Ep. 204: Joe Cecala - Democratizing capital markets for small businesses

Dream Exchange
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Full Episode Transcript:
Adam:



Welcome back to Count Me In, the podcast that explores the ways
management accountants drive business forward. I'm Adam Larson
and my guest today is Joseph Cecala, CEO and co-founder of Dream
Exchange, a company focused on building the next generation stock
exchange designed for early stage growth companies. This is yet
another podcast where I learned a ton, like how the rise of
electronic stock training essentially shut down IPOs and equity
stock market access for businesses worth less than $50 million.
What's more, I learned how management accountants will play a
critical role in making these new venture markets actually work.
Whether you work at a small business, are interested in investing
in small business, or wants to know more about the relationship
between equity markets and innovation, this is the podcast for
you. Let's get started with Joe Cecala.



Adam:



So Joe, I wanna thank you so much for coming on the podcast
today. We're really excited to get talking to you about the Dream
Exchange, but before we get there, I just wanted to hear a little
bit about your story. I was reading your bio and I just think
you've got a really great story starting off as a CPA and to
where you are now. Let's start with your story and go there.



Joe:



Sure. And Adam, thanks for having me. I my story I like to say I
Forrest Gumped my way through my career, right, I started as a
CPA went to law school and became a shingle lawyer doing a lot of
small business venture capital transactions. And you know, my
accounting career really informed that quite well. I guess the
big story of how we're here today is one of my clients, Jerry
Putnam, founded a company which became Archipelago, actually the
world knows today as New York Stock Exchange, Archipelago in the
mid 1990s. It was the first company to actually carry equity
security trades using the internet or among the first two. And I
got this national market expertise when that was being born. And
here we are 26 years later with a lot of legal expertise in
capital markets.



Joe:



So several years ago I just decided that a new exchange model was
needed to accommodate smaller companies. And we worked on
legislation for that. It's still pending in Congress and we're
actually building a national exchange as well. So everything that
we're doing is born out of those early years of learning what a
stock exchange is and does and how one is born, and the mechanics
of that and adding the kind of practical business of how to run
one to the legal expertise of how to create one. And really the
other, I guess the other major portion of what we're doing that's
different is that, you know, we're targeting what we call
underserved markets. The entrepreneurial market, very small
companies that don't really see interest from a stock exchange in
the earlier stages of their business life cycle. And we're also
especially concentrating in minority markets.



Joe:



The capital group that is financing the exchange and is the
majority owner, our minorities, it's a black owned exchange, the
first one in the history of the United States. So, you know, and
we're in the licensing, we're in the process, we'll be hopefully
licensed in about a year. So we're in that process right now, but
things are going really well. And that's how I got here, was
really starting as a financial professional and moving from
financial professional to early stage company, venture capital
lawyer. And so I really wanna help those small companies. It's
more about the companies through my career I haven't helped or
can't get access to capital than it is about the unicorn
companies that have an easy time. So that's how we got here
today. And hopefully the journey will be easier go in the next
six years than it has been for the past 10.



Adam:



I sure hope so.



Joe:



Yeah, me too. So, and then I guess what I would say is the Dream
Exchange today as it exists, as it perhaps might inform you know,
the audience for this particular, you know, group. We're really
concentrating on what are now gonna be known as early stage
growth companies. That's actually a coined expression. It is in
the Main Street Growth Act. And what that means is those are
companies that are very small. They might have a valuation of,
you know, 10 or $20 million, but they're gonna be seeking capital
you know, for 10 or $20 million. And we're providing the
mechanics of a brand new stock exchange environment for those
early stage companies to be traded with customized rules and
customized reporting and customized attention that the national
exchanges really can't provide because the financial reporting
and the cost of the coming public and Sarbanes Oxley and DOD
Frank and the regulatory environment for very large companies is
much easier to absorb the expense of doing that. But how do we
maintain the same quality in investor protection in a small
market while simultaneously making the cost less so that those
smaller companies could get access to capital in a public market
that's really the driver behind the meat and potatoes of the
Dream Exchange.



Adam:



Wow, that's, there's so much there that I think we're gonna have
to unpack a little bit of it. And I know that for me and I know a
lot of other folks, you know, maybe we can start with, you know,
how do you set up an exchange and what exactly is in exchange?
Because we all hear about the stock exchange and stocks being
there, but maybe there's a way that you can describe it for us
that even a seven year old could understand it.



Joe:



Yeah, that actually, and thank you for asking that because that
is, it really is not commonly talked about. Most people talk
about the functions of an exchange without actually knowing what
it is. So a stock exchange is merely a set of rules by which the
buying and the selling of equity securities is conducting. That's
all it is. And today those rules are primarily driven by
electronics. So trading rules, what type of order, what type of
sale, what the rules say about how the market participants have
to conduct themselves fairly. Now, most people think stock
exchange and what they're actually thinking about is what's
called the secondary market, because you, the stock is already a
public company and you wanna go and you wanna buy your shares of
IBM and you have to go through a stock broker, some very large
organization that is carrying trades to a stock exchange.



Joe:



Stock exchange is matching the trades that the order book and the
matching engine of an exchange literally matches trades today in
millionths and billionths of a second. And that's what people
think. They see the Dow Jones averages and they see the New York
Stock Exchange you know, set of listing is up or down. The
function of the stock exchange is to match trades in a fair and
equitable environment. Now, the other function that most people
are, are familiar with is the initial public offering market, the
IPO market. And they look at exchanges and go, they went public
on NASDAQ, or they went public on NYSE. That's the capital
formation part of exchanges. Now that's another kind of
misinformed use of stock exchange because stock exchanges don't
actually take anybody public. Investment banks do. So the
investment bank has to make an arrangement so that when a company
files publicly and sends its registration of its shares to the
SEC, they can also take a registered share of stock to a stock
exchange and apply to be listed on the exchange.



Joe:



Merely getting registered shares with the SEC does not automat...