Bars – Earlybirds Invest

It’s not too often that an interview at a crypto conference feels more like meeting a mate for a few beers at a bar. Yet that’s exactly what speaking with Max Rabinovitch, the Chief Strategy Officer of Chiliz, is like. Unhurried and unpretentious, after the high-octane pace of TOKEN2049 week, it feels good to take a breath and bring the tempo back down to earth.

From our meeting today, you’d have no idea that Max is used to being inside some of the most powerful boardrooms on earth, securing multimillion-dollar deals, and helping advance the conversation about sensible crypto regulation.

Unlike the multitudes of overly complex dApps and abstract solutions in search of a problem, Chiliz’s value proposition is very clear: the leading sports blockchain providing real utility for sports fans worldwide. Max explains:

“We’re kind of a weird niche product in the scope of crypto. We didn’t have the ambition to be a generalized chain winner and compete with the Solanas or the Polygons of the world. We just wanted to make this one thing work.”

Max admits that being part of a minority community building retail-facing utility entertainment products isn’t always easy. Retail traders tend to chase the speculation, liquidity, and overall “sexiness” of the latest narratives from DeFi apps to NFTs.

“You have to figure out other ways to entice people to essentially, one, build in your ecosystem, and two, interact with it as a retailer.”

Not being part of the cool crowd doesn’t make Chiliz’s USP any less compelling. When people tell Max that Chiliz “should have gotten into NFTs,” he replies:

“The market cap of our fan tokens and the daily trading volume are higher than the entire trading volume of all NFTs in the world put together. So we have to be doing something right.”

Unlike the shiny projects offering yield farming, liquid staking, meme coins, or Bitcoin DeFi, Chiliz is one of the few to make its way deep into the mainstream, becoming a household name in the world’s most popular sport, followed by an estimated 73% of the global population. Chiliz has onboarded some of the biggest football brands, including FC Barcelona, Paris Saint-Germain, and Manchester United.

“We have over 75 disparate token economies, of which the top 20 are still incredibly alive. Over the years, people have equated Chiliz with the football token. When the World Cup comes, Chiliz (CHZ) always pumps.”

Beers, bars, and QPR

As an American talking about football, you can tell Max has lived in Europe for some time. He no longer bothers to make the distinction between “football” and “soccer.”

I ask what team he supports, and he smiles. I expect him to say Manchester United, Real Madrid, or one of the multiple cup-winning teams that invariably attract a foreign audience to the sport. “It took me a while,” he admits. “Growing up in America, we had the other football.”

It wasn’t until Max’s gaming and poker background took him to Malta, the iGaming hub of Europe, that he found himself falling for the beautiful game:

“I had no friends,” he recalls. “The first friend I made was this British guy. You know, when you move to a new country, you just don’t have a choice. You either sit at home or go hang out with the British guy who only wanted to go to the bar to watch Queen’s Park Rangers play. It’s a Championship team. So I kind of just became a fan of them by default.”

Max has stayed loyal to the team ever since, and because he had “nothing else to do,” the first few months he spent living in Malta with only a British QPR fan for company, he spent a lot of time sitting in bars, drinking beer, and watching football.

“We watched every single game that season,” he laughs. “We went to the same exact bar and watched the game. It was also a good introduction to having a British friend.”

I nod knowingly, well aware of the necessity to muster a passion for football and a taste for Heineken when socializing with the Brits. Max didn’t know it at the time, but those misspent evenings in Malta would turn out to be instrumental to his journey into SportFi and the evolution of the Chiliz chain.

Finding a product market fit for sports

Officially on the scene since 2018, Chiliz is one of the most established and enduring players in the space. When I point this out, Max quickly emphasizes that Chiliz is a mature entity “only in crypto terms,” and not compared to any other business or industry.

“People refer to us as a ‘Dino coin’ or a dinosaur project… I mostly just find it funny. I don’t know what it says about an industry where surviving as a business for seven years, only five of them live, is considered some sort of Hall of Fame achievement of longevity.”

It’s easy to forget the rest of the world exists when you’re deep in the crypto rabbit hole, I say, and he laughs, “Yeah, it’s like, congratulations, you’re still here.”

Maybe it’s the incomparable pace of the industry that makes the years feel like decades and the weeks more like months, or the disproportionate number of scandals, rug pulls, and hacks. There’s also the 90% of ICOs that failed since Chiliz’s launch making the fact that we’re seated here today seem more impressive than it is. In any case, longevity is more the exception than the rule.

“We’ve been through the same cycles as everyone else, and yet we’ve managed to survive, and I wouldn’t say just survive. We’ve been able to keep a user base and keep liquidity, interest, and activity in the tokens.”

Chiliz has evolved from a permissioned chain focusing on token membership experiences through the user-facing Socios.com into the top decentralized Layer 1 blockchain, pioneering the SportFi sector with 2 million unique wallet addresses to date.

“Socios went a lot more viral than we anticipated,” Max admits. “Chiliz as a brand became very viral for a while in 2021, when fan tokens blew up during the pandemic, but we wanted to build it almost as a proof of concept to prove that there is a product market fit for sports.”

The real value of branded fan tokens

While it’s not Chiliz’s main USP, the fact that Socios is powered by blockchain isn’t abstracted either. It’s “very overt” that users interact with the blockchain when using Socios.com.

“We never tried to abstract away the crypto experience,” he says. “To my mind, we’re still the only project that tried to create a centralized DAO with a voting and rewards experience with fungible tokens, because we believed that’s what would scale. That’s what could pivot in case we realized nobody wanted to vote on team decisions, or people just wanted a staking experience instead of a token-gated engagement experience.”

Max explains that with an “essentially generic asset” like branded fan tokens, the uniqueness and utility come more from the team’s own elbow grease than anything inherently technical.

“The real value of Chiliz comes from the platform infrastructure, and the logistics and customer service teams that take care of users, collect tickets and merchandise, and all that. All of that you can change very readily. You can essentially plug the token from one use case into another in case it doesn’t work.”

I recall an earlier conversation with Tezos co-founder Arthur Breitman, who told me that one of the keys to Tezos’ endurance was its adaptability and the ability to change as the cycles and narratives require.

“We assumed [the ability to adapt] wouldn’t be the case—either in terms of flexibility or scalability—if we just did an NFT collection, and I still believe that.”

Keeping it simple with experiences money can’t buy

From exclusive limited edition NFTs to meetings with the players, what are some of the most popular experiences fans can buy with the branded tokens?

“When we started out, we were being very fancy. We had meet-and-greet experiences, even flying with the team on their charter plane to go to the game and come back. These are cool, but obviously not scalable. We tried digital merchandise, rewards, and Zooms to make sure that remote fans who couldn’t fly to do anything experiential would have something to get.”

Yet, over the years, the Chiliz team realized they were “overcomplicating things” unnecessarily. At the end of the day:

“People just want tickets. They just want those money-can’t-buy experiences of going to league final games, Champions League games, and big games for the team. When you talk about the last mile for a fan in terms of feeling like they have what they want, it’s just going to see the team play. So we focused on scaling that out, we gave away 12,000 tickets last season.”

Beyond discovering that “launching a Layer 1 is hard” and competing with highly speculative products takes some work, Max has learned that keeping it simple, about the love of the sport and the passion of the fans, is Chiliz’s most important ingredient.

The pain of losing an $80 million investment

When fan tokens and experiences skyrocketed in 2021/2022, Chiliz was on the cusp of unlocking the largest sports market in the world, investing over $80 million to make it happen. Then FTX collapsed, dragging much of the crypto space down with it, and slamming the door on Chiliz’s major league ambitions.

“We partnered with a majority of the NBA, 28 NBA teams. We partnered with 13 NFL teams, half of the NHL, and the entirety of the MLS. We were very close to actually launching both Socios as a product and fan tokens in the North American market for all those leagues and all those teams, which would have required doubling the size of the business and overhead.”

Yet life had other plans, and the hostile regulatory environment created by the FTX collapse and the reputational damage to crypto it caused pulled the rug from under Chiliz’s feet.

“FTX touched the sports business in an outsized way because of how much money they had spent on stadium rights, sponsoring Major League Baseball, and lobbying the U.S. government. Crypto became, in Washington and in the sports world, an extremely reputationally toxic topic. It was a big stain on our industry.”

Despite all the work “grinding to a halt,” in the aftermath of the crash, the relationships Max and Chiliz’s founder and CEO, Alex Dreyfus, fostered continued to grow.

“All those leagues continued to like us. They always considered us the adults in the room because we never came with bombastic financial guarantees or promises of how much money people would make. The business model just seemed to make sense to everyone. But they simply said, call us in two to five years. Call us whenever the administrations change or the SEC changes, because we can’t touch this.”

“We spent the next two years cleaning up all those contracts and paying off all our past dues for nothing. It was very painful financially and in terms of just business growth.”

The ‘right time’ to re-enter the U.S. market

With the about-turn in U.S. politics, what are Max’s thoughts about the Trump administration, and how does a thawing regulatory climate stateside affect Chiliz’s potential for growth?

“I truly believe—and Alex believes as well—that the future of our business is the U.S. The biggest sports market in the world is the U.S. market. The biggest entertainment market is the U.S. market, and we invested a lot in entering the U.S. market.”

On the weekend of Trump’s inauguration, he and Alex flew to D.C. to start meeting with people again and find out what the change in administration meant.

“More than anything, we wanted to start asking how this affects us. Does this mean we can start coming back? And over the months after that, it became more and more overwhelmingly clear that this is the right time to re-enter. So we started actively talking to the leagues and teams.”

In fact, Alex was in Washington just a week and a half ago to meet with the SEC, he says, and sit down with Bo Hines in the White House, the 29-year-old former football player on Trump’s crypto policy team under ‘AI and Crypto Czar’ David Sacks.

“We decided we were finished licking our wounds. $80 million is a lot to lose in terms of investment, but at the end of the day, it wasn’t our fault. The thing that hurt us the most is that we failed before we even started, that we weren’t able to launch a product.”

When can we expect Chiliz to try again, launch its winning product, and take the American sports market by storm? He shrugs his shoulders. “I’m no oracle,” he smiles…

“But I think that will probably be within the next 12 months because all the discussions we’ve been having with the SEC and the folks focusing on crypto in the White House have been very productive. I think the administration is ready to start opening the doors to crypto in a controlled way…”

…And the Chiliz team is poised at the starting line, just waiting for the gun.