An Interview with Ezra Levine, CEO of Collectable ????️

We recently had the pleasure of sitting down with Ezra Levine, CEO of Collectable, for a 45-minute podcast.

You can listen to the podcast here, or through Spotify, Stitcher, or anywhere else.

Collectable’s roots as a data aggregator

<Stefan> So you’re the founder and CEO, is that correct?


<Ezra> I’m technically not a founder. I’ve kind of emerged into a founder role. The backstory of collectible is interesting. Collectible hasn’t always been a fractional ownership class. Collectible was actually the number one rated sports auction data aggregator from 2014 through 2018. So effectively, in layman’s terms, you’d go on to the Collectable app, you type in a sports collectible, and it would pull up all the auction results dating back I believe to like the mid 1970’s.

<Ezra> From that, we had over 20 and 21,000 users. We had a pretty good reputation in the sports collectibles industry. We had connections with auction houses, and dealers, and professional athletes, and agencies. We’re in a pretty good space in this industry. In 2018, the founding team, I should probably give a little bit of a hat tip to the guys who founded the original Collectable, a guy by the name of Jason Epstein, who’s currently our chairman, and another gentleman by the name of David Yoken — were the original founders of collectible.

<Stefan> Okay.

Finding the right CEO

<Ezra> When they saw the fractional ownership opportunity, they decided to pivot the company away from just pure data aggregation to a fractional ownership model, and they set out for about 18 months to find the right CEO with the right skill sets to hopefully kind of lead the business through that transition.

My personal background is I worked on Wall Street for about 10 years. I was at a New York City-based hedge fund covering private and public companies, and consumer, and media retail, and sports. Also, had a sports entrepreneurship background that co-founded, the only still in existence and profitable minor league football model called The Spring League. I had these markets meet sports entrepreneurship, coupled with the fact that I had been around the industry and the hobby my entire life. My dad collects and so I knew a lot about the industry. I collected baseball cards as a kid, like every other kid in America. I just dream of retiring by the age of 35 off of my baseball card stack.

Which obviously speaking now was completely worthless and the junk wax era. I had this interesting background of sports entrepreneurship met with financial markets, met with industry knowledge about the hobby. I happened to be like a lot of people on Wall Street after about a decade. On Wall Street, you get a little burnt out and you want your next opportunity. I put out some feelers and I was looking for opportunities that connect with the guys at the Collectable and I fell in love with the fractionalization component.

I had this interesting background of sports entrepreneurship met with financial markets, met with industry knowledge about the hobby.

<Stefan> At that point have they started fractionalizing or did you help them get there?

<Ezra> Yeah, correct. At this point, it was really concept only.

<Stefan> Got it.

<Ezra> They had started to develop a mobile application but really hadn’t been through the whole SEC qualification process. When I took over the business, primarily concept, and I worked alongside Jason Epstein, who’s the chairman to get the company over the qualification elements, and ultimately build out a team to really advance the business to where it is today.

Navigating the legal issues and SCC

<Stefan> Let’s actually dive into that because I think like navigating, people think of these marketplaces, they think they just happen on their own and from doing a deep dive on the folks at Rally. I know that navigating the legal issues and the SCC is like a huge part of the humps they had to overcome. So what was the journey like in the early days and what are some of the legal considerations that you had to deal with? Just the nuances of the entire legal SEC waters?

<Ezra> Yeah, it’s complicated. It’s not easy to do what companies like Collectable and Rally Road do. It’s not easy to do what we’re doing and it’s certainly not sexy. It’s a labor of love in a lot of ways just getting to the point where you can provide fractional opportunities to consumers.

On one hand, I really appreciate the process. As someone who’s been around the industry for a while, you hear these stories of bad actors or fraudulent claims, trimming, you hear that. In my opinion, one of the biggest things holding back the sports collectibles industry is confidence issues around the industry at large. Can you trust the dealers? Can you trust the supply? How many authentications have items been through?

On one hand, operationally is not fun to go through but it does provide a huge degree of consumer confidence that the items that are being presented to consumers on the platform are ones that have gone through a lot of checks and balances to ultimately get into consumers hands.

To go through the process a little bit, it took us 5 or 6 months of back and forth work with our securities attorney and with the SEC. You have to think a lot about the business and the business model early. That’s different from a lot of startups, obviously. A lot of startups, get an MVP out the door and they iterate on the fly. With the SEC approval process, you have to layout a lot of advanced thinking, and you have a business model and business structure in place that the SEC deems to be secure for consumers. So, it does force you to use your imagination and to think futuristically about what the business could look like.


<Stefan> And not to mention the legal costs aren’t cheap, right?


<Ezra> Legal costs aren’t cheap.


<Stefan> I’m sure you spent a lot on lawyers on that but you also probably brought a lot to that world because you came from Wall Street so you probably knew who to talk to at the SEC, how to make things happen, that sort of thing.


<Ezra> A little bit. I mean, I don’t necessarily have contacts at the SEC directly. I do understand financial markets well. I understand a lot of the basic and widely accepted principles of the financial markets that I thought that the industry really needed, and ways to advance the ball forward.

When it came to structuring the business model, I definitely came with my ideas and thoughts, in terms of what are some pain points of the industry, what are some pain points from the sellers perspective, what are some pain points from the buyers perspective, so I was able to bring those viewpoints to the marketplace which I do think helped formulate our initial business model.

Introducing the concept of retained ownership

A lot of the concepts that we brought to the table are ones that I think are in a lot of ways revolutionary to the industry. They’re not unique overall. This concept of retained ownership, we’ll talk about this in a little bit. When I first got into this, I couldn’t wrap my head around the fact that there is this multi-billion dollar industry where there’s almost zero seller flexibility.

If you think of Wall Street, for instance, there’s the idea that people can own stocks and maybe bought a stock at $10, and appreciates to $13. You want to take a cut. You want to take some profits but you don’t want to sell the entire position. You think it’s gonna go higher but you want to sell a little bit for liquidity, maybe you want to invest in a different idea.

That concept of selling partial ownership and not the full position never existed before, and that was something I thought was such an obvious fix that if we could figure out how consigners or sellers sell partial ownership, get liquidity, maybe reinvest in other areas but also maintain some upside in their collectibles, that was something that I thought was really important to the industry and one thing that I think Collectable uniquely does, that other fractional company provides at the moment, and also no other auction house, eBay, or any other sales channel, and sports collectibles — nobody else has the concept of retained ownership of their collectibles.

Nobody else has the concept of retained ownership of their collectibles. That’s something I’m very proud that we brought to the industry.

– Ezra


<Stefan> So, you introduced this concepts of retained ownership. This is a new concept. This did not exist in any real way, shape, or form before for any sort of alternative assets, is that correct?


<Ezra> It’s existed in the financial markets and the public financial markets for very long periods of time. My understanding is that it hadn’t really existed in the alternative investment category, certainly not with the fractional companies, and definitely not at the fractional companies that have any association with sports collectibles, for sure.

How Collectable structures the assets

<Stefan> Let’s talk about this retained ownership a little bit and merge that into this idea of a secondary marketplace. Which, when you talked about bringing liquidity to the marketplace, which by the way, we came from the hedge fund world. Hedgies are famous for bringing liquidity to the marketplace. How did you go about the structuring of this retained ownership and also the secondary marketplace for buying and selling shares after an initial period of IPO as we call it?

<Ezra> Yeah, like a lot of parts of the business, what we’ve done is we’ve taken widely accepted financial market principles and applied them to this category, sports collectibles. And, I think all of us believed had a lot of room to mature and a lot of areas in which it could become more sophisticated and more financialized. We looked very closely. Obviously, the structures are in place without the fractional companies and just in terms of how private businesses or public businesses get funded. We really applied a lot of those same principles so what we do is we take an item, Collectable takes legal title to it, we create a separate LLC, a separate company structure for it.


<Stefan> – For every single asset you’re creating it’s own LLC?


<Ezra> For every single offer, I shouldn’t say every asset because there were some offerings that have multiple assets, and then we do a basket concept where it has like 30 cards in one offering. But for every offer that we do, it’s its own separate legal entities, separate LLC structure, separate shareholder base the whole bit. We literally create these holding companies and then we issue shares of the holding company to people, let’s say pro-rata to their ownership position. What this allowed us to do is, a consigner will come to us — a prime example is the Mickey Mantle offering.

We broke the all-time sports fractional IPO record by around $480,000 in our initial IPO. The previous record was held by Rally road. We did a Wagner card for $520,000. We IPOed right out of the gate, a million dollars of a 1953 Mantle PSA 10 baseball card.

The concept was interesting. It gives us a really interesting test drive us so we value the entire asset at $2.5 million. The consignor was like, “Look, I think I don’t want to sell the entire card, I need a little liquidity but I think the cards gonna go much higher over time, I want to keep some of it.” So, the seller kept 60%, or $1.5 million in shares of the holding company, and then we IPOed 40%, or a million dollars of the shares in the holding company, to the public.

<Stefan> Is it common for the consigner or the original owner to retain a majority stake?

<Ezra> I would say it’s a mixed bag. We’ve had some consignors who keep a minority stake, some have kept more than 50% of it. Okay, it’s a bit of a trade-off. What it does allow is, it allows us in my opinion, to get the best-in-class supply. A lot of consigners would never consider selling unless they sort of kept control, or at least the ability to veto acquisition offers if they don’t deem it to be a good price. It allows us to get far better supply and probably a lot more supply over time.

The con is — and I’ve always been very transparent about this— is that individual investors do lose a little bit of control only in the sense where when acquisition offers or if acquisition offers are received, the majority shareholder has the ability to potentially say, “I don’t want to accept that acquisition price.” And if that’s the case, then the item will just continue to trade on our secondary market, so there is a little bit of a give and take to it for sure.

Trading shares on the secondary market

<Stefan> Just because the mechanics of this is so fascinating. Let’s say that I’m a consignor and I am willing to give up the majority stake so I’m willing to retain 40% and 60% goes to the new shareholders. How do those new shareholders decide on the fate of the asset?  I mean, they’re the majority shareholders essentially to this company. How does that work? What say do they have in the direction of the asset? Do they have a say? How does that work?


<Ezra> Yeah, of course. It’s a very important question obviously, a very important question. We look at it in two ways, there are two potential ways to get liquidity or to potentially make money in a class.

One is just through secondary market and so we could IPO some at $10 then it could trace $12 or $13. People will have their own free will to decide if they want to reap and realize $2 to $3 of gains or maybe $10, $30, who knows. That’s one way in which shareholders always have free will. They can buy it and sell it on the secondary market.

The other way where people can make money is acquisition offers for the entire collectible. This is where the concept of majority/minority control does come into play. Really has no bearings on the secondary market whatsoever, it does come into play on the acquisition side effects.

Effectively what we do is, if a legitimate and accretive acquisition offer comes into collectible to purchase outright a collectible, we’ll take a shareholder vote. Very similar to a Rally road or a lot of these other platforms do. We’ll empower all shareholders with a vote to say, “Look, we’ve got an offer 12 bucks per share. It’s X percent over the IPO value. Are you interested or are you not interested?” People will get a vote pro-rata to their ownership position. Ultimately, if more than 50% of people want to sell the amount or price, it’ll get passed up to our advisory committee. We have a 5-person advisory committee comprised of some of the leading auctioneers, appraisers, curators, collectors in the industry. Probably, collectively over 50 to 75 years of experience.

Shareholder protection through the advisory committee

<Ezra> Ultimately, we’ll pass it to the advisory committee, which is really there just to protect shareholders to make sure that there’s no collusion of shareholders, make sure that all shareholders regardless of the majority are getting a good deal, which we’ll look at things like irrelevant comes to both public and private markets, we’ll look at any kind of forward projections internally that we can make, we’ll look at the scarce of the items. Really, we have this additional check and balance so regardless of if there’s a lot of people who vote yes, ultimately all shareholders are protected.


<Stefan> Interesting.


<Ezra> If the advisory committee thinks that not only it’s a good price but it’s something worth selling at that price then it’ll get sold and all profits will get paid out pro-rata for ownership positions.


<Stefan> Fascinating. Now, do they advise or approve, or both?


<Ezra> Both.


<Stefan> This is a licensed group so I’m assuming that they actually have to sign the paperwork and make this happen.


<Ezra> Yeah, they have to sign off on it. So again, it’s really there to protect shareholders because we thought about scenarios where you could have one person who retains majority control and they might want to exercise something that’s not in the best interest of all shareholders. We didn’t think that just because you own more stock than other people, that should put other people at any kind of detriment, that’s what the check and balance, to facilitate just kind of a free market and a fair market for all investors in our offerings.


<Stefan> The shareholders are just voting proportionally to their shares just what, through the app?


<Ezra> We’ll send a separate email effectively to only shareholders and the offering saying we’ve received an offer for this offering at this price, vote yes or no, we’ll give them 48 hours to do so. If we don’t receive a vote in those 48 hours, we’ll automatically count that as a no. That’s generally how the process runs so far.

Buyout offers and the secondary market

<Stefan> Very similar to being a shareholder of a publicly-traded company. Very cool. Are you soliciting these offers that you get for an asset after its IPO or they just come to you and now that you guys are a new source of leads for them?

<Ezra> It’s a little bit of both. Ultimately, if our secondary market is functioning properly, my view is that as a shareholder (and I’ve been a shareholder in some of these other fractional companies) for as many people who like accepting acquisition offers, there are a lot of other people who don’t like that.

My view is that ultimately if our secondary market if we can get this sophisticated and liquid, and functioning as well as I think ultimately we can get it to function, I would much rather rely on our secondary market.

If people think an item worth $125,000 there’s nothing stopping people from going on the secondary market and buying it up until $125,000.


<Stefan> Or presumably just offer making a full buyout offer anyways.


<Ezra> And, then making a full buyout offer, if the offer isn’t accepted, well it’ll be disclosed to the shareholders new offering, and chances are, that offering will trade up to that price anyway because people will get worried that we received the offer at that price.


<Stefan> [laughs]


<Ezra> Ultimately, my belief is that as someone who worked in Wall Street for a long time I think the key to all these fractional platforms is the secondary market. That will allow not only the utmost flexibility and kind of free will for shareholder’s side when and how they want to buy-sell-trade and hopefully take profits but ultimately is just, lets the market speak for itself. Let people speak for themselves, not some random group of people who own an item and sell it out from underneath.

So now, again, obviously, if there is an offer to shareholders that is accretive and beneficial, we have a fiduciary responsibility to them to at least present the offer. But, it is my hope that over time the secondary market will function the way it’s supposed to function and that people can get the same outcomes with having more flexibility.


<Stefan> And now, let’s flip it around and talk about if the retained ownership is over 50% for the owner of the asset or the consigner, so they’re looking to cash in on some of their assets, but they also want to retain that ownership or control. Is that would you say, more common or less common than giving the shareholders majority?


<Ezra> I’ve seen both, honestly. At least what I’ve seen it’s more common in memorabilia than it is in cards. I think with memorabilia you have, you know, a little bit like a higher emotional quotient for some of these items.

<Stefan> Seriously, I mean that’s yours. That’s not like a card that was printed somewhere and you happened to sign it. You wore it. It’s yours, yeah.

<Ezra> Right. Exactly. So yeah, I think it’s probably more common with memorabilia than cards. Ultimately, yeah, that the negative for shareholders I guess is gonna go that way, that an acquisition offer could be presented to collectible and shareholders. Well, obviously, you make that public that we received an acquisition offer. If there’s a majority control, we won’t accept it. It won’t be accepted but it’ll be disclosed and ultimately again it comes back to this concept of a secondary market. Ultimately, the secondary market is doing its job regardless of whether it’s accepted or not accepted, that it should at least trade close to the price at which we received an offer because that’s what people think it might be worth.


<Stefan> That secondary market window, how long does that last?


<Ezra> We are going to push the needle in terms of how frequent trading Windows will be. You can look at some of the other platforms. I know Rally does once per month.


<Stefan> Yeah, that’s right. Rally always does theirs at like, the most god-awful times being here in Melbourne. I have to wake up at like 3:30am, I’m like, “What am I doing with my life? Just to get a piece of some card or something, haha.


<Ezra> Yeah. Otis is doing effectively a 24-hour, you can submit your bids and offers 24/7 which is really nice for guys like you in Australia where you don’t have to be awake at certain hours to submit your bids and offers. You can just leave it out there and if it gets bid or lifted you’re done. We’re gonna be doing far more similar to Otis’s Model where 24/7 you could submit the prices you want to buy and the prices you want to sell, but the actual clearing after transacting will be twice per week, not once per week. 24/7 you’ll be able to submit your buys and sell orders and then twice per week, Mondays and Fridays we’ll kind of clear all the trades and that’s how will be done. I think ultimately I’m sure all of us in the fractional space are hoping that it gets to the point where you could have a 24/7 marketplace.


<Stefan> What is actually so difficult from either a legal or technical standpoint to make that happen? I’m curious.


<Ezra> There’s a couple factors. One is, how much demand that there is trading these things. I think that’s still a little bit unproven like how much liquidity will there be, will there be enough, like can you have a functional marketplace 24/7, one person like throwing out buy offers and sell offers and moving the price dramatically.

We’re gonna be putting in a lot of parameters for like better term parameters on the marketplace, and to make sure that it’s at least functional, and that people don’t get scared out of investments or pay ridiculous prices for them. I think one is just demand, how much demand is there to be treating these things constantly.

The other one is more kind of operational and back-office and that’s the trades have to clear. It takes a couple of days for trades to clear so if you do it it’s hard to do it once per day as of now because the infrastructure around the industry is not quite where it is in the public markets. You can place a trade on public markets and it might settle a day later or a maximum of 3 days later because you’ll still be able to trade right after that here. Again, the infrastructure is not quite there yet so we’re really pushing the needle with every 3-4 business days. I think it’ll be hard, it’ll probably be hard to move it. There’s much more frequent until the infrastructure around the industry improves.


<Stefan> It’s fascinating. Is there a clearinghouse that you use? Or do you work with a number of them?


<Ezra> Yeah, we use a few different parties. We have transfer agents, we have broker-dealers, we have a custodian, so there are all these back-office vendors who have to work together.

<Stefan> Well, keep doing what you’re doing, before you know it, we’ll be selling options and high-frequency trading on baseball cards.


<Ezra> I love that. I mean, honestly, as someone worked in Wall Street for a lot of years, you can say what you want about derivatives, and options, and short selling. It does keep people honest and more.


<Ezra> Yeah, it does. It does lead to people expressing views that are not just I think it’s going to go higher. And so, for the sanctity of like a liquid, more sophisticated market, I ultimately think we’re gonna get there but it’s just not there yet.


<Stefan> Yeah, it’ll take some time. That’s, it’s such a fascinating thing to think about though. Let’s talk about how you got that initial. I mean, you talked about that Mickey Mantle card, you said that was the record setter. For all of us, this entire industry, this whole world, that was the most the highest value placed on any fractional ownership sports card ever?


<Ezra> The highest sports collectible ever fractionalized by a lot.


<Stefan> That’s very cool. Wow. What’s the value of that?


<Ezra> The entire card was valued at $2.5 million. We offered a million dollars (40%) on our first launch asset.


<Stefan> All right, cool. That was the first, did I hear that correctly? That was the first asset you ever launched with or-?


<Ezra> It was a high risk strategy. [laughs] Our view was, we’re a new platform, we have to do something a little splashy to get press and get pub, and we wanted to make a name for ourselves. We want to show that we have the connections, we have the relationships, we have the supply, we wanted to announce ourselves.


<Stefan> That’s the way you do it. [laughs]


<Ezra> Yeah, and you know, but again, it was very risky because we did obviously knew we’re gonna get some press out of it but the question was, can we execute? Like, we were, either setting ourselves up for high profile success or high profile embarrassment. And, 10 days later, we sold a million dollars, over 405 shareholders. It was pretty cool. It was really cool. I think that spoke to the demand for fractional ownership but also spoke to the fact that the fractional ownership concept is not just for people who are buying $25. That’s all fantastic and ultimately our mission is to democratize the industry and to give people access to these investment opportunities that they’ve never otherwise had but it’s also a way to just provide a different way of collecting to people who could afford to drop $2.5 million.

We had some people who spend $50,000, $85,000, $100,000. Some people I know for a fact could have bought the whole card but didn’t necessarily want to because they would rather allocate $2.5 million to the multiple investments. It proved to us that there’s a marketplace for this for both the mass market, the micro investors, the people who could never afford it, but also a marketplace for people who just liked that there’s a way to better diversify and didn’t have to worry about insurance, and storage, and maintenance, and transaction fees. It was just like a brokerage account. Yeah, you spend 100 grand on a stock, now you can spend 100 grand on a collectible, same thing.

The passion and emotion of investing in collectibles

<Stefan> It’s like the Robinhood-ization of literally anything, you know. It’s interesting because diving into this world of alternative assets over the past 5 months, like so much of this is you realize it’s just how emotional it is. People aren’t really investing in wine or farmland because they love Chateau Le Blanc 68 or goats. That’s part of it, but it’s just that emotional, like resonance but especially in what you’re doing. I mean if you’re a sports fan it matters owning a part. It’s something to talk about in cocktail parties and something to like, you know, hold dear. I mean, do you feel that way as well? That the emotional side of things more than the raw returns is really what matters.


<Ezra> Yeah, one thing that we always use a phrase a lot with our company which I think kind of hits the nail on the head and that’s in my opinion, sports collectibles is really the perfect intersection of passion and profits. You know, obviously, people are very passionate about sports, they’re very passionate about collectibles, they’re very passionate about certain athletes, but there’s also profits to be made, and if you look at the data sets, they’re pretty clear. The profit, the bulk amount of the investment returns or profits typically right at the investment-grade where there are high degrees of scarcity, where there are high degrees of highly investable athletes.

The top end of the market really has not been made available to people but that’s where the money really has been made over time so we’re really introducing obviously the ability for people of all income brackets all across the country. Hopefully, all across the world pretty soon to partake in a high-end investment side of the business.

We’re also giving people access to the passion, the emotional side of it, which is, you know, look, if you grew up loving Muhammad Ali or your parents are loving Muhammad Ali. You want to own a piece of his “Rumble in the Jungle” championship belt. You can never afford 120 grand but now you can because it’s all you needed for $10. So, yeah I think it’s a very cool combination of passion meets profits and now we’re able to do it where everyone can experience that pride of ownership of passion and profits in a way that’s never been done before, and I think it’s pretty cool.

The top end of the market really has not been made available to people, but that’s where the money has been made over time

<Stefan> I love it. I think it’s super cool and I also, so I grew up in Boston actually 23 years. I was thinking of gifting, you know, if you had any Red Sox cards, I was thinking of gifting that to my mom for Christmas. I didn’t see any just yet maybe you guys are parts of the Yankees or something? I don’t know. But, yeah.


<Ezra> Fair warning I did grew up in New York City. I live here currently. I’ve always been a Yankee fan but the only Red Sox-related item we have at the moment, there’s a little bit of a sore spot for you, we have a Mookie Betts.


<Stefan> Oh, I saw that. Yeah.


<Ezra> Mookie Betts’s game-worn glove from his 2018 season where he won a championship with the Red Sox.


<Stefan> Yeah.


<Ezra> I didn’t know that. I didn’t realize how amazing of a season Betts had in 2018. He won like every award. There’s a possibility of winning in one season. MVP, The Gold Glove, Silver Slugger, a Batting title, I mean, literally every all of it. The cool thing is that the gloves, in particular, athletes go through multiple jerseys, they go through multiple bats per year, a gazillion balls, right? With gloves, well all of these players have used one glove the entire season.

That’s he wore, one glove pretty much the entire season. To be able to get access to that one glove that he wore throughout the entire regular season, The All-Star Game, The Playoffs, The World Series, during arguably the most historic season in baseball history is a pretty cool item.

The other one we’re gonna have, well we had The Magic Johnson/Larry Bird Rookie card on the platform already so. Bird obviously the big figure in Boston. We have some Larry Bird game worn stuff coming down the pipeline. I believe Q1 or Q2 of next year I’m sure but what I love about Boston is that you guys have very passionate fans for sure.


<Stefan> Oh, yeah. Oh, you have a Brady. I saw your Brady rookie.


<Ezra> Oh, you did. Yeah, that’s right. We have a Brady Rookie card.

Sourcing items

<Stefan> I can’t gift that now, though now that he’s a traitor. I can’t in good conscience invest in that one but this is super cool to see. I think that the big question on most people’s minds when they hear about this stuff is how do you source? Where does it all come from?

I read up on the Wilt Chamberlain, I love you have the backstory of every item which is a must-have and really interesting, and I read how the item got from the home, in his home, to that collector. Is there any sort of process to this, or is it just kind of helter-skelter, or do you work with people who just deal with this every day, or just to tell us everything about how you source your supply?


<Ezra> – Yeah, that’s the one thing that really in some ways attracted me to Collectable in the first place was we had all these existing relationships in place. We knew everyone from auction houses, to dealers, to collectors, we had a lot of existing relationships, and I brought a lot of my own to the table as well.

But so I knew coming into this that I can, we can get supply. I’m not concerned about the supply. Our seller proposition is honestly unbeatable. We charge significantly less seller fees. We provide a lot of additional seller flexibility. We tell great stories. We promote sellers that they want to be promoted. We have a really good seller proposition in addition to we just had a lot of connections.

For us, we’d never have a question of can we get supply, it was more of can we build demand and build our user base to the point where we can soak up supply. We’ve been in business for 2 months. We have 30 plus million dollars of supply already that we could thread through the marketplace.

Collectable’s consignment model

<Stefan> When you talk about getting the supply though are you buying these outright or you consigning them yourself?


<Ezra> The beauty of our model, is I think that it’s also different from a lot of the other alternatives marketplaces, which is we consign most of our stuff.


<Stefan> You do. Okay, so you’re not actually buying a lot of these assets.

<Ezra> We’ve purchased a couple of assets but by and large it’s consignment. It’s a consignment model, which the beauty of it is that it is far more working capital efficient. We don’t initially have to spend, we can, but we don’t initially have to spend our money to build the best class supply. One of the things about the consignment model, and it all goes back to retained equity, is that people who have that kind of seller flexibility to retain equity are far more willing to consign stuff than they are to make you purchase it because they still have some skin in the game on it as well.


<Stefan> This is what’s fascinating, when I was studying Rally, I couldn’t believe that they bought everything outright. What would be the pro of that? Am I missing something or are the cons to not owning the asset?


<Ezra> Honestly, the only con that I’ve seen from consignments is that you deal with external pressures, you deal with external timelines, deadlines, external pressures, as it relates to consigners who need liquidity of whatever periods of time so it’s a little bit of a scheduled management, like setting expectations for when consigners will have their IPOs or their offerings.

But again, in my opinion, the pros of consignments have far outweighed the cons of it. Like, you look at Rally road and they raised a lot of money in their series A, and they raised 70 million bucks in their Series B. I was thinking the other day, if I raised $70 million tomorrow, what would I even do with it?

And the honest answer is I’m not sure. We don’t need anywhere close to that to operate about our business. I think of the long term, as long as you’re able to get consignments, consignments are a significantly better capital-efficient way to acquire supply. And again, I really think that because of this concept of retaining ownership, we have to get things at better prices because it’s not like this one end all transaction where I got to extract every dollar from it today, otherwise, I’m never used to that money again. It’s like, “Look, I’ll consign 25% to you and as the value rises over time, I can sell the balance.”

In my opinion, not only we have to get better supply through a lot more capital efficiency, efficiently I should say, but also my opinion to be able to get things at really good prices because people are like “look, yeah sure, I’ll take 25% of the chips on the table at a fair price, and then over time, I can sell more on the secondary market.”I see a lot more benefits of consignments than I do an acquisition.

That’s not to say we haven’t acquired. We have an acquisition vehicle that we can acquire stuff with but, really we haven’t needed it too much, yeah.


<Stefan> – What would even cause you to want to buy something outright? It might be too much of a pain to deal with certain asset holders or it’s just priced low enough that you’re like, “You know what, this just makes sense?”

<Ezra> Yeah, I think so. I think it’s just like the ability to be opportunistic whenever you want to be and if you see a great deal, you can just lock it up and you don’t have to worry about any other third parties. But again, we have it just because it’s good to have the flexibility and be able to act when you see something attractive, but to me, I think our model is the way to go and I think our model is a lot more sustainable over the long term.

I think our model is a lot more sustainable over the long term.


Collectable’s early investors

<Stefan> It’s definitely a head-scratcher. Why would you not want to do that? Yeah, it’s really interesting. I’m going to think a little bit more about that. But yeah, I mean, I think what you’re doing makes a lot, a lot of sense.

Let’s talk real quick about how you did get started. I mean, you don’t need to raise as much as let’s say Rally because you’re not buying the assets outright but you still need money to get started, legal fees, all sorts of stuff. Let’s talk about your funding a little bit. I’ve noticed Emmitt Smith, one of my childhood heroes, was an early investor, is that correct?


<Ezra> Yeah, for sure he was. Emmitt, he’s been still a good partner for us and a couple of friends. One, well for a little bit of inside hardball here where we finalize today the first offerings of Emmitt at the ring from the platform to really, really cool offerings. I’m pretty pumped about.

One is gonna be the jersey he wore when he broke the NFL All-Time Rush record which was really cool. We got the jersey, the pants, all that stuff. The other is a basket of his 2 MVP trophies. So, we’re gonna be making those available to shareholders, hopefully, in the next couple of months.

In addition, we’re going to be doing, we call them shareholder access events, which is if you are an owner or an investor of Emmitt’s offering you get to interact with Emmitt in some way, shape, and form, whether it’s like being on a zoom call, or maybe if you spend over a certain threshold you’ll get a signed autograph, signed helmets from Emmitt Smith. We’re playing around with all these ideas of how can we kind of give people additional physical ownership or some experience that is in excess of just saying you own Emmitt’s offer.

Emmitt, he’s a really good case study for us. What he liked about our platform were two things. One is, he’s very big on authentication and promoting the hobby and doing things the way that they should be done. And, one thing with Emmitt, that people don’t necessarily know, that Emmitt has his own sports collectibles authentication business.


<Stefan> Oh, wow.


<Ezra> Yeah, called PROVA, where he had started because he would go to all these card shows and he’d be signing items that everyone would proclaim to be like, “Oh, Emmitt here’s your game-worn helmet.” He could tell off the bat, he’s like, “I never wore that helmet.” That’s not a legitimate game-worn item.

He noticed that from a player’s perspective there was a lot of fraud on the market and he did it more out of his love for the industry, to protect players and fans, and anything else. So, he started his authentication company. He’s very big, had moved the ball forward when it comes to authentication of the industry. He liked the fact that we were SEC qualified and that things had to go through a much more stringent process to get on the platform in the first place. That was really part one of it.

Part two of it, I found this interesting, he was saying how athletes even Hall of Famers like Emmitt Smith, ’ve done a million signings and have relationships with eBay, and all these other companies. He said that athletes to a large degree have no idea what their collectibles are worth and oftentimes that they get taken for a ride.


<Stefan> – By who, by like a broker, or like an auction house?


<Ezra> Yeah, by auction houses who put lesser reserves on them, by eBay, by dealers, by collectors, by or even people internally, people say, “Oh, your Emmitt is worth 20 grand.” And they go, they buy for 20 grand and they sell it back so you used to say that. A lot of times athletes have no clue what their stuff is worth, there’s no fair way for them to retain upside and the items that they’re selling, and there’s no real good way for them to share their collectibles with fans who supported them throughout their careers, and the key to their career-relevant and up-to-date. What Emmitt liked in our platform is he can sell some of the items, he doesn’t sell all the equity in the item so he would retain equity ownership and upside, if the item is worth less than he thinks it is then he’ll still make money over time.


<Ezra> He can also do some storytelling and tell the story of his career and himself. He could keep his career relevance. He could give back to the fans. There’s all these other aspects to this that really has nothing to do with the actual money part of it. Emmitt came at this and we connected with him and he loved.

The fact that it was more regulated and better chances of the items being fully authentic to protect the confidentiality of the consumers and B, that athletes have now a way to connect directly with fans who want to invest in their careers but also a way to maintain some of the upside of their collectibles over time.

There’s all these other aspects to this that really has nothing to do with the actual money part of it.


<Stefan> I love what you said about there’s an emotional side to the seller side of this as well like you said about Emmitt connecting with his fans and giving back in a way. Aside from the price discovery and ending the problem of brokers screwing you over and all of that, and unauthenticated crap flooding the market, there’s also just an emotional side to this from the seller side saying like, “You know what? I don’t want this to go to some faceless.


<Ezra> For sure.


<Stefan> That’s really cool. That’s compelling I bet for a lot of these folks, huh?


<Ezra> Yeah, for sure. Emmitt will definitely be our first case study into this but our anticipation is that this direct to the fans could turn into a pretty meaningful thing.


<Stefan> So, much of the world’s collectibles don’t live in with professional collectors, they live in like my basement, hopefully, not my basement, but hopefully on the mantle or somewhere nice. The point is, they live in people’s homes and now you’ve got this platform and you’re giving price discovery to the world. I’ll bet there’s a lot of people frothing at the mouth saying like, “Look, I’ve got a Jordan signed basketball from way back like my Dad gave it to me.” Maybe that’s worth something. Maybe I can sell it to you, to Collectable, right? Is that something you guys are ever thinking of doing and maybe sourcing from your fans directly, from your users directly?


<Ezra> Yeah, for sure. It’s not something we thought about. They’re obviously a minimum value threshold that it makes sense economically for us to do. As a result of the fact that we’re SCC qualified, there obviously every offering we do there are some fixed fees, there’s illegal fixed fees, there are broker-dealer fixed fees, there’s securities work so it doesn’t really make sense for us they go down the path unless items are let say minimum 12 grand, 15 grand in a ballpark.


<Stefan> Yeah.


<Ezra> We definitely thought about doing a service where people could effectively give us items to figure out where the market is, and to indicate what the demand is for certain items, and at what price points. That’s something we have the ability to do, or waiting until our user base is built up to the point where we can give people really good data points, and how much demand and what price is. Certainly, a service that we thought about is I think one that we could also make money from overtime.

Partnership with Sports Immortals

<Stefan> Really cool. You know, you guys definitely have to stay focused in the short term. It’s really good to think about these long term things. Without revealing future plans, is there anything you can talk about aside from the secondary market in terms of what’s coming down the pipe in the short, maybe next 6 months or so?


<Ezra> Yeah, I think one thing you’re gonna see a lot of, which we announced yesterday is a partnership with Sports Immortals, which I think is going to be a really, really cool thing. I mean, they’re a relatively unknown commodity to people who are not in the sports collectibles industry at the high end. They’re considered to be the largest and most diverse sports memorabilia collection in the world. I read somewhere, they have a million artifacts in their collection, they have an estimated value, I’ve heard between $125 to $250 million. We have an exclusive 5-year relationship with them. I think, and again, I was down there for 2 days during the peak of COVID back in June. It was honestly the most, I can’t even describe it, it was honestly a jaw-dropping experience that the stuff they had, so through that partnership it’ll keep us busy for, it could keep us busy for decades.


<Stefan> [laughs]


<Ezra> You’ll see a lot of amazing items from Sports Immortals coming which will be very cool. We’re working on a couple of additional athlete relationships which I hope we can announce some time shortly so you’ll see that. You’ll see our secondary market. You will see, what else you gotta see, we have a whole live events part of the business that we formulated right as COVID was beginning.


<Stefan> Yeah, I saw that.


<Ezra> The traveling galleries, traveling showcases, exhibitions, dinner series, we have a lot of ideas for this. Obviously, it’s a little bit on hold with COVID right now. I think there’s a lot of ways to take this business. I think that the combination of sports, and passion, and profits. What I love about sports is there’s always stuff going on, there’s always events happening, there’s a constant stream of content, the constant stream of calendar. I see all these other fractional companies trying to be everything for everyone. Rally doing a gazillion different types of alternative assets.

To me, I think there’s something to say for focus. And, for going deep in the market has as opposed to going an inch thin a mile wide. I think there’s a ton of opportunity to stick to our lane doing what we do best, utilizing our connections, and going deep, deep into sports. I think the sports market, by some estimates, on the low end I’ve heard a few billion. You see that statistic everywhere. It’s probably a lot bigger now because that was done about 3 or 4 years ago. There are some people, I heard a podcast with Dr. James Beckett, who has founded Beckett Magazine, who indicated he thought the sports card market alone was $100 billion.

My point in saying this is, I think sports is a big opportunity in and of itself and I feel great about the way that Collectable is positioned in the category. I think there’s a lot to be said for focus and we’re very focused, and we’re going to go deep, and we’re going to be the best in our category, and I think that’s something that will be set for that.

I think there’s a lot to be said for focus and we’re very focused, and we’re going to go deep, and we’re going to be the best in our category.


<Stefan> That’s awesome. That’s really great to hear. Yeah, that’s really cool. Do one thing and do it extremely well.


<Ezra> Yeah.


<Stefan> Awesome. Well, that’s it. This was going to be my last question. Is were you going to, had you considered branching out, in the way that let’s say Rally is done, but it’s a really, honestly, it’s a very good point. You can argue that you run the risk of spreading yourself very thin doing that and it’s very wise I think to stick to what you know and are clearly experts in going back all the way to the data aggregation days.


<Ezra> That’s not to say that we could never go into other directions, of course, I mean, I’m pitching every day on art, or comics, or Pokemon. So, anytime we want to go in that direction there’s nothing stopping us from doing so. But we’re focused, we have a big runway, we have a lot of inventory, we’re building out our customer base, we love what we’re doing, and specifically what we’re doing, so I wouldn’t ever rule out, kind of expand other collectibles. In my opinion, there’s no need to and I think there’s a long runway for us in this category. Again, I like where we sit. I think we have a really capital-efficient business model and we’ve got the connections in place to make some serious headway here.

I think we have a really capital-efficient business model and we’ve got the connections in place to make some serious headway here.


<Stefan> Well, it has been an absolute pleasure talking to you. I think this is fantastic. I love what you guys are doing. I look forward to bringing it to the readers. I think the readers are gonna love it.


<Ezra> Thanks, it’s been a lot of fun, thanks.

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Stefan Von Imhof

Stefan Von Imhof

Stefan lives and breathes asset analysis and valuations. Before co-founding Alts, he created a Due Diligence Service for evaluating website & micro PE deals. In his spare time he enjoys record collecting and managing his short-term vacation rentals. Originally from Boston and later Santa Barbara, CA, he now lives with his wife in Australia.

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