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So we found what we thought was a good asset to start which was the 1977 Lotus Esprit and this was a, I believe a $77,000 vehicle. We did 38.50 a share I believe I’m not mistaken 2000 shares and that’s a car that in terms of supercars, the Lotus Esprit the series one, it’s a little bit esoteric, but at the same time, there was a story that we could tell that made it relevant.
Jay Clouse 0:22
The startup investment landscape is changing. and world class companies are being built outside of Silicon Valley. We find them, talk with them, and discuss the upside of investing in them. Welcome to Upside.
Eric Hornung 0:50
Hello, hello, hello, and welcome to the Upside podcast. first podcast finding upside outside of Silicon Valley. I’m Eric Hornung, and I’m accompanied by my co host, Mr. Fast Track it himself, Jay Clouse. Jay, they tell you to step on the gas and you go.
Jay Clouse 1:07
Yeah, we are fast tracking a new course experience over at Smart Passive Income SPI. And we’re flying. You know, we ran, we ran a survey to our audience to say would you prefer that we host this course beginning in May, or beginning in July? And the results said May and we said Oh, okay. A lot of dominoes knock over make that happen. But here I am knocking over the dominoes one piece at a time.
Eric Hornung 1:36
If you were a NASCAR driver, who would like your go to sponsor be like if you were like who’s on the hood? Who are you excited about having out there?
Jay Clouse 1:45
Gotta be Four Loko. I feel like that’s the most aligned to the NASCAR brand. And yeah, I feel like I would be number four. And I’ll be sponsored by Four Loko.
Eric Hornung 1:57
And maybe have like a king cobra on the back and you can call your card the hyper Viper,
Jay Clouse 2:01
The hyper Viper. Wow.
Eric Hornung 2:04
That could be nice, segue that.
Jay Clouse 2:08
I’m trying I’m trying really hard. Well speaking of fast track, today we are talking to Rob Petrozzo. The co founder and chief product officer of Rally formerly known as Rally Rd. Rally is a liquid financial marketplace for buying and selling equity shares in ultra rare assets the same way you buy and sell stocks, things like American muscle cars, Eric things like rare trading cards, things like rare documents, which we’ll hear more about in the interview.
Eric Hornung 2:40
Potentially things like Jays future NASCAR car, the hyper Viper.
Jay Clouse 2:45
They were the first to turn tangible assets into fractionalized public securities offerings. And they were the first to establish a liquid secondary market for those securities. They classify these offerings Eric as IPOs, and they’ve had more than 200 IPOs with hundreds of 1000s of shares of trading cards, classic cars, watches, memorabilia, rare literature, modern collectibles, and more on the platform. Very, very cool.
Eric Hornung 3:11
This fits squarely into our thesis of the financialization of everything, Jay. I have been following Rally for a while now a huge fan of what they’re doing, huge fan of what they’re building. And I think the medically over the next two, three generations, you’re going to see more and more stuff like this around the financialization of everything,
Jay Clouse 3:30
totally agree. And it’s just a much more interesting thing to invest in. And if I’m going to live my one life the way that I want to live it, I want to invest in things that I really care about Eric.
Eric Hornung 3:41
And if you want to live your one life the best way you can, you can go check out our friends at Ethos Wealth Management at upside.fm/ethos Ethos.
Jay Clouse 3:53
Rally Rd. has raised nearly $27 million to date. And as we’ll talk about late in this interview, they have just recently acquired a $2 million broadside copy of the Declaration of Independence printed in July 1776. That is bonkers.
Eric Hornung 4:12
That’s the one with John Hancock, right. Johnny Hancock.
Jay Clouse 4:15
That is the one with Johnny Hancock. I wonder what his NASCAR would be.
Eric Hornung 4:18
Uh, the old horse and buggy. Maybe you’d have like the Kentucky Derby sponsored or something.
Jay Clouse 4:24
Well it’s gonna be a fun conversation here with Rob. He’s obviously a later stage founder. But we wanted to talk a lot about Rally and their history, especially with the trailblazing they’ve done in the way of fractionalization we’d love to hear your thoughts on this episode. As you listen you can email us firstname.lastname@example.org or tweet at us @upsideFM and we’ll talk to Rob right after this.
Eric Hornung 4:47
I hate that we’ve demonized scheduling links Jay.
Jay Clouse 4:50
Scheduling links are actually one of my favorite things. I love the ease of someone saying here’s where you can book a time with me and then I can choose when it’s best for me too.
Eric Hornung 4:58
Whenever I get an outreach and someone says what time looks good for you. I asked them, hey, do you have a scheduling tool, and you know what scheduling tool I wish they had.
Jay Clouse 5:06
Which one is that?
Eric Hornung 5:07
It’s a new scheduling tool called SavvyCal. SavvyCal makes it easy for both parties to find the best time to meet.
Jay Clouse 5:14
SavvyCal makes the scheduling process even more savvy than any other scheduling tool that I’ve seen. And I mean that. It makes it so easy to personalize your link, you can say, Hey, this is a meeting time for Jay and Eric. And it just looks so professional, so sophisticated.
Eric Hornung 5:30
So much so that we’re going to be using it for Upside going forward, and maybe even rolling it out to the Upside network.
Jay Clouse 5:37
You can use SavvyCal as well, you can sign up for a free account at SavvyCal.com/upside, that’s savvycal.com/upside. And when you’re ready to upgrade to a paid plan, you can use the promo code Upside for a free month.
Eric Hornung 5:59
We like to start on Upside with background of the guests. But given today’s conversation, can you tell us about the history of Rally?
Rob Petrozzo 6:07
Yeah, for sure. So Rally is to give you the high level. Rally is a platform for buying and selling equity. And unique often kind of one of a kind assets with historical value with cultural value a lot of social significance. Every week, we run an IPO, multiple IPOs, typically on assets like that. So in every instance, a lot of times, it’s a high value asset. It’s one that people really care about anything from classic cars, where we started in 2017, all the way to dinosaur fossils and crazy political memorabilia, and historical memorabilia from sports and all the associated fields around it, we treat each one kind of like a stock where it has its own investors its own share price. And at the end of the day, you’re a true equity owner by making that investment. And then we facilitate a secondary market. 90 days after that IPO closes allowing for buying and selling of shares to register broker dealers. So we’re really trying to create this two sided marketplace that allows people to invest in the things they really really care about.
Eric Hornung 7:03
You mentioned equity a couple times there, I want to dive down into the tacticals into the nitty gritty real quick. What are you actually buying on this platform?
Rob Petrozzo 7:11
That’s the right question. So your your, the way we look at is that each asset is its own investment. But the complexity of that, and what we’ve really sort of pioneered is the ability to leverage the legislation that came with the JOBS Act in 2012, 2013, which allows for non accredited investors to make investments in the types of assets that were typically reserved for the super wealthy, or for the people with millions of dollars or a ton of access. So it’s called Reg A+. And what that is, is kind of like leveraging crowdfunding, where we take each of these individual assets, each of these items, whether it’s a baseball card, or a piece of political memorabilia or a Birkin bag, we turn it into its own company, which has its own cap table, its own costs, and we kind of maintain it and store it and manage it on behalf of each investor. So the technical is you’re investing in an LLC that owns and operates one asset and that asset is your investment. And then we maintain that we do it sort of in a very cost effective way. And we allow for those shares to be tradable onto that Reg A+ legislation.
Jay Clouse 8:09
Wild. Well, we’re sitting in 2021. And this isn’t a crazy concept to me. But I remember in 2016, 2017 when I first heard about you guys, it was like, bonkers. So talk to me about the atmosphere then and how this idea even came about that you can say like let’s rip apart, not rip apart physically, but like, theoretically, assets and let people buy pieces on them.
Rob Petrozzo 8:32
Yeah, I mean, that’s the right question. And you’re right to have thought about it that way, I think in 20. So 2015, myself, my co founders, Max and Chris, we’ve we’ve known each other for a while, and we knew we were going to work together in some capacity. Max was in finance at Barclays doing private placement deals that were way bigger than what we do here. But he understood that structure. And Chris was like a serial entrepreneur, an operator, he had been a VCs, he had been a VC before he understood how this whole process worked in terms of the way you raise money for anything, whether it’s an asset or a company, and he’s just one of the smartest people I’ve ever met, he’s been the smartest kid in my life for 25 years. So he was the person who’s gonna be able to operate this as a real business, I got lucky in that I draw pictures really well. And they allowed me to hang out with them and draw a picture that turned into the app. So all that together, I like to think of is that 33% of the equation is probably way less. But that being said, I’m so into storytelling, and I’m so into sort of trying to make people understand what the future what I believe the future will look like. And in 2015, 2014 and 2015. The concept made no sense the idea that anybody would have a portfolio that had anything other than stocks or their 401k. It seems like it wasn’t that long ago, but it was still very foreign to most people. So when we were walking around trying to make people believe that the future wasn’t investing in anything and the things you care about and democratizing access, it was still such a new concept. So back then, when everybody started to hear about us a little bit 2016 let’s call it we had two things that we were trying to prove. One was that alternative assets like vintage baseball cards, Then like even dinosaur fossils or meteorites or all these crazy esoteric assets, that that would potentially be a part of a portfolio or retail portfolio. By the time everything was said and done, the second part that we want to prove was that Rally was a place that you would go to put those assets into your portfolio, we got a little bit lucky. And every business, every startup, Every company has to get a little bit of luck. And that 2015 was this moment in time, where a couple of things are starting to converge, communication was changing dramatically. So the way you talk to friends and the way group chats are starting to work and the way Instagram was really a peak and sort of, you know, communicating your life to others. And having those small groups realize that they were huge. They were way bigger than they thought and Reddit was starting to get crazy at that point too. The other side of it was that you had the Robin Hood’s of the world, the coin base is crypto was starting the year in 2015, at an all time high and had a lot of volatility in 2015, but a lot of coverage too. So people are starting to look at that as an alternative asset. All those things together and the proliferation of Robin Hood in the way that that sort of took over the world 2015 and 2016. It made retail investors understand that was more than just what they were given there was more than their 401k. That was the first lane where it stopped in the end of 20. Sort of, I would say the middle of 2016 at 2016. People were way more open to the idea. And it wasn’t just me and Chris and Max run around like, you know, like Doc Brown screaming inBack to the Future, like trust me like it’s I we saw the future. And we felt like everyone else started to see it a little bit too by the end of that year.
Jay Clouse 11:24
What was the first item you guys created.
Rob Petrozzo 11:26
We started with cars and classic cars was this space that had massive enthusiast group. But it was a lot of it was sort of on reality TV and the auction results were getting published everywhere. And everyone was kind of following the money. But no one had any idea what to do or how to buy a classic car, nobody would have bought that because he had to put it in a garage and store it and roll the tires. And there’s so much complexity that goes around that. So for us, starting with classic cars was like the hardest asset class. But it was also one that translates everywhere into fashion into the sneakers that you were into the conversations that happen into the design that goes into architecture and all the new vehicles, everybody looks to the past to classic cars. And so some of these vintage designs and the way they build anything now. So we found what we thought was a good asset to store which was a 1977 Lotus Esprit. And this was a I believe a $77,000 vehicle. We did 38.50 a share I believe I’m not mistaken 2000 shares. And that’s a car that in terms of supercars, the Lotus Esprit this series one, it’s a little bit esoteric, but at the same time there was a story that we could tell that made it relevant. And that Elon Musk really built Tesla on the heels of Lotus and this particular car and the earlier Roadsters that came with it was really the inspiration for how he built that first roadster and how he kind of built the company. And they were using Tesla engineers overseas for the first seven or eight years of that company too. So we had this thing that we knew or we believe was a good investment, because it was kind of undervalued relative to the other supercars of that era. And it was also one that even though it was from 1977, had roots in, you know, 2015 2016 2017. So we ran that IPO, it took around all in almost a year to get approved by the SEC. And then it took us around three months to fund that start to finish. So you fast forward to now with 12 asset classes and IPOs that sell out in minutes sometimes, and a really active secondary market. And it happened really quickly and really slow kind of at the same time over the last four or five years.
Jay Clouse 13:20
To get a little bit more clarification on timeline. You know, besides teaching people like, Hey, this is an alternative asset you can buy, it’s going to be valuable. You’re also showing up on the doorstep of the SEC saying hey, this is a security and like, no, that’s a 1977 Lotus Esprit. How did that process work? And when did you socialize the concept of people versus get the process started with the SEC?
Rob Petrozzo 13:41
Yeah, so we another thing got to have smart people around us, Chris and Max knew immediately we should talk to as many lawyers as possible. And I was I was that made no sense to me as I was just start building stuff. But that’s the the the build things fast and break stuff mantra only works on social media, it doesn’t work for for anything in a regulated industry. So really early on, we brought in people who understood the regulatory construct better than we did. And that was like the first big upfront cost for us as a business where and making sure that you know, lawyers were paid and that the right paperwork was in place and using, you know, real well established people as opposed to cut rate, you know, that take anything away from lawyers, but we weren’t calling 1-800 numbers to find the person to communicate with the SEC on our behalf. And that was the smartest investment we made early on. So we had a really good feel early for something that the few the other people had done. So the Kickstarter is in the go go some of the early kind of debt financing platforms, they had taken a similar approach. That being said, you know, Chris, and Max wrote the majority of that first offering circular from scratch. So now you have 20 or 30 potential players in the space and the stuff that they’ve done is literally being taught at courses at NYU when Max spoke at MIT about it, it’s always a situation now where that template that that was written early on, which is you know, now is 185 page document I think inside of our app start to finish was the bulk of the work for the first year of the business, they let me kind of run it just build the app start to finish, and come back in a place where we already had that regulatory approval in place. It was time to kind of get moving really quickly.
Eric Hornung 15:11
You mentioned 20, 30 other players who kind of ran off your guys back. I know that there’s kind of this big trend right now around fractionalization of assets in general, what can’t be fractionalized?
Rob Petrozzo 15:24
It’s a tough question to answer, because there’s really there’s nothing that can’t be fractionalized. The way we think about is that anytime you have a really enthusiastic group, whether it’s big or small, and you have assets that have access, that’s kind of either moved away or was never there for the group that cares about it most. That’s the space we want to be in. And I think that where we’ve seen a lot of the most activity in the app, are in the spaces that we didn’t necessarily look at as the ones that would be the most popular. So when we think about first edition literature, and you’re talking about, you know, things that people would know, like Great Gatsby, and you know, something with a bunch of Shakespeare, like the piece that we have on the app right now, or the ones that people would really know well, but you know, open right now is a Wizard of Oz, the original first edition, which it turns out a lot of people in our on our platform didn’t know that that was a book first. And it also turned out that the questions and the communication and so the engagement get around a piece like that. It’s almost as crazy as it is around, you know, Mickey Mantle rookie card. So Well, we’ve always tried to do when we think about like, what can we fractionalize is more like a, what should we and we let the user base take us in that direction. Because again, we look at each one of these, these verticals that we’re in now, each of these categories is almost like its own little sub Reddit. And it’s hard for me to look at that. And say that that world might be too small for us to go into. Because that group, especially the smaller it is, it tends to be like the more engaged and other people that really understand that and want this access. And it opens up a lane for a lot more people to understand that when you have that community within each of those asset classes.
Eric Hornung 16:52
Let’s talk more about that concept, that framework of a subreddit, you guys dropped, rode from Rally Rd and made the conscious decision, it sounds like to go horizontal, where you can have all these different sub reddits on the platform, but there’s a lot of competitors that are springing up that are niche and vertical. So why not focus on cars and be like the number one person in fractionalized cars versus trying to go broad?
Rob Petrozzo 17:16
Yeah, you know, we’ve always thought about it in that a, when we started building this, we were like, this is a novel concept. How has this not been done yet, that was part of what started getting down that pathway we knew was gonna take a long time. And we kind of overthought it a little bit. So the name Rally Rd in itself was this, like quadruple entendre, where it to us, we know is going to be interpreted as cars. And that was a little bit of our moat. But we put that on paper, the way we trademarked and the way we talked about it in houses that it was the other Wall Street, the idea was that, like Rally Rd is in Wall Street, it’s not a place where there’s big buildings, and everything’s intimidating, and everybody’s wearing suits. It’s probably somewhere in the middle of the country where the people just kind of get together, think about something they love, and they kind of put their money where their mouth is. And that was how we always thought about it. And then rallying people together, and the Rally that goes with the market, we’re like, God, this is perfect. It turns out the domain was super expensive. So we kept the rd as long as we possibly could. But it’s also a situation where we always looked at it as those sub reddits. And I always kind of built this in a way that I thought, there’s no reason that somebody should come in knowing classic cars and knowing that well, and the generation that exists right now is so into information. And they’re all so self taught. And we have the ability to go to YouTube, or go in and learn anything, you can go anywhere and learn anything. And you could do that in a way that the deep dive didn’t really it existed a decade ago, but not the same way it does now. So when we think about the journey of our user, and the journey of an investor, we’ve seen it firsthand, and that they diversify really quickly. So someone might come into the app, and it might be a car might be a 1985 Ferrari Testarossa and that’s something that they might know every single thing about, then they start looking around the app a little bit, and they see some of the stories that we tell within those asset portals, then you realize, all right, that was actually Michael Jordan’s favorite car. And that was one with as a really iconic picture of him pulling into the arena. With the MJ air plates on it. It’s like, Oh, what is this the Michael Jordan rookie card, oh, there’s only 300 of those that’s kind of similar to the the flying mirror version of the Testarossa. And they kind of find that shared DNA really quickly. And they diversify quickly. Because now you have so many users on our platform, who look to rotate in and out of things or build that diversified portfolio. And we always want to make that possible. And we that was a bet that we made that it would happen and it has happened. So for us, it’s always about pushing the envelope when it comes to new asset classes and activating the, the new group that comes into the app that might look at it as their subreddit, but also open up that opportunity for the rest of the community who might be looking at it from a distance.
Jay Clouse 19:35
How would you describe your user base proportionally, in terms of people who are like shrewd capitalists and seeing this as a money making opportunity, versus purely for the love of it? Like how do you think about those segments?
Rob Petrozzo 19:49
That’s a that’s a good question that a lot of people don’t ever ask us that’s never come up. Shockingly, that’s never come up in any investor meeting either. That’s a really good question. This is the way I think about it. Is that everybody looks at this as a financial product to a certain degree. But we’ve always looked at what we do. And we’ve called this a lot internally, we don’t do it as much externally. But it’s passion lead investing, where the idea is that passion leads you somewhere. And it might be something as simple as a pretty picture, or something you recognize that has nostalgia from when you were a kid. But once they get inside the app, and they start looking around, we’ve put all the financial information in front of mine the same way we’ve put all those pretty pictures and all the stuff that relates back to childhood for some of these assets in the same place. So they might be led in by passion, but they really quickly become somebody who’s paying attention to this from a financial perspective. But at the same time, I’ve always looked at this as as different than finance. And even, you know, Max, who was at Barclays and Lehman, he did this for 15 years. He was like my friend who wore a suit to work every day, but he wasn’t that guy, you know what I mean? And we’ve always tried to look at it that way we do the same way. And that you know, what you do on weekends, it defines you way better than what you do for a job. If you work in finance, and you were in a Patagonia vest every day, I’m not gonna I can’t make funny, I can’t tell craziness. That’s a lot of my friends. So you know, I mean, but at the same time, you definitely passionate about something. And I think a lot of those people who look at this, and say like, that’s just a financial instrument, those are the people who are still in that world where finances a zero sum game, and it’s just make money by any means. And we’re just not that platform and don’t want to be that platform, I think we’ve done a good job of balancing it where it’s a, it’s a FinTech app, it’s a FinTech product. But at the same time, it’s a it’s a method of sort of surfacing really interesting information, stories around these assets that do hold value. And if you want to put some money to work, you can. And that’s part of why we never had any minimums on the platform to is the idea that if you want to put 25 bucks to work, and the thing you care about, you should be able to do that. So we want to afford that opportunity.
Jay Clouse 21:40
I would imagine you can see some of this behavior play out in in the data, you know, I would assume that people who are there like using this as a financial instrument, or probably their their trading velocities probably higher than the typical user. So what can you tell us about the behaviors you’re seeing in terms of this passion lead investing are people buying and holding, or a lot of people trying to flip in and out of stuff? Or what type of trends do you see.
Rob Petrozzo 22:01
It’s funny, because like, we see a lot on Twitter, too. So we have, you know, the platform is big enough now with you know, hundreds of 1000s of users and so much activity happening in the app every single day. It’s not the same way it used to be in in 2016, when somebody would call the customer service line and like, I would pick it up and they would want to spend spend like $1,000, and it was still shocking to me to hear that, you know, like that. And that I still have that when I see anybody invest in I’m opening the admin system, it’s like, there’s a bunch of investments coming in still shocking to me, that we build something that really resonates with so many people. And that’s kind of what we always wanted to do. So it’s, it’s shocking, but it’s also so rewarding to see it. But it’s also a situation where, you know, we see so much of this play out on social media now too. Where you have people saying like, I didn’t think I was gonna invest today on Rally, and I bought two of these, or three of these, or five of these. And I think that is that passion element, where we’ve been able to engage people in such a way that they’re basically saying, like, I saw that band first. And that was how we’ve always looked at is like, you know, everybody wants to say that they were there in that bar when it was a 30. You know, it was 35 people. And it’s like, yeah, and now that’s the Grateful Dead, you know, I mean, like some crazy thing, like there’s one, there’s always like everybody wants that sort of, to be a futurist and to see the future and see around the corner. And we want to provide that opportunity. So what we’ve seen more than anything else is that that diversification happens quick. So when you have, you know, portfolios that have four to five assets, on average, and you have a 28 year old average investor, and you have sort of, you know, making their first investment really quickly. And then the second investment, and, you know, seven or eight days later, let’s say that’s a us signals that they’re engaged in the platform, they want to learn more, and they want to diversify quicker. So for us, we’ve always looked at it like assets will lead the asset stories lead, and then the trading component of it allows you to potentially, you know, see where the market is engaged where it is, but we have very few situations where there’s day traders on the platform. And we’ve, that’s not something that we monitor super closely. But it’s also something that we know we’re in it. In a lot of cases, we believe in these assets. And we’re trying to buy things that are relevant not just now but will be relevant in the future and really hold value both from nostalgia and that and that kind of emotional standpoint, but also are the best in class to the museum quality that tend to sort of you know, move without correlation to each other or to the markets.
Eric Hornung 24:11
I’m going to take us away from the passion side real quick and into the financial side, because I do wear a suit to work every single day.
Rob Petrozzo 24:18
I will, listen there was 20 I think it was 2017. I wanted to ask my girlfriend one on a crazy suit kick and I bought like 30 suits. I don’t even I wear a suit once a year, so I’m not against it at all. I love suits.
Eric Hornung 24:28
So if Rally’s kind of the infrastructure for this alternative asset universe, has anyone built like an application layer on top of it and in finance, that would be like a hedge fund or a mutual fund or an ETF or some sort of financial vehicle for investing in a subset of the assets on the platform.
Rob Petrozzo 24:45
Yeah, there are a couple that have started springing up now. And I think again, that goes back to that validation question and that when we started this it was like the yeah alternative answers are cool, but that’s the thing that is never gonna be retail. I think now in the last year and a half or two years. Let’s call it as the on ramps. become more obvious. And as those become more apparent and get built by, by us and some of the companies around us and other spaces, I think it’s become obvious that there’s something there. And like everything else, when that when that institutional money starts to come in, and the bigger check, start to take a little bit, take it a little more seriously, and start thinking less about that total addressable market, and individual units. And so I think about it more as a bucket of alternative assets that everybody really gets and gravitates towards, you start to see those pop up. So it’s really early. And, you know, people come to us all the time, they have great ideas they want to build on top of what we do, we’re kind of head down building out what we have right now, before we get to that point. But that being said, the thought that there won’t be sort of buckets of assets, or, you know, the layers that live on top of the rallies or or complimentary to the rallies that allow people to sort of hit that one button investor on our IRA or investor investment advisor and a bucket of or ETF that lives as a sidecar to what we do. I think that’s that’s a pretty obvious direction that everybody’s gonna be going in at certain point for sure.
Eric Hornung 25:59
It feels like historically, there’s been this thing called the 60-40 portfolio, 60% equities, 40% debt. And I feel like in the last five years, we’ve seen access for the average investor in the private markets expand dramatically into alternative assets into real estate into collectibles. Do you have any sense for like how that historical portfolio allocation is going to change over the next 20, 30, 40 years.
Rob Petrozzo 26:26
It’s hard to see the future like everybody wants to get like, I love the idea that I could pretend I’m a futurist and a technologist and like, I know exactly where everything’s going. But the big, obvious inflection points in me is happening right now, as we speak. There’s, you know, I know 18 and 19 year old to try and keep as many sort of young, ambitious, smart, you know, people around me who really understand and could see around the corners that I can’t, that are, you know, 80% net worth, and crazy all coins that I’ve never even heard of, and don’t even know where to go to trade them. And they’re winning, you know what I mean? So it’s hard. Granted, we’re in a bull market for a lot of things right now, it’s hard for me to look at what Gen Z is doing even as like a talent of a millennial, myself seeing some of the younger millennials, it’s hard for me to not look at them and say the future when it comes to alternatives is way closer to sort of 50-50 than it is, you know, 80-20 or 90-10, only because the alternatives when I was sort of hearing that, in 2009, 2010, when I first got a couple of checks, and could like, invest real money. And when I say real, I’m talking about 1000s of dollars instead of hundreds. The options were so few, it was an ETF, it was options. And it was equities. And getting real estate meant buying a building or buying a home somewhere. And that just was out of the question for me, especially in New York. And sort of diversification didn’t really mean anything. To me, it was like buying a few pairs of sneakers, I was gonna wear maybe one or two of those a cup of value, it made no sense to think that alternative assets would be what they are now, if I’m if I’m 19, or 20 years old right now, and I have a little bit of financial education that probably taught myself. And I’m making a little bit of money on these things that like the older generation knows nothing about, it’s impossible for me to think that’s not going to accelerate dramatically into the future. And I think that me getting into my late 30s I’m thinking about this as I wish I would have done it earlier. But the on ramps exists too. So it’s hard like I was in my office this weekend and my dad came by, there’s absolutely a short story. And he pulled up the middle Lafayette Street and got out of his cards to hang out. And he’s wearing a Ovadia tracksuit head to toe and he’s got on like, you know, white new balances that like cool guy. I mean, Leon Dore new balances. And he’s got his Robin Hood account out, and he’s like, shit, I wish I had held on to that Dogecoin whatever, instead of selling a 26. And I’m sorry, I was like, what world are we living in right now. And it articulated this moment in time. So specifically, and that this 19 year olds doing something I don’t know about my 60 year old dad’s doing something I really know about. And everything in between has no choice but to catch up. And to think that the portfolio of the future won’t be a little bit of everything. And we’ll just be what the safe bets looked like in the past I think is off the table at this point.
Jay Clouse 28:55
We are in this bull market. Eric told me the word frothy.
Rob Petrozzo 28:58
Jay Clouse 28:58
What what what happens if that turns to alternative assets? Are they the first to go? Are they the most? Is that what people are going to hold on to the most?
Rob Petrozzo 29:06
I you know, it’s it’s it’s a weird thing to think about because I think that a lot of what gets lost in what’s been happening and in the in the bull markets that there’ll be moments of consolidation, and there’ll be ups and downs along the way. But I think what we’ve seen in the last call it two years, let’s say or a year and a half give or take is that it’s not necessarily there’s pockets that get killed on a weekly basis and allow those like those those weird all coins and some of the really fringe investments. I think that this generation, what’s crazy different, not just that retail is leading so much of this charge, but that the idea of like buying the dip is is an absolute lifestyle decision has nothing to do with the way people think about finance. They just see as an opportunity because this generation more than any other generation myself included, has the ability to zoom out in a way that I never did. So in 2008, 2009 like I lost every single dollar and that was because of selling at the bottom not because it was Because I was I was, I was thinking about the future, it was an immediate emotional response. And these kids have no emotion now when they trade and when they sort of make investments, they know that they just want to sort of, you know, get their cost basis to a point that makes sense for them to hold on to it for the future and get their money back. That’s one big difference. The alternative asset side of that, I think a lot of what we have right now, what we’re seeing is that the information that’s available on Twitter, and a lot of other places is different than it was back then too. So 2008, 2009, you were get listened with CNBC was telling you a little bit. And there was only so many places you can learn what was actually happening and what the macro trends were and what the future might look like, and get told to kind of zoom out and think about the future. I think that some of these asset classes now, it’s not just new liquidity that’s coming into the market driving these prices, it’s people that really understand these assets, they understand the history of it, of you know, a Mickey Mantle rookie card has 70 years of history, whereas any, you know, how long has Tesla been on been listed 8, 9 to 10 years. I don’t even know, the average lifespan of a company is 15 years on any exchange. So it’s hard for me to think about what the future looks like and not think that this new retail generation, when that dip does happen, when that pullback does happen. The rug polls are gonna look and feel way different than they used to, I think a lot of these assets with history and with this, this new investor has the ability to zoom out and see that history will potentially take it as an opportunity to educate themselves on what it could do in the future and potentially reload if they had the opportunity to do so.
Jay Clouse 31:19
That history is what’s really interesting to me about Rally and we’re living in a moment now, where NFT’s are really big and NFT’s don’t really have any history, but could be an asset that you fractionalize. How are you guys at Rally thinking about NFTs?
Rob Petrozzo 31:33
What’s an NFT?
Jay Clouse 31:34
Non fungible token. It’s a digital asset?
Rob Petrozzo 31:37
Ah, no, I’m joking.
Jay Clouse 31:39
Okay. I was like maybe he doesn’t know maybe he’s not thinking about it.
Rob Petrozzo 31:43
Sometimes my deadpan humor works. Now, that was a stupid one, though. But in all seriousness, like, you know, NFT’s are weird, because it’s I think a lot of people look at, like, look at everything as a crazy bubble right now. And I think that it’s not, it’s not out of the out of it’s not crazy to say that 99% of NFT projects will probably go to zero, I think it feels a lot like, like the Ico boom felt like in 2017. And if you go back to me right now, again, back to that theme, where it’s like, everybody wants to be first everybody wants to be a futurist. Nobody wants to miss out, I think you have a lot of young, super smart technologists who have made a little bit of money and a lot of money in some cases this year. And they’re rotating out of the kryptos, they made their money in putting it into NFT’s. And a lot of these projects continue to pop up and move really quickly. Because that cycle of information happens so quick. At the same time, it’s heartening to not look at it as having staying power at this point, because a lot of same reasons that we exist. And the reason that we sort of, you know, we’re able to make our name in 2016, 2017, and get people to believe it, and that people are willing to take more risks. And it’s a very, very risk on trade right now for a lot of people into the things that they care about. So, you know, I went to school, I went to art school, and the idea was, I was gonna come out of school and be an artist, like an actual working artist and paint for a living. But that’s just wasn’t, it wasn’t gonna, I wasn’t good enough, and it wasn’t going to happen anyway, because it’s not a job that was, especially in 2000, you know, 2006, that wasn’t a job, you had to be a designer. But if I had the ability to create, build my community, and then be able to sort of, you know, feed myself off that community and do in a way that we all did it together, I can’t see reason I wouldn’t have tried that, especially as technology was sort of taking shape. And that’s what we’re seeing now is that this whole creator class is able to engage community and community is willing to spend on the things they care about. So NFT’s are not that dissimilar from what we do in terms of the way that you engage emotion, the financial returns, and the history of it might be a little bit different. But I think there’s a lot of interesting projects that will have sort of this equity aspect and a utility aspect that’ll stick around. And I think those are the spaces that we always look at, we don’t go into any sort of asset class without significant domain expertise. I think that NFT’s, as we are sort of paying attention to them for probably, you know, I’ll keep it real like six to eight months, there’s a lot of smart people around us who’ve been preaching the benefits of it and where it’s going to be for years at this point. So for us to think about the conversation we had a year and a half ago or two years ago, around what digital would be in what tokenisation will look like. It’s happening now way quicker than I think a lot of people expected in terms of velocity. But it’s a space that we’re definitely keeping our eye on. And when the right project pops up that makes sense for Rally, I’m sure it’ll be something that’s on the platform.
Jay Clouse 34:06
I want to dive into that a little bit more, because we haven’t given listeners enough of a taste of the breadth of what’s in this platform. So talk to me about some of the projects that you guys have on the platform now and coming up. If you’re able to say that you’re excited about.
Rob Petrozzo 34:16
Yeah, so I mean, every week is something new. So you know, this particular week is the 1999 first edition Pokemon PSA 10 set. So this is the Pokemon set that everybody had played with destroyed, traded. And now looking back, I wish I personally would have kept every single car and I’m sure a lot of people do too. So there’s 11 registered PSA 10 sets of which Rally has to at this point and it’s one that hits on so much of the emotion and so much of the the nostalgia that goes along with the late 90s and early 2000s. But it’s also something from a rarity standpoint, from an art standpoint we look at as a really interesting asset that will have legs as a franchise that we believe will last forever to in terms of just the way Pokemons are looked at not necessarily the set but Pokemon in general. So that kind of hit on a lot of points for us then Look at the other categories that we have right now whether it’s classic cars, wine and whiskey, comic books, first edition literature, all the political and space history, watches, collectible technology, that to us is kind of hits on all these points, we have history, you have sort of something that’s gotten out of reach in a lot of cases. But also, it’s a look at what the future might be. So the Apple One computer, which one of those first sort of hand built Steve Jobs and was computers, the one that that birth did the equivalent of personal computing, the way I think about it, and a lot of people think about it was an IPO that we ran a couple of weeks ago, $125,000 really unique example, one of 20. Similarly, you know, when we go into an asset class, we always have these, these watermark, these kind of benchmark, we want this, this makes the most sense for us. Let’s go after it. One of those was the Declaration of Independence, which it sounds insane to say like, we have a Declaration of Independence. But I think a lot of people don’t don’t realize that there was the original declaration of independence is the is on permanent display in the National Archives Museum in DC, with the Constitution, the Bill of Rights, there are these broadside copies that were the equivalent of the first copies made that were used, especially within the colonies, to let everybody know that independence was achieved. And it was something that, you know, these first 1776 editions, one of the ones that we have a known as a wall 15 copy, one of only a handful that have ever come to market. And that’s an IPO that we’re running in the next month or so end of May. And that’s one that’s really, really interesting, a $2 million asset, the most expensive asset we’ve ever done, but also one that when you think about history, you think about to the last 250 years, something that’s shaped so much of what we see today. And you know, a lot of polarization around that. And for better or worse, it’s something that’s that’s within sort of the the annals of time and history. And it’s one that we always looked at as a potential heirloom benchmark piece for us that we acquired a couple months ago.
Eric Hornung 36:44
So much of what you’re talking about is physical like it’s, it’s something you can touch something you can feel. And I remember when I lived in New York, you guys launched a showroom, I believe in Soho, or West Village or something. Can you just talked about the decision like to launch a showroom for a digital platform and how people interact with this physical thing on the platform.
Rob Petrozzo 37:07
Yeah, so that tactile element, and bringing it to life was part of kind of proving that alternative assets are real. I think that the first, when we started this, it was cars, the question that we got all the time that we don’t get as much anymore now was, well do I get to drive it? And our response to that, always, like, it’s a weird, it’s like, No, you don’t get to drive it. But I’ll explain to you why. And here’s the reasoning behind it. And for us, we always looked at it like, there’s the museum quality version of something, the one that we want to maintain and ensures available to future generations. And it’s the one that has all the bells and whistles. But it’s also the one that if you were to keep it and have it yourself and drive it, you’re talking about, you know, potentially 10s of 1000s of dollars in maintenance just to keep it and never drive it. And we’re able to do that at scale in a way where you can have the one that you drive, and maybe it’s the lower quality version, a lower price version. And in your portfolio, the equity element is going to be the best version of the museum quality version. So you have the utility and you had the equity if you really want that the same thing exists for for somebody’s baseball cards, if you want, you know, a PSA 10 version of a Michael Jordan rookie card, and that’s a $500,000 card. That’s one world that might be unavailable to majority people and is only 300 of those exists. But there’s PSA nine all the way down to one that potentially you know, meet that threshold for what you want, and for that utility aspect. And you can potentially afford it as well. So we did our showroom. The first one we did was a pop up and it was on Wooster Street. And it was in a random garage, we just drove two cars into it and open the garage door that was in the front of this gallery space that we rented out. And we did it for a weekend in 2017. Right around Thanksgiving, it was that we got lucky. It was really good weather. But we didn’t really advertise. We had no budget, a bunch of people walked in and asked a ton of great questions. So we always knew from that point forward, when we sort of you know, have our next office space a we want to be in a high population, high traffic area. But be bringing this stuff to life and making sure people understand exactly what it is not just investors or potential users, but everybody is going to be an important part of the platform. So we opened our second space as our full time retail space. And I’m actually in it right now because we’re getting ready to redo it on Lafayette street in between prints and spring right below our office space. So that’s a US too in terms of neighborhood, it was you know, a one block south of supreme and all the streetwear stores, everybody knows and it’s one block north of, you know, Jack’s wife fried and all the restaurants that get insane and you can barely walk down the block during the summer. So we want to put in a space that had tourists that had locals that have people who really understood, you know, a culture and knew was going on the city that would come here for a specific experience and just open the doors. So when you walk into the showroom, there’s a car that sits in the middle, which right now was a 1980s era James Bond Aston Martin, the walls have a bunch of glass cases with kind of infinity mirror setups that have you know, Mickey Mouse rookie card and one of the rarest Birkin bags in the world and a Michael Jordan game one jersey. There’s some iPads and some things you can interact with. But at the same time, the whole goal was to have somebody walk in and say what is this and we get that every day, so we’ve been closed for COVID for a while now, but right we’re about to reopen and get ready to expand and potentially going to other places and do some pop ups. But that’s us was the when when you get a bunch of people to walk in, they just happen to be walking by Lafayette Street, maybe they were going to lose a ton. Or maybe they were just going to, you know, Warby Parker, and maybe they would just go in sort of walking around trying to get a feel for what was going on the neighborhood and just people watching, the doors are open, and there’s a half a million dollar car sitting in the middle, and nobody’s really pressuring you to come in. They just kind of wander in, say, What is this, we have a conversation with them. And then we started shorting it, they were saying on average for like, 19 minutes once they asked that first question, so that’s us, was the wind, just getting the conversation going, getting the word out and having people leave? With that look on their face? Like, what did I just see, and then finding their way back to the app eventually. And that’s always been a really important part of the platform for us.
Jay Clouse 40:45
Well just add on to that the stuff that’s not on display, or even when it is on display? How much do you guys have invested in security and protection of these assets has got to be insane?
Rob Petrozzo 40:54
Yeah, I mean, again, we’re really lucky in that we do this at scale. So we get a little bit lucky. And that we have, we have two purpose built facilities. One is in New Jersey, and that’s where all of our cars are located, and other ones in Delaware. And that’s the equivalent of a vault that has the majority of our assets. And it’s a space that’s set up in a way with you know, 24 hour security, and it’s, you know, nonstop protection and something even when we go in and out, it’s like crazy protocol, like we’re traveling around the country, just get into the space at certain times. And it’s also something that, you know, when were thinking about the future of this business, the ability to sort of do all those things without sort of passing on costs was always a really important part of what we do. It just so happens that now in our, in our secure space, we have, you know, the last floor of the Staples Center that Kobe played on which is a, you know, a 12 foot or 18 foot piece of wood. And then you also have this, you know, Honus Wagner card, always these small things that are potentially just as valuable. Keeping all those in one place was a really important part, at least the way we looked at it, because we want that to be sort of an experience center. At a certain point, I think we will sort of do more with those assets across the country as things start to reopen.
Eric Hornung 42:00
What’s the crown jewel? Like? What’s the thing that you haven’t been able to get yet that you really want to get?
Rob Petrozzo 42:05
Man, It’s a good question. I think there’s a few there’s stuff for me personally, that’s like the the childhood stuff that I really, that is like the Grail type stuff, one of them that we got, we have the we have what would be considered by many to be the best example of an early Super Mario Brothers. And that’s one that you know, 40 million, 41 million, 42 million, something like that game sold. I don’t know what anybody that got that game and didn’t rip it open and play it immediately. So for anyone to keep that sealed in the condition of the one that we have, it is absolutely absurd to me. So that was one that’s that I always think about is like, I can’t believe we got this type of situation. But then we start thinking about the future of this platform, and kind of where we want to go. And what we want to have. There’s a couple of kind of Super Bowl type rings that I’m thinking about that are really interesting. There’s some intangible assets I’m thinking about that are really interesting. And that I think about, you know, being in New York and having been in New York my whole life, you walk down any street and anytime a day. And now my eyes are just always looking around. So I’m looking at somebody walking by with like a really ridiculous watch that I know what the value is. And we haven’t been able to get that particular one yet because of trying to find the right one. And then you see like, a piece of street art on a wall. And it’s like, man, getting something specific from that artist for our platform would be really awesome. Then I start thinking about like, a Campbell drive by and it’s like, Damn, those cab medallions got really beat up, that might be a good platers buy a bunch of those medallions right now. It’s impossible for you to not look at everything happening at all times and think about it as an asset now, because from a collectible standpoint, I’ve personally collected so many weird, obscure things, not even thinking about the value, to look at everything that’s happening, especially in New York, where is this sort of hub of culture and a million different things happening. I want to securitize everything I want, I want to democratize every single asset that has a fan base and people that care about it, and be able to bring that to people and sort of bring it to life and tell the story behind it. So it’s impossible for me to pick one thing at this point, when I feel like I’m so surrounded by it at all times.
Jay Clouse 43:55
On this show, we talked to a lot of investors who you know, they see 100 deals, they invest in one to 10 companies, you and your partners are in some ways, investors in this way do you guys have like investment meetings where you pitch some of these assets to each other to say we should throw down on this?
Rob Petrozzo 44:10
Yeah, all the time. Unfortunately, I don’t have the same poll I used to hear because it’s we have a lot of younger, smarter people who are in charge of that now. But it’s you know, we have a we have this very specific checklist that we go through when we want an asset. And when we target something and it’s got all the tangible must haves and if it was like a car be the you know, specific mileage specific provenance, it’s got to sort of have you know, all the doors stamped with the same serial number, all the basic stuff you will look for. But also we want to make sure it’s something that’s that’s culturally relevant and will be relevant in the future. So that’s where the intuition comes in. So we use a mix of data, a mix of understanding these markets, and we have a great group around us of advisors and people we keep close to the company who have roots in these specific asset classes. And in these verticals kind of walk us through a lot of that stuff. But you know, when we were looking for a dinosaur like that was to me one of the Grail type pieces, and that’s one where you know everybody when they’re young when they’re 10 years old, like an amateur paleontology Just to a certain degree I learned about in school, I was pitching so hard to do like a T rex first. And that was one that from a from a sticker shock perspective, it’s just like, how would you have a Tyrannosaurus Rex at the same time, like, we know one of the two of the T rex that we saw cuz we see so many deals once we think about a vertical, they just weren’t the right T rex is and I didn’t know that until I did like the full crash course and was like, you know, zooming with the head geologists and paleontologists at the ranch in the Dakotas. And it’s explained to me what’s happening and why. And you realize like, listen, a T Rex, that’s only 40% complete might not be the one that we want right now. But this Triceratops skull, which is more complete, and the bone density is different, and the structure of it is different, is one that from an investment where the perspective makes more sense. And then I start to wrap my head around it a little bit more effectively. And I could remove the emotion from it a little bit more than I typically would. So we always think about things in terms of both that hard data, and the intuition, the emotion that’s associated with the asset.
Eric Hornung 45:56
I want to jump back to the product for my last question. We talked earlier about there are people on the platform they have you have primary offerings, and then there’s also this whole secondary market. So there’s people trading, we talked about the kind of ups and downs of the market in general and bowls and bear markets. One of the things that Robin Hood was in the news lately for and Coinbase, I guess as well, is there just UX design, and kind of what it implicitly or subconsciously tells people to do incentivizes people to do, how do you think about the moral and ethical and maybe even legal repercussions of designing the product at Rally?
Rob Petrozzo 46:31
Yeah, so it’s the right question to ask. That’s one that we think about a lot in terms of product design, we took a lot of what we did early on from Robin Hood when it comes to onboarding because that was just such a unique experience for someone like me who only had an E trade and a TD Ameritrade account before Robin Hood existed. And part of what those dashboards provide for the old school kind of financial technology. It’s intimidating in a way that I’m afraid to open up a lot of that level two stuff, and a lot of the trading interfaces that probably do provide the most information and the most relevant information for my trades. But at the same time, they don’t make a lot of sense to retail investors, myself included. So we thought about putting this together, we really want to storytelling to be at the forefront. And we want to sort of make sure that all the disclaimers, every piece that goes along with the rest of the financial responsibility to fiscal responsibility on our side was front of mine. So we didn’t go super hard with the gamification or with, you know, making everything look like it goes up, or we really did it did a really good job, I think of laying out a process that kind of pushes somebody through the entire story of an asset and the value proposition before the ability to make that investment. So, you know, we work with a lot of really great partners, some of the custody of shares and some of the money transfers, and the amount of disclaimers and upfront sort of agreements that we have in our app to me, I thought it was gonna be something that that kind of went by the wayside people just click through. But oddly enough, we look at our metrics and the offering circular, which is, you know, again, 200 pages is a button inside the first version, the first asset portal before you can do anything it says legal on it, that gets clicked as much as the chat button, which is on the we’ve never put into the app they’ve been working on for a while, but we’re not 100% sure we’re gonna move with yet. So it’s a weird sort of, it’s a weird concept to think like disclaimers and responsibility upfront. But we’ve been really cognizant of the fact that there are some things that you need to put forward for retail investors to make to make them comfortable with the process, we found that they’re more comfortable seeing more of it than seeing less of it at this point. That’s how we designed the app as well.
Jay Clouse 48:34
It’s been awesome, Rob, thanks for taking so much time to explain all this stuff to us. If you want to learn more about you or Rally, where should they go after the show?
Rob Petrozzo 48:41
Go to our Rally Rd rallyrd.com our handle on Instagram is @Rally and then on @Rallyrd on Twitter. Everybody has my phone number most of our users so feel free to text me directly to if you Google my name and phone number. I think it’s pretty easy to find.
Eric Hornung 48:56
Jay, what’s your favorite podcast app named after a fruit?
Jay Clouse 49:01
Gotta be Apple.
Eric Hornung 49:02
Can you think of any other ones?
Jay Clouse 49:04
I tried really hard. But I didn’t want I didn’t want to wait for too long. I didn’t want too much dead air.
Eric Hornung 49:08
Hey, you know what’s worse than dead air? Not getting reviews on Apple podcast from your listeners.
Jay Clouse 49:13
Oh my gosh, it is the worst every day that I wake up and I don’t have a new review on Apple podcasts. I just look up the sky and I go Ah,
Eric Hornung 49:21
I like how the first thing you do when you wake up is to look at Apple reviews.
Jay Clouse 49:25
If only I was lying, but I’m not and I’m looking for new reviews for upside on Apple podcast, Eric and if you are listening to this right now, you could be that person that helps get the day started right.
Eric Hornung 49:37
All you have to do is go to Apple on your iOS device or web browser. Plug in and leave us a review. Five stars would be nice. Four stars would be great. Let’s do five stars.
Jay Clouse 49:47
Let’s do five stars definitely prefer five stars. Even if you don’t use Apple podcast as your preferred listening app on an iPhone. Please take a moment to rate us there anyway to helps us bring on great guests. It helps us climb the charts our show get better if you do this very simple act, so please, please.
Alright Eric, we just spoke with Rob Petrozzo. He co founder and Chief Product Officer for Rally. What stuck out to you about this interview talking about fractionalization in rare collectibles.
Eric Hornung 50:23
Before we dive in to Rally though, I guess this is really part of Rally, I want to talk more about like some broad brushstrokes, things that we’ve noticed on Upside before things that I’m particularly excited about going forward over the next 50, 100 years. I think this financialization of everything, this fractionalization of just about anything, is a big macro trend. If you think about kind of how the world was set up before, the ability to fractionalize things became cost effective with people like Rally, you had to write really, really big checks to buy something, which means that only a certain amount of people could actually buy that thing. Which means that the price of that thing likely was wrong, whenever anybody bought it, the more transactions that happened to a thing, the more efficient pricing becomes. And there’s this thing in finance called a discount for lack of liquidity. And you can make the case that all assets in the world are undervalued because that are the fall into that bucket because there is no liquidity for those assets. So as we add liquidity to things, we one develop new asset classes that investors who are not hyper rich can invest in in diversify portfolios. And to probably see asset prices increase around those things to levels that don’t make sense historically. So I’m super bullish on stuff on all of the alternative asset spaces. We talked with people like Main Street, we talked to various different kind of crowdfunding platforms here on Upside, and now we have Rally Rd, which is just another kind of arrow in that fractionalization democratization of finance quiver.
Jay Clouse 52:14
Ah, use the word quiver good. I see your broad brushstroke, and I raise you my own fumbling thoughts through history and finance. I believe our history of money is rooted in gold as a gold standard, we printed dollars that were backed in physical stuff being gold, and in some way, we’re fractionalized the aggregate amount of gold that we had in reserve. And as time has passed by, it seems to me that we’ve just printed more money than we necessarily have gold. And so to have new assets that have innate value, because there is scarcity, there’s actual scarcity, there’s no longer necessarily dollar scarcity tied to the amount of gold we have to have actual scarcity with this asset makes a lot of sense. Now, the thing that went to question is, yes, there’s scarcity. But scarcity is valuable when there’s demand, you know, there’s only a small amount of supply. So 50 ,100 years in the future, will there continue to be demand for a Pokemon PSA 10 Set? Probably, but also maybe not. So it makes this a little bit more risky, I think of type of thing to invest in and peg value to, but I really like what you’re saying about the more transactions that there are, the more accurately priced an asset is and thought about things in those terms. But I agree, I think this this makes interesting sense to tie your own amount of wealth to because there is this like very real known scarcity of the thing.
Eric Hornung 53:50
And I think Rally is on the right road. How about that?
Jay Clouse 53:55
Eric Hornung 53:55
When it comes to this path, I think that they went through all of the hurdles to do this in a regulatory fashion. That’s correct with our current regulations in the United States, as cumbersome as they are. And that set the precedent for a lot of other companies to do this. I think if you are at all interested in this space, and you tend to find your way around the internet, you’ll find that there are kind of mini Rallys popping up that are more niche, whether they’re I think there’s a couple that are focused on wine. There’s one that’s focused on watches, there’s one that’s focused on cars, specifically like there’s, there’s more and more of these, and I think that’s a good sign that there is that demand that you were talking about.
Jay Clouse 54:37
In a lot of ways. You know, this is pegged back to a lot of human history in terms of what we invest in, in status. Like a lot of times people would buy art and put on their walls for the story in the the conversation starter to talk about why they bought that piece, why it’s important to them. And this is a really great, interesting way to diversify into other things that are conversation starters and can uphold status. Something that’s stuck out to me that I wanted to get your take on. You know, he said the actual underlying mechanics of this are you invest in an LLC that owns and operates one asset? That sounds very similar to conversations we’ve had with Trivest with Assure Syndicates, Am I understanding that correctly?
Eric Hornung 55:16
As far as I understand it? Yeah, I think that special purpose vehicles seem to be making a little bit of a under the radar rustle here across what we’ve been talking about on on Upside. Maybe they have the flexibility to do a lot of this financial innovation that hasn’t historically existed in funds. Or maybe they’re just becoming more accessible to those without lawyers.
Jay Clouse 55:40
Back in my day, you gave someone an SPV, and they got upset at you.
Eric Hornung 55:43
That’s a bad joke.
Jay Clouse 55:46
SPVs boom times. Yeah. Yeah, I agree. We’re hearing about it a lot here on the show. It’s really interesting to me, and I’m sure it will continue as you and I weaseled our way deeper into this web, rabbit hole, rabbit hole.
Eric Hornung 55:59
I thought I saw a webbit I do want to go into Rally and kind of their future started with as Rally Rd diversified into cars. I guess my one shadow around Rally would be how do you stay true to like, where people want to be and not diversified too far, like declaration of independence? Super cool. But is there a world in the future where it makes sense to have something not as cool on Rally? Is it always just going to be the hyper luxury on Rally? Or if we think about like, museums, there’s that one Picasso and a museum that everyone’s like, Oh, you got to go see that? Or there’s the Mona Lisa in the loop. But then there’s also just like some ancient Egyptian arrowheads, that’s probably not really a thing, but that maybe aren’t worth that much. Is Rally also gonna facilitate that type of stuff that smaller? Or is it always just gonna stay hyper luxury? And if they do stay hyper luxury? How do they stay core to what it is that they do? They’ve already been differentiated away from cars.
Jay Clouse 57:01
Yeah, it’ll be interesting to watch and to see, you know, I like their approach of being diversified. Because as I think about my own portfolio of investments, it just tickles me pink, to be able to look at one dashboard to see all the things that I have like financial interests in, you know, whether it’s my brokerage account, in my retirement accounts, my banking accounts, even my mortgage. So eventually, if Coinbase is in there, he’s well in front of all this, eventually, you know, I would want to tie in these places that have fractionalized assets like Rally row, just to be able to see that in one dashboard. And if I have to integrate 50 different marketplaces for 50 different types of investments, then it’s going to be less fun for me visually.
Eric Hornung 57:45
Isn’t that what your brokerage account is today though, if you have a bunch of different ETFs, you have a manager out there who let’s say you have an emerging markets ETF, they’re going and picking a certain amount of stocks that are in emerging markets. And that rolls up in your brokerage account. And then maybe you have another ETF that’s focused on non meat products, and they are just going in buying all the non meat stocks and managing that for you. And by specializing, they’re aggregating risk and trying to figure out what the return of that portfolio is going to be. Whereas in Rally, you don’t know the quality of the thing that comes on. They’re basic, except for what Rally has historically put on. So if you have a specialized marketplace, you know that they’re only looking at wine, for instance, and they’re only putting the best wines on there. Or maybe they’re putting all wines on there. But there’s ratings around those wines. Whereas on Rally, maybe there’s only one bottle of wine that gets put on there in a year.
Jay Clouse 58:38
Yeah, I think I think the difference is, my understanding and my draw towards Rally in what it sounds like reading between the lines is a lot of their users is I’m buying the story and very, very particularly picking the things I’m investing in, it’s not that I’m trying to get a diversified set of the different wines because I think that the value of wine john is going up, it didn’t sound like that was the typical Rally user yet, of just saying like, I want a bucket of this type of thing, because I think this category is going to go in this direction. It really seemed very onesie twosie. I want this because I like this, I want this because I like this. And I want to be able to talk about that and have full visibility into that at all times. Because that’s what I’m interested in buying more so than the shrewd capitalist part of it.
Eric Hornung 59:25
It’s fun, how different we look at that.
Jay Clouse 59:29
Well, in in my way, it’s not necessarily the smartest financial lens of looking at it, and probably not where this asset class is going long term.
Eric Hornung 59:37
And my ways, not the probably current way of looking at it that resonates with most users of the platform. I do think people like investing in stories until they lose money and stories, though.
Jay Clouse 59:49
Easy to invest in stories when you’re doing really well and all of your investments are are growing. Well, a lot to unpack here folks would love to hear your thoughts on this episode. You can tweet at us @upsideFM Or email or something a little bit longer Hello@upside.FM we’d love to hear stories of alternative assets that you’re investing in on platforms like rally. If you invest into something we’d love to hear what it is and why. So shoot us a tweet @upsideFM or email us email@example.com. And we’ll talk to you next week. That’s all for this week. Thanks for listening. We’d love to hear what you think about this episode. So tweet at us @upsideFM or email us Hello@upside.FM and let us know. You can learn more about us and browse our entire back catalogue of firstname.lastname@example.org. And if you love our show, please leave a review on Apple podcast that goes a long way in helping us bring high quality guests to the show.
Interview begins: 5:59
Rob Petrozzo is the co-founder and Chief Product Officer for Rally.
Rally is a liquid financial marketplace for buying & selling equity shares in ultra-rare assets the same way you buy & sell stocks. Together, we Rally to make investing behind ideas, emotions, and communities safe, easy, and accessible.
They were the first to turn tangible assets into fractionalized public securities offerings. They were the first to establish a liquid secondary market for those securities. And they were they first to do this with SEC qualification.
200+ IPOs later, hundreds of thousands of shares of trading cards, classic cars, watches, memorabilia, the world’s rarest literature, and modern collectibles are all actively trading on Rally.
- Reg A+ 7:03
- Rally’s Platform 8:09
- Fractionalization of Assets 15:11
- Rally Rd is more than about cars 16:52
- Rally’s User Base Proportion 19:35
- Passion Lead Investing 21:40
- 60-40 Portfolio 25:59
- Bull Market 28:55
- Rob’s view on NFTs 31:19
- What’s New With Rally 34:06
- Rally’s Showroom 36:44
- Investing in Securing the Assets 40:45
Rally was founded in 2016 and based in New York City.
This episode of upside is sponsored by Ethos Wealth Management.
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