About the Episode:
Taking a company public includes a multitude of steps, hard work, and knowledge. Learn how Joe Cecala has made his career working in and around the stock market, with public companies, and making it easier for people to invest.
A former U.S. Army Cavalry Officer, civil rights lawyer, securities lawyer, and CPA, Joe Cecala was legal counsel for the first company to carry electronic securities trading over the internet called Archipelago. Archipelago grew to eventually become the ECN of the NYSE and is known today as NYSE Arca. Since that time, working closely with small entrepreneurial business owners, Mr. Cecala has helped conduct over 100 successful capital events. Most recently, he contributed significant authorship for the Main Street Growth Act, the legislation creating venture exchanges. This act is pending in both the US House of Representatives and the US Senate. It has previously garnered unanimous support in Congress multiple times from 2018-2021. Joe is the Founder and CEO of Dream Exchange, which is forming the first ever venture exchange as well as the first ever black-owned national exchange in the history of the US, scheduled to open late 2022. The Dream Exchange has been created from more than 30 years of continuous progress to help US capital markets become a fair marketplace where all communities and people come to achieve the goal of making the world a better place by funding the future of great ideas and inventions.
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If this is your first time, if it’s your 87th or 200th time because we have over 200 episodes. It’s good to have you and buckle up for this one because we’re gonna dive deep today into securities and when I mean securities, I mean the markets, the stock markets and ways you can grow your company. I’ve been talking a while now about how to reach outs. My cybersecurity company was about to go public and now we are public with the regulation tier two offering which is pretty badass, and today, this amazing dude from my hometown of Chicago, right here, who is also a former US Army cavalry officer, civil rights lawyer, securities lawyer and CPA, man, that’s a lot of stuff, Joe Gallo. Welcome to the show, buddy.
And yeah, too. Much for one lifetime.
Yeah, I mean, your bio is awesome, man, and I said, look, we’ll get into a lot of it, but there’s so much stuff because everyone’s always wondering like, what do I do and it’s really cool for me to see today in age that there’s a lot of younger people that are starting to ask and I want when I’m saying younger, I’m talking in their 20s, generally, but sometimes even down to their teens. Now, dude, I’m seeing people are asking, Hey, how do I get into investing in something because it’s awesome because it’s not just like, if I could just phrase it this way in old people’s thing anymore, right?
It’s well thanks to the internet. Right on. Yes, young people’s thing. It really is. The response from young Americans from all walks of life. We had a million people through our website a year ago. From one press release, most of those people were much younger. They’re thinking about building wealth, building equity, and investing in markets, and, you know, we’re kind of trying to be a part of making it more accessible to that marketplace. That’s really the primary purpose is to democratize finance for a younger generation of people investing.
That’s pretty awesome, and plus, probably get them the education behind what they’re actually investing in as well. Which is sometimes pretty elusive.
Yeah, that in fact, that’s been one of the primary goals is we have one program called it’s a financial literacy program, which is complicated when you say remedial, you know, to me, you know, Mandarin Chinese, I would start at remedial, okay. You know, it’s an entire science that most people know nothing about. So you’ve got to really start with the basics and give people enough information to move forward. And there’s so much information in crowdfunding and there’s, you know, Kickstarter and there’s all these things that are coming at people via the internet, and really, what we want to do is start educating people saying, Okay, how do you, how do you go through this ecosystem? How do you go from a little tiny acorn to an oak tree you know, congratulations, by the way, you’ve won the Golden prize being a public company is, you know, it’s just, it’s a rarity today. So thank you, brother.
Our goal is to see more of you. We want to see people graduating in the School of capital markets, if you will, and I guess you primarily just as a start, you know, the primary goal of the dream exchange has always been to help cultivate the most brilliant ideas. I’ve been doing this for close to 30 years, and what I’ve found is that the best ideas come from the most obscure corners of our society. You know, Steve Jobs started in a garage, you know, these things are not unique stories. Actually. We have a guy in a you know, webcast that we did, who’s a major hair care supplier, and never went to college, and he started the haircare Supply Company in like the 60s, in his garage with a bathtub. He didn’t know how to mix chemicals. He wasn’t a chemist, he just knew how to do that. You know, it’s a multimillion dollar company. 100 100 million plus dollar company today, so we want to cultivate that. We can’t lose that. That’s what makes the country amazing. You know?
Crazy right now, when I know I’m a Cold War generation kid, I think we conquered the Soviet Union with CocaCola and Rock’n’Roll. Love it. Yes, we have. We have better ideas. We have cool stuff. And we’ve got to get those people the investment capital they need to expand so the best ideas are always out there. The fabric of the American genius is always getting the money in need. So we survived better. You know, it’s not just a cool app. But there are people in laboratories that have, you know, the next invention, the next cure and we can’t lose that we can’t lose that early stage and middle market company, because to lose that we really lose the greatness that makes a free society in a free market system work. So that’s the primary purpose. 14 year journey of creating praise, creating a stock exchange for the second time in my career.
That’s pretty awesome. I love that you’ve been involved in creating the exchanges and also in some of the legislation to form what I’ve seen, right with the mainstream growth that main three growth act.
I mean, so you know, the major growth that started out in 2015 as a three page securities bill, it wasn’t very good. And what I did, I kept visiting watch, with over 200 members of the House and Senate over the last five years to really contribute to making it into a meaningful new different stock exchange capital market, trying specifically to handle the gap. So you can go out and you can raise some venture money or some seed investors or friends and family. And the gap between that stage of a company’s lifecycle and graduating to a national market exchange is enormous. So we designed a bill that allows for liquidity into those intermediate level companies. They can graduate there, it’s a stepping stone. And we researched it for years.
Actually, there’s an article if everyone wants to sleep well. There’s a white paper published in Oxford University’s handbook on IPOs. It’s chapter nine. Myself and our director of research on the author’s it’s called low visibility markets, acting as stepping stones to national exchanges. So we need this new structure because people just don’t know that that structure doesn’t exist. They’re they’re waiting around until a magical day when Goldman Sachs knocks on their door and says, We want to take the public and it just doesn’t happen that way. You know, it takes hard work and it takes a dedicated marketplace and we’ve designed a brand new type of security, brand new type of stock exchange, that once the bill passes, actually.
So back to the bill. The bill actually went through the United States Congress in the House unanimously, three times in 2018, and this and the Senate wants unanimously so the only reason we’re talking about it as Bill is would have been signed in a lot but they shut the government down if everyone remembers at the end of 2018. Over the funding for the border wall. So all the bills that were attached to that year and appropriations bills were kicked to the next Congress, and then we had COVID. But the bill has been reintroduced. It’s bipartisan. There’s three Democrats in the House, one in three Democrats, one Republican in the House, Republican we got bipartisan support in the Senate so I expect it’s a matter of when it will pass rather than whether it will pass. It’s been vetted by Congress multiple times, and the marketplace really, you know, you just did an IPO. And you know, there’s underwriters and there’s book runners and there’s accountants and lawyers.
My god it’s a process, it is hard work.
So, the problem is when you do that first round, or second or third round, and there’s a lot of capital in the company could expand. But it can’t really expand without more capital. That’s what a public company environment does. It gets you millions and millions of dollars at your disposal. And before that happens, you’ve got a myriad of problems. One is if you’ve issued a secure account, this is a little known fact, there’s an educational point. When you start your small private company, it’s private because you haven’t registered your shares with the Securities Exchange Commission. That’s the difference between private and public. Meaning that once you register shares, you now have a stock of security available for sale to anyone, the securities professional scalably, the grandmas orphans and widows you can sell to anyone. Okay, before that. To sell that stock, you have to prepare enormous exemption documents. Okay, private placement exemptions, there’s about 18 different ones. It’s a labyrinth of rules, and here’s the really interesting thing. Once that investor makes his first investment, you raise your 100,000 $500 million. The investors are now saddled with the exact same problem. He can’t sell his shares either because they’re not registered.
So in order to resell the shares, what ‘s the purpose behind the Stock Exchange and the sidebar by itself? Not only do you have to register the shares, but registration doesn’t automatically entitle you to list on an exchange. So great you’ve got to stop it’s public. Well, where does someone go to buy? Well, they have to go to a broker. If it’s not listed on an exchange. A broker is not easily finding all this what’s called the over the counter market. Yep, yep. Easy to find those securities and here’s what’s really what you touched on. The importance of transparent and truthful information, even for a registered company over the counter company, is generally missing. But if you’re listed on an exchange, you have to comply. You’ve got to tell the investors what the deal is. So the exchange environment provides an added trustworthiness, which makes the securities more saleable because they’ve been vetted by an exchange process.
Yeah, I’m starting to put two and two together because ours is ours is a mini IPO. You know, with the regulation, they’re a tier two, and there’s no exchange with those at first. Yeah. Yeah, exactly. No, I understand. So, you know, there’s um, I’m comparing this a little bit you know, for those who are listening and follow us here, because this is a lot of good information, everybody. It’s a lot of high level stuff that we’re really really bringing it down to just easily accessible information for you that there’s in Canada, right? There’s TSX, the Toronto Stock Exchange, but then there’s also TSX Venture, right, and this sounds very similar. To that sort of structure. Is that true?
Yeah, the actual nomenclature in the Mainstreet growth that is venture exchanges. Nice. You’re exactly right that this is my contribution to the bill. We had three tiers of securities in there, the lowest tier is used. You just mentioned regulation, a Regulation A plus. Well, you can go public with those securities. Okay? Especially if you’re the kind of the highest tier of Regulation A but you don’t have an exchange. So I fought very hard for two years. Regulation A is in the securities laws was known as a section three B exemption. Section three B stock is now eligible to be traded on a Venture Exchange once this law passes. So you’re a perfect example.
This is kind of cool, isn’t it?
It’s a perfect example of a security that would then be listed on a Venture Exchange. And there’s a marketplace. If you want to go to Robin Hood and find your company because your broker will have access to it. You’ll find the company and you can freely trade your stock on the Venture Exchange.
Yeah, it’s been an interesting process to it too, because this is Regulation A for everyone listening is that’s the method that reaches out when my company in order to it’s an easier entry, because there’s less compliance, it’s needed. There’s less reporting that’s needed. It’s a way for the private companies that Joe’s talking about to kind of ease in to the public market space and then have some exponential growth after at least that’s the way my consulting team tells me right ways I public offering it’s not a real sum, and what you’re saying I said there’s 18 exemptions. Well, this would still be considered an exemption to a full what they call 1933 Registration. It is 33 Act registration here, you’re still sort of exempt from a lot of rules. Yeah, yeah. Look, how can you comply? One of the main complaints is, for example, it could cost a million dollars a year to comply with the Sarbanes Oxley act.
Well, if you if your gross revenue is $4 million a year, you’re not going to pay that you’re, by the same token, there’s nothing really untrustworthy for Sarbanes Oxley to address so we got to get you into a marketplace where a good company that’s transparent that does its proper reporting, and it’s been vetted by a team of people at a stock exchange. Now you’re freely trading you can go to the app and find your company. It’ll have a listing symbol, buy it and the beauty of this is resell it. The key is liquidity. Okay? Private company stocks are generally illiquid, you can’t find buyers. You can’t find buyers because you can’t find a marketplace. It’s just a supermarket. You can have the best tomatoes in all of the land. And if you can’t get your tomatoes to a market you just got some rotten tomatoes eventually. So we need a marketplace. That’s that’s a stock that’s all stock exchanges are there an auction marketplace for good company security.
So yeah, we’re really hitting this. I’ve been hitting it for years because that’s what I did for a living. I was a lawyer for VCs earlier in my career and the fundamental question they always asked, I love this company. I want to make this investment, especially the smaller investors. I want to make the investment. How do I get out Joe? What’s my exit? How long will I tie up my 100 $200,000? And the answer always was till a big company buys it for the last 20 years. Now, you like I said we’re data driven from 2000. And before, we were averaging between 500 and as many in some years close to 900 IPOs a year. And 70 to 90% of those IPOs were companies that were 50 million in the last 20 years we’re having like four or five years.
Yeah, yeah, they’ve slowed down a lot.
But while you’re there, I was with the lawyer who founded what the company the world came to know as archipelago. So archipelago was really the premier and first company to trade stocks over the internet in the late 1990s, and the volume of archipelago electronically just dwarfed the rest of the market and by 2005, my former client Jerry Putnam, became they acquired the New York Stock Exchange, and Jerry became chairman because a trading floor was now an antiquated thing. Everything had moved to an electronic environment. Yeah. So that drives, you know, if you’re a business person, well, you want to make money, and if you’re in the business of taking companies public, really the aftermath of the public offering, the volume of that company stock, is what you’re concentrating on. So a billion dollar IPO will have, you know, literally, you know, billions of dollars and billions or hundreds of millions of shares, trading volume in its first year.
A $50 million company has in its first year won’t have as much volume as a billion dollar company has in a week. Yeah, sure. Why would you do it? Why would an investment bank or a stock exchange be attracted to that market? So we are approaching the volume of the market in the numbers of IPOs. That’s our business model. I’d rather have 20,000 Really good small companies on my Venture Exchange, then, you know, we have 3500 companies in the country right now that are really on the big board, public companies.
I’d rather have 20,000 And maybe your company won’t trade all day every day. But you’ve got liquidity. You’ve got a vetted vetting process. You’ve got investor protections, and you have the liquidity you need to bring in the extra capital to put the extra systems there to hire the extra people to to expand your company, and that’s really, this is very detailed, actually pleasantly I don’t necessarily get this granular but that’s really what the Venture Exchange marketplace will look like. It’ll probably be beyond my lifetime. It’s a brand new thing. It’s just been invented. But it’s an idea that’s got legs. This will be here for 10-20-30 years. So that just becomes a part of the fabric and you’ll go oh you’re you’re doing an initial venture offer. Like you’re doing reggae? Yeah, you know, 10 years from now. Hopefully it’ll be just commonplace. You know, we’ll be talking about how the venture markets are doing instead of what the venture market is?
No doubt. First, that’s an incredible legacy. That’s amazing, man. You got to be just thrilled to death that this is something that you haven’t, you’ve had a good hand in.
I love what I do. It really has been. I mean, especially because I’m an entrepreneur. Okay at heart. I would lecture at universities and I got into the MBA program and I say, Okay, how many of you think you’re an entrepreneur, and everyone raises your hand and says, Okay, how many have a day job? Okay, you’re not really you’ve got a side hustle.
Yeah, no kidding. Amen to that.
Then the next question is okay. How many of you put your payroll on your credit cards? Um, that’s an entrepreneur, and I love those people. I love risk taking, taking people. I love people who are hell bent on leather that they’re going to succeed and, you know, in my viewpoint, it’s just never quit. You just keep plowing ahead, finding a new way, and eventually if you can get to my marketplace, you know, then you can start your diploma in the public markets and then graduate to the national exchanges. So that’s really what I do. I love it. I hope that it’ll be a great legacy. I’m old enough now to be actually thinking about it. You know, my oldest son is going to be 30 and he’s thinking about kids.
So I look at it through that lens. I’m not actually thinking like a 25 year old entrepreneur where maybe I can hurry up and make a score and buy a big house. I’m thinking of it. What’s going to happen to my grandkids 35 years from now when I’m here to take care of and this is, I think, a wonderful thing for the country. Unanimous consent of the Congress. Just the reason I’m and thank you for asking that. Thank you for the acknowledgement. I know. We changed the mind of 24 members of the House Financial Services Committee, so the bill originally was introduced, and it was 32 to 24. Republicans, yes, Democrats now. So I met with all of them over a two year period, and I don’t know if you know what it’s like to get 56 members of Congress on either side of the aisle to all agree. I mean, they won’t agree that water is flat.
This is the truth everybody.
So because we presented it like I’m presenting it here, I’m just telling the truth and then it helps me sleep at night. This is a really good thing for everybody. I’m hoping there’ll be competition. I might my greatest fear with our Venture Exchange is that we’ll be drinking from a firehose, like the response amongst
I’d have a huge wave of adopters.
Huge and you know, I’m hoping that there’ll be three, four or five other changes right now I’m only aware of two others. The NASDAQ clearly wants to change but they’re actually shooting for a much higher tier of security than we are. So there’s virtually no one other small group that they’re kind of kicking it around. They’re part of an exchange group. But we need like 20 or 20 that I need. I’d love to have 20 competitors, so it’d be fun. You know, not everybody’s flavors dream exchange. Great. Maybe there’ll be a menu, you know, Baskin Robbins, they’ll be 36 flavors.
Yeah. I’m actually a little bit sad, because with my play right now, I wish that this would have just completely been signed into law back in 2018. That’s the one question that I get all the time, from people who don’t understand the public markets is, which is the majority of Americans and not in a bad way. It’s just they think stock exchanges, NYC and NASDAQ. That’s it beyond that, there’s nothing there’s no other type of Public Security. Exactly. So a question I got, it’s like, cool, let me know and I’ll go into Robin Hood, and buy your stock. Like that’s not where this is.
Here’s my email and you’re still kind of, you know, not that that’s snail mail. But you’re still at a point where there is no bonafide marketplace. Yeah. For those companies and
We literally have to create the market ourselves, and that’s the hard work with something like this.
Yeah. It goes right down that lane, where everything is relationship driven. Yeah, sending an email with a, you know, an investor deck and you’re talking to your broker and he’s talking to three people and it becomes just a sheer relationship driven capital market, and if you’re disenfranchised, what if you don’t have those relationships? Well, you can have the best company in the world and not find your struggle when we did our thing. The number one survey word for what we’re doing was access that the investors don’t have access to a menu of these types of investments, and the entrepreneurial company, that early stage company, doesn’t have access to a menu of like minded or strategic investors. So we are the access point. That’s what’s given to the market.
Through incredible man, I can’t wait to see where this is going to go over the next several years because I know where I went, where I came from, and what I went through because especially going through this in a pandemic, taking a company public it delayed so many things, you know, and it took about two and a half years for from start to qualification with the SEC and a lot of money about those about three times as long and about three times as much money to get to that point, and I guess that’s what they teach you at the Wharton Business School too, is like a 3x rule.
Yeah, yeah. If you’re gonna hire one person, plan that it’s going to take three to get the job. Um, yeah. And what’s interesting, you’re talking about the cost of it. That’s because there’s really no standardization. So you’re offering Wow, there’s boxes to check out, you know, did you have audited financials for so many years? Did you see it’s a checklist, but what standard is that? So in other words, when does everyone think NYC and NASDAQ? Well, they’re the only two exchanges that actually have a license to take on new public offerings. So if you’re not eligible for those two exchanges, and they have very stringent rules, one those are huge. So if you check all the boxes, the standardization, which is good for NYC and NASDAQ, because everyone’s then familiar with it, it’s like, you know, you go to Starbucks to buy coffee, you know what you’re gonna get? Yeah, and see or NASDAQ. You know what that product is, it’s just a different company.
Well, first thing that even though you’re in a different company, and you’re in the right lane, by the way, talk about expansion areas of our of our world in security and Tronic security is just there’s nothing but it’s going to go. But okay, great. There’s a whole industry of companies like that, where an investor can then put one next to the other and say, Oh, I choose this one, it’s the best. Or I choose these 10 Because one of you knows, maybe five of those forces will win the race, and they can choose to diversify and concentrate at the same time. I want to concentrate in electronics security and cybersecurity companies. But I want to diversify and I want to take, you know, a $10,000 bet on five of these 10 companies instead of having to choose one and put all 50,000 into one place. Yeah, the exact same reason that for 230 years, the large capital markets have worked. We just are willing to look at the smaller guys where we’re interested and I think that’s really what drives me most is people like you where I love meeting those people. If you know, I know this. I know I like to be in the room where I know I’m not the smartest guy.
That’s when you learn. Don’t you love that? I like, on the contrary, I love being the dumbest person, man. How much can I learn by being here?
Let me get into Yeah, listen to that guy. Wow. He’s a genius, and picks up what he’s got and carries it forward. And that’s really what this whole market is about. Yeah. I and one congressman asked me, you know, so do you have success stories of the kind of companies that will be in this market? I said, I’ve got a couple, but that’s really not what it’s about. It’s about all the people I haven’t been able to help. You know, we had a Nobel, the 2005 Nobel Prize winner for chemistry who started a company. Well, that’s confidential but we couldn’t raise money for the guy. He was a little too forward thinking I mean, he was way ahead of his time. But talk about wicked smart. I mean, he was absolutely anyone I’d ever met, and I thought I would give you my money. But you know, I’m not the cadre of investors. You know, you needed $30 million which is perfect for this market. Perfect. I would invest in just some people say you invest in sometimes you invest in the horse, sometimes you invest in the jockey. Well, he was clearly the jockey that I would have invested in.
Those are the case studies of the people we haven’t helped. That would be the neck. A broad market free marketplace of ideas and open it up so people can invest in companies have a fighting chance.
That’s so awesome, and as we start to close this out for today, this has just been amazing information. I enjoyed the conversation. What’s the best advice you could give somebody right now and entrepreneur who’s thinking, You know what, I’m going to go public someday and that thing, and that’s their big dream and if I remember, right, you know, I’m actually sort of hoping you could answer this for me, but me 10 years ago, before I knew what I did today, what would you tell them?
I mean, okay, so there’s, there’s two things. The first thing is it’s very simple and it’s very philosophical, but never quit. Just put, put those words on a wall somewhere and just never quit. Because if there weren’t bad days as an entrepreneur, there would be no days. Okay? So you just have to adopt a mindset of philosophy that says, this bad day will get through it, and you’ll have a winning day and then you’ll take the second piece of advice is take the small wins as big wins. Take the 400 times that didn’t work, and that you never quit and the 401st time when it does work. That’s a huge win and focus your attention on the on the wins that are going to get you to the finish line, because, you know, eventually you’re going to be talking to like I said, the book runner and the underwriter and the CPA and all those professionals and if you don’t have your vision, that you’ve not quit on the purpose behind what you’re doing, um, you know, I see great ideas. I see people who just become so discouraged. And maybe that’s the third piece of advice which I’ve done. I surround myself with people.
There’s a great tape by James Valvano. Coach Jimmy V. Ne. He talks about his father, and how much he loved his father and he realized after his father died, he said, Well, what was it about my father and he said he believed in me. Surround yourself with people who believe in the idea and believe in you. And if they don’t believe in you, don’t make them wrong. Just say you believe in something else. Go go your way. We need true believers that are never going to quit and that are going to take the little wins and turn them into big ones. If you can do those three things. You become you. You win the prize, and then you know, I’m looking forward to you. I actually haven’t gonna follow your story now because that is Thank you. We want to see you graduate. I want more large public companies. Great company that went public not too long ago in your space called no before, and yeah, they started as a group of guys down in Clearwater, Florida, and they did that because they just believed in themselves. They got people that believed in the company. They had a good purpose and they never quit and boom, they’re on the they’re I think they’re on the doorstep now.
Sure, right on.
I’m actually looking forward to you being on Dream X national because we’re starting a national exchange as well so you can graduate to my national exchange.
Very cool. When is that going to be because I’ll put it in my deck right now.
We’ll exchange if we’re very far along. So I suspect that in about four or five months, it could be as many as six months before we actually apply for our license. All right, cool. Yeah, expect to be open. I’m hoping that the national change will be open by the end of the year, early next year, and fingers crossed. Everybody go and write your congressman pass the nature growth act. When that passes 190 days after it’s the ink dries on the law. We expect to apply for that license. So the law looks like it’ll pass this fall, which means that by a year from now, we’ll be talking about the launch of dream X venture, and so it’s within the next 18 months. I want to be fully operational. We have 20 people now. We’ve got a really good cadre of, of investors. We’ve got our main Capital Group helping us and I hired the former chief architect of NASDAQ was my CTO now and we’re we’re building a wonderful team state of the art team and yeah, so for on January 1 Next year, I want the national exchange open and then and then we’ll talk about getting you listed.
Beautiful, I love it. Joe had an amazing conversation today my man if for nothing else, I was all in man for what we were talking about today. I love it and go back everyone listened to this like three more times because there’s a lot of information in here and Joe just just peel the onion for us today. Joe, it’s incredible. We can find you on LinkedIn. If you look up the company page dream exchange.
The website is dream x.com But yeah, just perfect ages dream exchange. We have YouTube videos, we have educational videos. We have a social media site for people called Dream X Connect. Where if you’re looking for strategic help, go in there, put your profile in and we have a messaging board and we’ve got probably at least we’re approaching over 2000 identities in there. We’re trying to grow that a little bit but yeah, we’re all over the place. So Google dream exchange, and you’ll find us where we have a pretty nice footprint.
That’s awesome. Joe, thanks so much for being a man. Really enjoyed our conversation.
Thank you so much. This was actually really great. I appreciate it .
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