In this episode of The Agent of Wealth Podcast, host Marc Bautis is joined by Joe Cecala, Founder and CEO of Dream Exchange, a new stock exchange that will focus on small business capital formation and diversity, allowing investors to empower emerging businesses in a way that has never been done before. Cecala was a securities lawyer for over 25 years – working on capital transactions for over 15 years – and found that small capital transactions were particularly difficult because there was no clear exit in sight for the investor. Cecala explains how Dream Exchange solves this long-standing problem and shares how investors and companies stand to benefit from this new exchange.
In this episode, you will learn:
- The issues with A-typical, small capital transactions – both for the investor and the company.
- The benefits to early stage investing, much of which has been impossible for investors to access/break into.
- What it is that makes Dream Exchange unique and innovative.
- How Dream Exchange intends to create a controlled, fair and ethical environment for economic expansion.
- And more!
Resources:
DreamEx.com | DreamEx Connect | [email protected] | Bautis Financial: 7 N Mountain Ave Montclair, New Jersey 07042 (862) 205-5000

Disclosure: The transcript below has been lightly edited for clarity and content. It is not a direct transcription of the full conversation, which can be listened to above.
Welcome back to The Agent of Wealth Podcast. This is your host, Marc Bautis. On today’s show I brought on a special guest, Joe Cecala. Joe is the founder and CEO of the Dream Exchange, an exchange designed for the free trading of small business stock through a fully licensed and operational stock exchange. Joe, welcome to the show.
Thanks, Marc. It’s great to be on.
Can you start off by telling us what Dream Exchange is, and why you decided to create it?
Dream Exchange is still in formation – it’s not licensed yet – but it will be a national market system exchange to be of competitive nature to the NYSE and NASDAQ. Dream Exchange will be for a special purpose, which will be of use as the Main Street Growth Act – a new law our research team, myself included, have been primarily responsible for – becomes law. Right now it’s moving its way through Congress. The Main Street Growth Act will form a new type of stock exchange called a venture exchange, which allows for liquidity and secondary liquidity for emerging company stocks. The exchange will have to go through the exact same transparency, due diligence and vetting process as a larger exchange.
The brand new piece of federal legislation is editing the 1934 Securities Exchange Act, allowing early stage investors to have access to investments they ordinarily would never be able to access, all while providing substantial investor protections that are customarily unavailable for a private company investor.
Very interesting. Can you provide a real-life example of how this new type of exchange will benefit both businesses and investors? How does a business get listed on the exchange? And how does the investor then go about selecting a company to invest in?
What Early Stage Companies Could Qualify for DreamEx
Sure, the listing is called a candidate line. We’re actually developing that market today and we haven’t published our rule book yet. But we are gathering data on successful companies, over 1,600 of them, that have gone through the public markets and graduated to national exchanges. Our research team is doing due diligence to create early stage listings, that way the probability of success is high. I published a white paper with our Director of Research on this : Chapter 9 of the Oxford University Handbook on IPOs.
We’re looking for companies in their infancy, and we will probably go down to as low as a $5 million capital raise for an IPO – but it will need to be a fully compliant initial public offering.
Registering Securities vs. Being Listed On a Stock Exchange
One of the questions that we’ve found is misunderstood is; what does it take to not only be a public company, but to be listed on a stock exchange? Even among the best financial professionals I talk to, there’s confusion around the difference between a registration of your securities with the SEC and a listing on a stock exchange.
You can register securities and can sell them to anybody. A listing on a stock exchange is very different.
We’re bringing the registration and listing into the small cap markets with the proper financial reporting, transparency, due diligence and educating the small company owner as to how he maintains that going forward, this way there’s a trustworthy investment market.
On the entrepreneur side, we’re cultivating a network of people. We have a free capital networking software called DreamEx Connect, which we have about 2,000 entities in right now. And there’s an entire team of people working on our rule book for the entrepreneur right now.
How Dream Exchange Provides a Solution for Early Stage Investing
I’ve been working in capital markets for about 30 years. In that time period, I’ve represented a lot of VCs and angel investors – that’s been the audience of my career. I found that all private investors ended up asking the same question over and over. They decide on a company to invest in, they appreciate the due diligence and believe in work, but they ask: “How do I get out? What’s my exit?”
When you make a private investment, you’re essentially in for the long haul. You can’t resell your shares once you’ve purchased into a privately held company. The typical way an investor gets their money back is from the total sale of the company. In order to do that, the company has to sell to a larger organization, or sometimes even a private equity firm.
The exit is very often a complete liquidation, which for the early stage investor may not be optimal. Remember, there’s a founder and an angel investor. Then there’s the second and third round of VCs. They all tend to be grouped together, but they all have different goals and objectives, and they all have different ideas about whether they want to stay in or leave.
In our exchange we will have a secondary market liquidity option for early stage investments. The listing of that company’s shares allows each individual investor to make a self-determined decision. In other words, they can sell their shares just as they would with any publicly listed company – for any reason or no reason at all. It’s exactly like you would make an investment in a large cap company on a major exchange.
The difference is that the listing, diligence, transparency and regulatory investor protections are all in one place. That way, an early-stage investor is adequately protected.
How will they go about doing it?
The Process of Investing on The Dream Exchange
Exactly the way that they would go about doing it on the big board. They can invest through any investment app that’s linked to a brokerage. For example, E-Trade. In that, they’ll see a separate menu of listings that’ll trade on the Dream Exchange. That menu will allow you to view all EDGAR filings and due diligence materials before choosing to make an investment.
Then, as continuous reporting goes on, the investor can choose to sell or you buy more. It’ll be exactly the same financial technologies that are used for large cap companies on major exchanges.
This early stage investor that we’re talking about, do you see them as a venture capital private equity firm, or someone who makes a lot of money? Or maybe a combination of the two?
It’s a combination of both. When we really were pushing the Main Street Growth Act to legislation early on – five or so years ago – I was pleasantly surprised by support from The American Venture Capital Association and the VC groups. They showed interest in this type of exchange because they have PPE firms and portfolio companies – good companies – but they can’t optimize their valuation. They’re in a strategic relationship, and they’re looking for their own exits.
This type of exchange does two things:
- It gives them access to listings that aren’t necessarily multi-billion dollar IPOs, but good companies. They might produce a 15-20% IRR, and those are good numbers for an exit.
- It gives them an opportunity to supplement their fund. For example, let’s just say a VC has $500 billion in their VC fund. They can now choose to amplify the fund by making less of a VC investment, but using the public capital market to supplement. Maybe they take a 30% interest in the company, but they might need a syndicate of other VCs to round out the capital raise. Well, now they can approach the public capital markets and don’t have to partner with other VCs or angels.
High-net-worth individuals are also ideal early stage investors. There’s a vast number of these individuals that are really qualified investors, and they can be qualified in two ways.
- Some meet the accredited investor standards. In a Regulation D offering, you have to be an accredited investor.
- Some are what I call sophisticated investors, though they may not meet accredited standards. These people can’t, at this point, go to a retail market, side by side with VCs and a public offering.
For that second group of investors, the Dream Exchange really opens up their opportunities. It will give them access to the earlier stage companies.
The Benefits to Early Stage Investing
The earlier you’re able to invest, the more wealth creation there is. Investors just have to chose wisely. For example, some invest in companies in an industry or a marketplace that they’re an expert within. These individuals can identify early stage technology and products that are going to grow.
Some sophisticated investors choose to acquire smaller portions of the same company. There will be no minimum, as there might be in a private placement. So, it really opens up the market to the entire investor category.
But we have to have a good market. We have to be very disciplined about getting excellent companies with good products that are transparent and willing to report to the exchange. Otherwise, we’ll have a bunch of dogs with fleas.
So, on the investor side, it goes across the board from those who have raised funds to the individual investor’s family offices.
When we launched Dream Exchange with some major press releases about a year ago, we had over a million visitors to our website in just two months. Since then, we’ve been able to survey the public and see what their interests are, helping us tailor the marketplace to accommodate the needs of the American investing public.
So the investor will have the option to come onto the Dream Exchange and either consider investing in a company that’s IPO-ing, but also, there will be a secondary market where they can purchase shares in a company that’s gone public already?
Yes, it’s exactly right. I wasn’t a big fan of the term “venture exchange,” because it sort of isolates it to purely venture capital. A lot of the companies we will see on the exchange won’t necessarily be venture capital investments. They’re operating companies with strong earnings that are privately held. If they want to raise capital to expand, that’s one feature of the market. But once they’ve done their IPO, which would be on the national exchange – these will probably be called IVOs (initial venture offering) – investors can get in at the red herring price when it goes public. In the law there’s a brand new type of security as well, called a venture security. It’s a completely new type of investing.
If the company is small with low volume, they may only auction once a week. It’s not necessarily a continuous trading market. But once a week is a lot better than a private investment that you’re locked into forever.
The Lack of Liquidity on Current Private Investments
Over my career, I’ve seen people invest $100,000 in a small company that’s doing great – expanding, flourishing, etc. Then I’ll get a call from the investor saying, “My kid’s going to college.” Or, “I want to put a new deck on my house.”… Or, “my wife wants a swimming pool.” Now they’re in this conundrum where it’s a very healthy profit, and nothing is wrong with the company, but the company has to go on a secondary capital raise to liquidate the investment.
Then you get into an evaluation discussion, right? Because that $100,000 investment may be worth $300,000. So now you’ve got to raise $300,000 to find a replacement investor to recapitalize the company.
With that comes a labyrinth of legal documents for a secondary placement of a primary placement of a private offering. It’s just super complex.
This market eliminates that. If your kid wants to go to college, you check pricing – there will be a free market valuation – and you decide how much is sufficient to sell. It’s a really neat marketplace. I’m really looking forward to the launch, which will hopefully happen by the end of this year or early next year.
How Dream Exchange Opens Up Investment Opportunities Pre-IPO
You mentioned the lack of liquidity on some private investments. I think that scares off some investors because they want to have control. They understand private investments are not as simple as going into their brokerage account and clicking sell, but they don’t like being told that their investment is indefinite. The other thing that DreamEx sounds like it solves for has to do with IPOs. Nowadays it seems like companies are holding off on IPO-ing until they get a lot of early growth, so when they do IPO, it’s not the same as it used to be when companies would double their revenues in the first couple of years being public. Now they’re almost a mature company when they IPO. The ability to access an early stage investment is lacking right now.
Yeah, the IPO timeline has expanded dramatically. For the companies that do eventually even make it to the IPO marketplace, they’re approaching eight years from receipt of their first venture dollars. That used to be more like 36-48 months.
We held a lot of webinars and shared YouTube videos that show the problem is really in the 50 million and under IPO marketplace. At one time, between 70-90% of all initial public offerings were 50 million and under, and that’s normalized for today’s dollars. We would have anywhere between six and 800 transactions per year. Now, we’re lucky if we have 200 transactions and less than 20% – sometimes as little as 10% – of those are 50 million and under.
The marketplace has dramatically changed because of financial technology, and a small company that has low volume is of virtually no interest to the national public markets.
The companies that are going to list on Dream Exchange, do you see them at some point graduating to one of the larger exchanges?
That’s our plan, and that’s why we’re forming a national exchange to begin with. We want to see a broad venture security market and get substantial numbers of small candidates that trade, then see those companies graduate to a national exchange. There are limitations written into the bill. Once a company reaches a $2 billion market cap, they have 12 months to graduate to a national exchange. I think a $2 billion market cap will give them plenty of time.
The pilot company that we worked on 12 years ago started out with an $80 million market cap when we took them public – it was an over-the-counter company. When they graduated to the NASDAQ, they had about a $200 million market cap, so they more than doubled in value over a 36-month period.
Early stage investors were really happy, and the private investors that went public with us got 7X. If you’re an astute early stage investor, 7X in four years is venture capital style returns. Yet, they were not in a venture capital investment.
Those early stage investors acquired at about a dollar a share. When they graduated to the NASDAQ, I think they were at $11 a share. So they were in a free, open public market in the Russell 2000 with 4,000 investors and many mutual funds. There was a secondary liquidity market for something where maybe the early stage investor only wanted to harvest 20% of his shares, but he’d already made his money back, and then some. And he was still holding a very nice part of his portfolio in a then existing public company on a national exchange.
Graduating to a larger exchange is something we want to see, and the companies don’t have to be $2 billion to graduate. Dream Exchange will likely see companies graduate earlier than they have in the past, because the excitement around some of these companies will be high and they will get faster to the $2 billion market cap in valuation, in spite of the fact that they may not be growing revenues or profitability.
I think one of the things that can scare off an investor from private companies is the lack of transparency. They just get nervous, because it feels like they’re handing over money and it practically goes into a black box. Earlier you mentioned that Dream Exchange will have some investor protections and reporting. What will the individual investors get to see, or what protections will they have?
How Dream Exchange Creates a Transparent & Fair Environment For Investors
That’s a great question, and I have a very simple answer. There is no reduction in public filing transparency in this market. It’s a full blown, fully compliant exchange just as a national exchange marketplace. The minor difference is there’s a category of securities that will have some relaxed reporting.
Today, there’s relaxed reporting for early stage or emerging growth companies (EGC). They don’t have to comply immediately with the Sarbanes-Oxley reporting for the two year period in which they become fully compliant. This gives the early-stage public company the opportunity to become fully compliant. So in that context, it’s no different then it is if you invested in an EGC that went public on the NASDAQ.
However, there’s a category of securities in the Main Street Growth Act that look a lot like what would be a Regulation A exempt offering with one very distinct difference.
Let’s say you’re going to make a private investment in a Regulation A exempt offering today. Well, it all depends on who the professionals are that are creating the transparency and have done the due diligence. And it’s different, as there are reggae offerings. What the exchange does is it provides a standardization – a minimum threshold by which we examine eligibility standards – if it gets listed. So, we’ll have the ability to siphon out anyone who’s not willing to be fully compliant with quarterly reporting, audited financials and the additional exhibits that are not necessarily required at all in a private offering.
An exchange by rule requires that a company meets the listing standards every quarter. If they fail, there’s exchange compliance or regulatory exchange compliance that prevents that company from continuing to trade. So companies have a tremendous incentive to keep up with compliance, since the duration of the investment is of great importance. In other words, if you did your IVO on January 1st and you were out of compliance by March 31st, it’s very difficult to run a pump and dump or to do some type of shenanigans in 90 days. If you fail by March 31st, you’re going to receive regulatory consequences, go into exchange compliance and be penalized.
So if a company doesn’t intend to be a good market participant, the Dream Exchange is not your market.
Yeah, I think that definitely will help investors feel more comfortable. Joe, we’re just about out of time. I want to thank you for being on The Agent of Wealth Podcast today. How best can someone reach out to you and find out more about Dream Exchange?
DreamEx.com is our website. If you want to get in contact with us, you’re welcome to email [email protected] – that email address goes directly to our senior management. The other thing your listeners can do is connect with us at DreamEx Connect. If you go to the DreamEx.com website, you’ll find the links there. There’s links to DreamEx Connect, the legislation, YouTube videos, and so on. There’s a tremendous amount of data and lots of really great videos.
Great, we’ll link to all of that in the show notes. Joe, thanks again. And thank you to everyone who tuned into today’s episode. Don’t forget to follow The Agent of Wealth on the platform you listen from and leave us a review of the show. We are currently accepting new clients, if you’d like to schedule a 1-on-1 consultation with our advisors, please do so below.