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This startup lets you buy and sell shares in collectible items

Rally CEO George Leimer joins Yahoo Finance's Zack Guzman to discuss how the company provides a unique investment opportunity for those people interested in collectible items.

Video Transcript

ZACK GUZMAN: As we've been discussing here in 2020, the fastest bear market sell-off in history back in March coupled with interest rates near historic lows has some investors scrambling to find a way to put cash to work here this year. Maybe outside equities. There's Masterworks, a startup that we profiled just a couple of weeks ago that lets people buy fractional shares in artwork. But one new startup is making strides, looking to help people do exactly the same with collectibles.

And that would be Rally based here in New York. Launched in 2017, the platform already has about 200,000 users getting access to alternative asset investments in collectibles. Just recently, the company raised a fresh round of capital, bringing in $17 million from some big name investors including Reddit's co-founder Alexis Ohanian and also brought a new CEO and a former Disney execs-- and a new Disney exec, George Leimer, who joins us now.

And George, appreciate you taking the time to chat here. I mean, as I said, the company got their start in 2017. You guys focused on classic cars back then. But now the platform includes everything from watches to wine to sports memorabilia. But the idea seems similar here. So talk to me about how it works.

GEORGE LEIMER: Yeah, thanks for having me. So very similar to when the company started with cars. And so what happens is we-- we take an asset like a baseball card or a case of fine wine. And we securitize that investment. And we offer that investment to investors, just as an investor would invest in an IPO of a company. So in essence, these become investable entities. And investors can buy shares of them.

ZACK GUZMAN: Yeah. And I mean, when that happens, I mean, obviously, you guys are looking, trying to find what might be good memorabilia here, what might be good collectibles for people to invest in. But what does that look like? I mean, what's the average investment you're seeing here or the products that you guys are going after?

GEORGE LEIMER: Yeah. From a product perspective, we're really looking for things that are aspirational, that are one of one or-- or one of a very small set of examples of the product. And as far as-- as far as the investments go, the investments range from a dollar to an average of about $25 a share. Investors invest anywhere from $300 to $1,000 on average. The average portfolio after an investor's been on the site for a while range to about $1,000 and 3.6 assets in their portfolio.

And so we've really got investors investing across a wide range of assets. They tend to migrate from whatever initial category they've invested in to other categories quite quickly.

ZACK GUZMAN: Interesting. So not just coming on for one specialty perhaps, but also just seeking some alternative asset class across the board. And on that front--

GEORGE LEIMER: Definitely.

ZACK GUZMAN: --I've seen these things blow up. It's been kind of crazy to look at the historic nature of some of these large flips. I mean, at another network, I wrote about a man who was homeless who went to a millionaire overnight because he auctioned off a Navajo blanket. I suspect nothing crazy has come through yet on your guys' platform relative to that, but talk to me about the process here in terms of the returns that you're looking to turn here for investors en route.

GEORGE LEIMER: Right. So there's really two-- two parts to that process. One is we have a secondary market where investors can trade, buy and sell shares that they've-- that they've either purchased in an IPO. Or new investors can come in and purchase shares from initial investors in the IPO. And we also get offers all the time to exit these-- these items outright.

And we've done that about six or seven times in the past with returns that range anywhere from 15% to-- to close to 100%. So there's-- there's a lot of opportunity here for investors to sort of realize appreciation on these assets that they invest in going forward.

ZACK GUZMAN: Yeah, those exits outright is always, to me, the most interesting question here when you think about how that might work, because it's very different than a company getting bought out or what that process looks like.

At Masterworks, we were talking about how it looks, you know, in terms of selling the art pieces. But when it comes to answering that question, how would you look at an exit process when you think, all right, we've got a fair offer here or when you need to say, all right, we're going to cut our losses?

GEORGE LEIMER: Yeah. It's somewhat similar, right? We get that offer. We put that offer up to vote to the shareholders of the particular item that we've gotten the offer from. It's a non-binding vote. But so far, most of the offers have been-- have been good enough that the majority of the investors in-- in a particular offering have voted to accept that offer. And then we-- you know, we more or less follow what the shareholders of that-- of that-- of that product ask us to do when that offer comes in.

ZACK GUZMAN: And lastly, I mean, obviously, you guys are the platform. We've seen different business model set up here. Where does Rally make money here? Is it off the sale? Is it sign up fees? I mean, wh-- how do you guys monetize it?

GEORGE LEIMER: We think there are a lot of paths to revenue. Right now, we're not focused on revenue at all. We're focused on building-- building the community, building the-- the investor side of the community, and also just continuing to access the best investments. We think if we-- we access the best assets and we build the user side and show that value, there's plenty of ways to monetize in the future. So we're really focused more on building-- building the audience right now.

ZACK GUZMAN: All right. Well, catching a lot of attention, no doubt, after the latest round. Alex Ohanian-- every time you got his name attached to it, a very interesting project here. But Rally CEO George Leimer, I appreciate you taking the time to chat.

GEORGE LEIMER: Thank you so much. I appreciate you having me.