19 year old who is just you know they grew up going to school and learning about space and now they're at a point that it's still relevant because you have elon musk and you have sort of you know bezos and you have this resurgence of kind of getting to the moon and getting to mars where it stays relevant over the course of generations and we've always tried to appeal to the idea and not the individual by age or demographic or social status or any of that type of stuff because these things are really the celebrities the idea that this thing is just one thing that a whole group of people care about.

42:34We found the best example of it on this platform. And depending on how much you want to put into it, anything from$10 to$10 ,000, you have the option to do it in this one place. We're doing it together. And that's always driven a lot of our decisions around how we underwrite individual assets, what we bring to the platform is making sure that it's relevant now. It's going to be relevant in the future. And there's some value attached to it that any generation could pay attention to and understand better. Let's say I'm a millennial guy. I've got 10 ,000 bucks. How do I learn about Rally? How do I get involved, what are the steps that you'd recommend I take to get, you know, just start investing in collectibles?

43:07Yeah. I mean, it always starts with the thing that you care most about. So there's, for me, like, again, it was a lot of it was around art and like I was trying to buy prints and I was trying to understand better about like who these artists were and why they're important. Pop art was always this really important thing to me. I was in New York. So like getting on like the art train and coming to Soho and walking around in galleries when I was younger was always the thing I would do as much as possible and try and get access to it. But now, you know, if you have any individual interest, there's a good likelihood that an example of it's on Rally.

43:34So either on the website on rallyroad.com or in our app in the app store, you download Rally, there's no requirement to buy anything. You go into that app and see 450 different assets. Every single one has a story about where it came from, why it's important, the price and the value around it, comparable asset sales via auction and private sales that we put inside the app, every image, every piece of content. And that's a starting point for a lot of people. I think that from that point. It really is. We're living in an age right now where you go on Reddit and there's a subreddit for every single individual category or product or thing or interest group.

44:06And getting on with as much of that information from as many different resources as possible is easier now than it's ever been, but it's more important now than it's ever been because there is still so much noise and so many people trying to sell you stuff right now from day to day. But starting with the thing that you care about most, a lot of times starts with nostalgia. When we did dinosaurs, we started putting dinosaurs on Rally and I started learning more about it, it really came from me as a five year old. Like one of the first things you learn about is dinosaurs. It's something that it's 65 million years ago, but it's still as relevant now as it's ever been.

44:34And I grew up in that Jurassic Park era and it became this like larger than life thing. So that to me was like something that once I got a little bit of information and I realized that we can put dinosaurs on the platform, I went super deep into dinosaurs, understanding what the bone mass meant and what density of individual objects meant and what the plasters that they use to sort of put the rest of the skulls together, where the dig sites are, why when the permafrost melts, it's harder to find X than it is Y. I started going so deep in it. It all started on Google and then on Reddit and then led back to Rally.

45:01And then we started putting those dinosaurs on Rally. So it really is like, it's getting as much information at your own speed for as many resources as possible, but it's got to be rooted in something you care about. If you don't care about it and you make an investment in a collectible, think you're going to make money, you'll never, ever make money. Finance to this point has always been the zero sum game where it's like, all right, I see a bunch of numbers. I'm buying this thing. I'll sell it later for more money. That you could do anywhere on Rally and with collectibles in general, starting with the thing that you actually care about, whether it makes money or not, that's generating enough interest from you to be downloading podcasts, going into subreddits, doing as much research independently as possible, having that conversation with your friends about it.

45:37If it's in the group chat, it likely should be something you're paying attention to and investing in. And we've tried to bring that to life on Rally. I was on your Twitter feed and I think you've got some LeBron James memorabilia that's maybe up for sale or, you know, like an auction that's come or not. It's not an auction, but like capital raise, I guess. Yeah. And the video was incredible. I watched that thing and I was like, I want to, you know, I want to be part of this. Who does that? I mean, those are really well done. The last couple I did, because this is from Will Stern, who was running our content here.

46:10He's an incredible journalist. He went, he wanted to go do a media company. He's doing it with Dan Revelle's company called Collect. a great platform that's necessary that digs super deep into collectibles and into the auction platforms. I almost couldn't let him leave. I needed an extra month out of him, but before he left me with a bunch of content, we're in the middle of onboarding someone new to do it. I've been doing the in the middle, but I've been doing it for now. But in reality, these are the things I care about. So making content and editing some quick video together and having some of our photographers go down and shoot these pieces and give me back the raw files that we could work with, that becomes like therapy for me like sitting and that that's the same for anybody who's making this type of content and it was making good content for collectibles for lebron it's one of those things where it's like i've gone my entire basically adult life and young adult life watching this person who's the same age as me go in the nba doing these incredible things but it's polarizing he's somebody that does generate a lot of hate and i've in the past been like f lebron you know i mean like i've been that guy too the same way because i came from like the kobe era a little bit.

47:07And I'm like, no, I'll ever be a Laker the way Kobe was. But you realize when I started going through a lot of these files, a lot of that information, you realize how important A, these game-worn jerseys from this era of LeBron are, and then B, what he's done for culture in general, the cultural impact he's had and how much I paid attention to it over the course of the last 20 years without even realizing it. It's just so ubiquitous and it's such a part of your life and your conversation with your friends. You realize how important these are when you start putting that content together. I think a lot of what's missing in the space for investment in general is that storytelling piece that goes back to me as a six-year-old or a seven-year-old trying to draw pictures in my parents' restaurant.

47:43You realize how important that storytelling is, how important the look and the feel are because we're in this crazy attention fight right now. Every single thing is content now and people try to take your attention. It's Netflix and it's work and it's phone calls and it's texts and it's got to call your mom at the end of the day. You have this much time to get somebody's attention. Sometimes it takes a really good piece of content around a collectible in particular to unlock that, oh man, I really do care about this a lot. I just didn't even realize it until I brought back this whole wave of memories from the specific moments.

48:13We try and do that as much as possible with the content. And I think anybody, auction houses, individuals who are doing it successfully right now is leveraging really good content and specific moments to bring people back to life and back into the moment. Let's take a quick break and hear from today's sponsors. Hey, it's Sean O'Malley, just popping in with a quick message. If you like this podcast, well, I've got great news for you. We've got a handful of other shows for you to explore, from learning about Bitcoin to embracing a richer, wiser, happier lifestyle. Just go into your podcast app and type in We Study Billionaires to find our collection of shows.

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51:50All right, back to the show. Well, those videos really hit people's emotions. And in a lot of ways, you're selling nostalgia, right? I shared with you, I was really into baseball card collecting as a kid, Honus Wagner and the Mickey Mantle rookie cards. I could never afford anything like that. But with Raleigh, I could buy a Honus Wagner card or a Mickey Mantle card or a portion of it. And I just think it's really cool. The content that I saw, I just saw a handful of your videos, really touched an emotional chord where it just brought up this feeling of childhood and nostalgia for me. Yeah, dude.

52:25We live in this era where everything moves so quick. And I don't want to sound super old, but everything is commoditized in a way where it's just attention economy and you're going to lose if you try and pay too much attention to any one thing. It feels like that at least. If something doesn't give you chills and doesn't make you care, there's no reason to even give it attention at this point. There's a lot of options right now for where your attention can go. If you're just doing this to get them done, I find myself doing this at work a lot. It's the worst way to live. You're just on to the next, on to the next, on to the next, and nothing is sticky.

52:55You lose a little bit of a reason. And the reason that you have to give people is something that wakes them up. And if you're not getting chills from looking at something or seeing something, You don't have a specific moment in time that makes you happy or makes you remember a moment. Nostalgia is such a big part of that. There's almost no reason to do anything. If you're just doing something for a paycheck or you're doing something just to make money, that to me is a little bit of a mistake. It took me a long time to realize that. But we're at that point now where you walk out, we're in the middle of Soho.

53:19I'm in our museum right now. And if I walk outside right now, the amount of inputs and the things that are happening around me are just so overwhelming. If you could stop for a minute and find something that makes you actually stop and care and gives you goosebumps for a split second and makes you remember a moment from 10 years ago that you forgot about, that's a massive win. And that's not sales. That's just bringing real life back to somebody. If we could do that, it turns into an investment. That's great. But if you just see some of that content and it's a little bit of a kick on your day and it's a way to start something new or think about something new, that's also a win for us.

53:52Yeah. Say more about the cafe museum. You've got all of these collectibles. It's a brilliant idea. You've got this museum. And tell us about the museum and what you guys are trying to do there. Yeah. So when we first started, a lot of it, it's a little bit easier now to explain to somebody that these investments are real. But a lot of times it was like, I'm just funding somebody's collection. Those things don't even exist. So we were like, all right, we got to find a space to put some of this important stuff on display so that investors and people can come in and see it and know that we actually have these things, that they're real, that they're super special, that they have a great story around them.

54:25So we had a really small space up on Lafayette, had a few blocks up and we put a car, we put just like a Lamborghini in the middle and had a couple things around it. And it was more of like, it was meant for Instagram pictures. It was like big flowers and all sorts of stuff set up as an activation, but people liked it a lot. So we sort of started to outgrow that space as a company. We found the new office a little further down on Broadway. And now we have like 3000 square feet in the retail space on the downstairs that we use as our museum space. So we set it up with, again, similar, the most important assets on the platform and it rotates around every quarter or so we change out the assets.

54:55But right now it's probably 40 items, everything from one of our dinosaurs in the front window. We have two of our cars. One of our earliest IPOs was a 1955 Porsche Speedster is here. Elantia Delta, which is a really important group B rally car. Some of Michael Jordan stuff. There's a Warhol on the wall. There's a Lombardi trophy from a Super Bowl. It's all these things that really immerse you in a real life version of the app. And that was always our goal with the museum space. We don't have a huge market. We have no marketing team. All of our work marketing has always been word of mouth. There's no growth team.

55:26This is our marketing budget was about putting this in a place where anybody could walk in, get a feel for what we do. On the weekends, we staff it with our brand ambassadors and security and all that, obviously too. But you can ask anybody here, even the security about what Rally is or about any individual asset. And they all could tell you the exact story, everything about it, why it's important, what the pricing is, the relevance. And we've done that really intentionally so that people that come in here to get that, if you want to win the attention economy, it requires some really good storytelling and it requires some great things like this.

55:56So when people come in here, they're not in and out. They stick around for 20 minutes, a half hour. They take pictures, they relax, they hang out, they'll grab coffee. We have our cafe in the front of it too. It really wasn't intended to take the museum concept, whether it's everything from the Guggenheim to the Met. So all these places that are at the moment, that are these institutions in New York, they feel very, I love going to museums. I don't do it enough, but they feel very sterile at times. And we wanted to make something that was way more like, walk in at your own pace. I'm not going to annoy you.

56:22If you have questions, let me know. If you want to know about any of these things, it's a QR code that goes into the app. If you want to buy shares in it, by all means, go ahead. But not a single person here is ever telling anybody to go buy shares. They're just explaining what these assets are. So having that physical space has become a real important part of our community, but also an important part of explaining to people what we are and why it's important. Do you have a lot of your investors show up at the cafe, checking out things and just hanging out? Absolutely. I was late for this call because we had two people here who flew in, who were here for a weekend that I'd never met before.

56:54But I knew that one of our earliest investors on the platform and somebody that's got a bunch of assets that was in town to see a Broadway show. And he's like, I'm in the neighborhood. I can buy quick. I'm like, yeah, of course. So bring them in, get coffee, show them around a little bit, do the private tour. That's a must. And that for us, when we did the opening, we had people coming in from Florida, from Connecticut, from Texas. You had people flying in specifically for the opening of this space that are investors on our platform. And they're not people I've ever met face-to-face, but we've had conversations.

57:19Everybody here, including myself, is doing customer service, is responding to DMs, is having conversations. My phone number is in the phones of probably thousands of our investors, and they'll text me and we'll talk about it at night. This is my actual life. And it's the life of a lot of people, the majority of our entire team right now are people that were collecting or cared about something here before they got here. And that interest and the things they cared about it, what led them to rally. So our investors are us, like we built this around the persona of us. It turns out that there's, you know, half a million people just like us that are on the platform now that have that same feel.

57:52So when I'm, when I, when anybody comes here and I'm here on weekends all the time too, and I'm doing, you know, working retail or I'm doing, I'm behind the counter at their coffee shop. I'm trying to do as much as possible, talk to anybody that comes in because more often than not, it's just a natural conversation about the things you care about. It's not a sale. And that's what we've always done. I think really well with this space. And we've done as a team really well as well. That's awesome. Is it a challenge sourcing the items that you end up offering to investors? Talk to me about that process of finding out what you're going to offer on the platform.

58:23Yeah, it was. I think early on it required because again, part of what we did with this platform and why it was successful is that we wanted to kick a door down. We wanted to make sure that everybody who cares about it has access. When it comes to especially individual categories like art, it's opaque by design. They don't want small money and they don't want people like me in there, bringing my friends with me to pool our money together to buy a Roth card. They don't want that. And that's by design. So we had to come out of pocket and buy things probably for more expensive than we should have and then mark them down for the platform and take a little bit of a loss early on.

58:54Now, as the platform's grown, we haven't just gotten the respect of individual collectors and of the brokers and the private dealers. A lot of the auction houses that we talk to now that I think early on, we looked at as like, at a certain point, I want them to be our competition. We realized that's not competition. Everybody's in the same space, kind of building their community and building collectibles as a true investment vehicle, but as something that feels as obvious as investing in real estate would be investing in art or investing in collectibles. I think that now it's become a community that comes to us.

59:22So more often than not, whether it's an auction house or it's somebody that has a great collection, they can come to us and say, do you want X, Y, and Z? Here's what we're thinking about. Maybe they'll consign some of it where they'll keep a portion of it in equity and then 60 % or 70 % will be on the platform so that we're all kind of playing the upside together. But we have our kind of underwriting checklist, our standards, and it's 24 points that goes everything from authenticity to provenance to the value relative to auction comps, all the stuff you would expect that checks those boxes. But then we have a relevant score that we apply to something too.

59:55We want to make sure that something's important in the past. It's important right now. It's going to be important for the future. So whereas an investor in real estate might look for a specific neighborhood that's on the rise and a two family so they can rent out and have ongoing revenue. And there's all these elements of what you want in a home that you might purchase as an investment property. It's not that different for individual assets here. The big difference is that for us, at least we give things a score that goes along with all those tangibles to say like the relevance of this asset of this item is going to increase in popularity as opposed to stagnate.

1:00:29And that's always a big part of like, when you see, you know, certain comic books and certain dinosaurs, all these things still have movies, entertainment and huge communities around them and theme parks. That's how, you know, the future is going to look bright in my mind for some of those assets, as opposed to others, which are just kind of like sitting by the wayside. They don't get a lot of attention. It's going to require somebody to put a lot of work into it to make it relevant. How do you determine the holding period? Let's say I invest in, I don't know, like a Mickey Mantle car. Actually, didn't you buy Mickey Mantle's childhood home?

1:00:58We did. We did buy his house. Yeah. That's pretty cool. Let's say I invest in that childhood home. What's the holding period? How do I really, let's say I am financially motivated. It's not just nostalgia. how do I recognize that gain? So right now, for that particular asset, as an example, that to us is a world where we could create ongoing revenue. We've done a little bit of that to start already by monetizing the space. We make trading cards around it with a piece of the barn that came off. There's elements of it that are easy to monetize immediately. We did that and that was like a dividend check that went to investors.

1:01:26But for that particular asset, when we bought it, our thought process was three to five years on that asset. And there was a bunch of factors around it. One is that MLB is an investor rally and we started a conversation with them about doing something with that space. It usually takes around 18 months, start to finish, to work with the MLB on an activation, and that potentially adds value to it. So that's on the two-year horizon. There's a theme park that's being built that's from a bunch of the team from Disneyland is building this giant theme park that's 15 miles away from the town. And we have the data that suggests when something like that happens in a space, here's where tourism goes, here's where property value goes.

1:01:59And that's within like a three to four-year window. So for us, along with that particular neighborhood in commerce and in that area where comps have been going, we're able to sort of put together the equivalent of sort of a prospectus and an investment memo that speaks to that three to five year window as potentially reaching peak investment. And we also make sure that along the way, we're running votes and we're running individual sort of conversation with our investors around what they want out of it so that the market deems that now is the time to sell because if something happens, an anomaly that raises prices dramatically or drops prices and we feel like it's not going to come back up, we're in a position that we can exit and talk to our investors about that exit and go find a buyer on their behalf and solicit in the way that you would the same way if you were selling a home.

1:02:41If I were to sell my portion of the Mickey Mantle home, it's a marketplace. So how do I, I'm just selling shares to somebody else on the marketplace? Is that hard? Yeah, so we have two ways that it sells. So we have a secondary market that's run through registered broker dealers that has bid ask. And obviously certain assets are going to be way more liquid than others. Something like our Honus Wegner card is a very tight spread, but certain things like some vintage literature and first edition books are a wider spread, but there's always a bid. And it might not be exactly what you want, obviously much like the stock market, but it trades and that's something you can exit.

1:03:14That happens usually 90 days after the IPO. The other side of it is that we'll do whole exits. So we've done 72 individual offers have come in for assets on rally for the full buyout, almost like a hostile takeover. And 62 of those, I believe, have exited. So what we'll do is if a qualified offer comes in or if an auction house feels like there's a potential market for an asset and gives an estimate, we'll bring all that data to our investors. They get a 48-hour window to vote yes or no based on all the factors in their individual payouts. If they say yes, then it goes to our third-party advisory board to ratify and within 72 hours, they get payment out of it.

1:03:49So we've done that pretty effectively too. We've set a bunch of world records. We sold the most expensive video game ever sold was a$2 million Mario Brothers that came from us. The most expensive Modifari Tessarosa that ever sold was a$332 ,000 sale from us. So we've done really well at kind of getting the best assets. But then if you want to buy, if you're a wealthy person or an auction house who wants to list the best version of an asset, there's a pretty good chance that one of those is on rally. And we've become way more active in those conversations over the last year and a half. Is that a part of the strategy is almost hoping for, like you called it a hostile takeover.

1:04:23Is that part of the hope ultimately is like somebody really wants this Honus Wagner card and they make a bid for it? I mean, if you want to have it, you got to come through us. I think that in establishing the relationships we have, part of it was even people who consign to rally, a lot of that is a pool of potential buyers later for similar assets. And we've always made sure we maintain that conversation. But it's also part of the acquisition strategy without question. I think that dinosaurs, as an example, when we went into dinosaur fossils, this was probably four years ago, we started that conversation.

1:04:53The first one went on the platform probably two and a half years ago. It was something where talking to paleontologists and geologists, talking to people, to financial advisors, to all the people in the space and started to bring up and tease dinosaurs to them, it became pretty clear that as a collectible for the ultra wealthy, they were starting to show up in living rooms. And it was starting to be a situation where tech billionaires, celebrities like Leonardo DiCaprio has a massive collection of dinosaurs. Nicolas Cage has a massive collection of dinosaurs. Jeff Bezos tried to buy our dinosaur before we got it.

1:05:20It became one of those things where like the zeitgeist and the cultural relevance of this thing was changing where the pool of buyers that before it might've been like museums. It might've been somebody who was a private buyer somewhere overseas. It was a very niche kind of buying and selling group. We're starting to open up and expand a little bit. So we can provide access to a best quality example. Our triceratops in the front of our museum is likely the best triceratops in the United States, better than the one that's in the - And that's a skull, correct? Yeah, that's a skull, that 68 % bone mass.

1:05:51And it's got all these check marks that you look for in a triceratops skull. That was also something that triceratops in particular and T-Rexes were becoming the sort of playground for the ultra wealthy. There's only so many, and there's only so many that are 68 % bone mass. There only are so many that are complete skulls and only are so many that look like ours and are symmetrical as ours. So we look at individual assets and say like, we want this to trade, we want it to be active, we want it to be relevant. At the same time, we need a pool of buyers to bring full exit liquidity to a certain point.

1:06:21And this is an asset that likely puts us in the best position for that. Yeah. I mean, all of these are scarce assets and it just seems like the price has got to be up and to the right for most of them. I can't, you know, if you're buying right. Yeah. I mean, my lawyer would tell me not to say that. Not to, no, right, right. Me personally. Yeah. But that said, from a, you have the best example of something or a top 10 example of something in a space that has lots of brand new buyers with new money. And it's also got relevance where the masses and regular people are paying attention to on a regular basis.

1:06:53it's something that we have confidence in the liquidity the future liquidity of that asset by just checking as many of those boxes as we possibly can and in reality when you think about like to use the dinosaur as an example that's in our front window it's the first thing everybody sees when they walk into this museum everybody immediately thinks it's worth a million dollars it's only worth like 300 000 it's not because the market hasn't really caught up with the visualization of what that market is yet i think a lot of people need that that reinforcement of it's a deal. And I had that myself too with dinosaurs.

1:07:24We started thinking about buying dinosaurs. I'm like, yo, we're not going to be able to afford dinosaurs. What are you talking about? This T-Rex just went for$32 million. We're not going to be able to afford these dinosaurs. Then you start realizing like, this is an underserved market in my mind. There's a lot of people who look at this and say, that's got to be worth a million dollars. It's a dinosaur. They're not making any more, right? Yeah. I mean, it's one of those things, they're not making any more dinosaur, but it's also something that is, there is not a single person you could talk to and doesn't have an opinion one way or the other.

1:07:48It's either they believe dinosaurs didn't exist or like they remember from school. It's something that's always in the conversation and you look at these really unique pieces of, they're like art. It's just, I'm looking at a 12 foot triceratops right now. There's no reason this shouldn't be a million dollars. But the market is what the market is. Right now it's a$350 ,000 dinosaur. I believe personally that in the future, that's not going to be the case. They're going to go up to the right. But I think that from a visual perspective, making sure that it looks and feels the part is as important as anything else because people are going to make their own decisions in their head.

1:08:16They want, everybody wants to reinforce intuition. They want to say like, I made the right decision. We're trying to put as many of the right decisions in front of people as possible. What's your most valuable collectible right now? Like the asset that is the most valuable in the museum or just in general? On the platform right now is we have a broadside copy of the Declaration of Independence. There's probably 20 of those in the world. And ours is a really complete, very well-maintained version that it was a$2 million IPO. Right now it's trading at around 3 million, I think. It went up to around 4 at one point, but it's something that A, people didn't even know existed.

1:08:48People thought that the declaration, a lot of people that came into the platform that bought that IPO originally thought that the declaration of independence was only a single copy and the one in the rotunda in Washington, DC. In reality, that was a moment, you know, obviously cell phones didn't exist in the 1700s, but there were a bunch of copies that went to all the colonies so that somebody could literally read them in town square. And this is one of those that has a really ridiculous provenance that goes with it. It was owned by one family for 300 years, basically, for 200 years. What does that word mean?

1:09:18Providence. I'm not familiar with that. You've used that a couple of times. What is that? Yeah. So that's the timeline, the history, and the story that goes with an individual asset. So it's like what collection it came from. And sometimes it's a more recognizable name or person that owned it or that it came from than another one. That adds to the value too. So there are, let's call 17, 18 individual broadside copies, engraved copies of the Declaration of Independence that were etched in that everybody has access to that was read in a town square by one person basically saying, speaking to the independence the country.

1:09:47So there's some that pass through 20, 30 different hands. I'm probably exaggerating, probably fewer than that, but there are others that stayed in one family and that family was important in the construct of the creation of the United States. And this is one of those. So the provenance and the story that goes along with our copy adds value, even though there might be an identical copy. If you put them next to each other, the provenance and the story that goes with this one has something that adds value to it because it's basically tracked back to the founding fathers. That's awesome. Rob, this has been super fun and fascinating.

1:10:19I could go on and on talking with you. I know you've got a meeting to get to, but how can people find out more about Rally, find out more about you, find out about the museum and cafe? Go to rallyrd, rallyroad.com. Has everything, but you download our app. We're at Rally on Instagram. I'm Rob Petrozzo across every platform. All I talk about is what's happening at Rally. So feel free to reach out to me directly. And there's like a good chance if you Google my phone number, you'll probably find feel free to text me or FaceTime me too. I do that all day with a bunch of investors. So I'm happy to talk to anybody about any of this stuff at any point.

1:10:48It becomes part of my life, whether I want to or not. I talk about this stuff even when I'm not at work. So I could do the same thing, talk for three or four hours about it. So feel free to contact me, anybody who's listening. You're lucky, man. It's fun stuff you're up to. And yeah, it's just fascinating. It's touching a chord with, I know it's touched a chord with me and I'm going to check it out. I don't know if I'll make an investment, but we'll definitely see. It's cool stuff you're up to. Thank you, man. I appreciate it. And again, I just want more people to know what's going on. Investments are great.

1:11:15Anybody who spends money on the platform is somebody I really appreciate, but more so caring about what you're doing and what we're doing is such an important part of building anything. So I'm excited when anybody gives it attention. Yeah. I highly recommend people check out your videos and it's just guaranteed like it will touch a chord with people. So thanks a lot, Rob. I appreciate your time. Okay, folks, that's all I had for today's episode. I hope you enjoyed the show and I'll see you back here real soon. Thank you for listening to TIP. Make sure to follow Millennial Investing on your favorite podcast app and never miss out on our episodes.

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