Can a new stock exchange revolutionize investing?
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Small companies that actually have really innovative, great ideas.They generally don't go to the public markets until very late stage. By the time they're going to the public markets today, all the wealth creation, all the opportunity to quote unquote, get in early and build wealth by making an investment in a in a company that's emerging, it's gone.
Welcome to Financial Freestyle here on Yahoo Finance, and I'm your host, Ross Mack. Now look guys, no matter where you are on your financial journey, there's always the first step you got to take and look no further guys, because I'm talking to some of the most influential people in the world of finance and uncovering their truths. And today's no different as I'm talking to Joe Sekela, founder and CEO of the Dream Exchange. Joe, my man, my Chicago native. How you doing, baby?
I'm doing great and I really appreciate you having me on, on the show.
The feeling is mutual, because one, you're doing some amazing things, right? And so even before we get into that, right, just a kid from the west side, right? Obviously I did my due diligence, but to the world, to the people, to the audience, who is Joe Sekela?
You know, oh wow, nice question and thank you for catching me by surprise. Um, you know, I'll tell you, uh, I'm an entrepreneur at heart. I've been an entrepreneur my whole life, um, but, you know, I have the credentials, the career, uh, you know, CPA lawyer, I was an army officer. I've done a, uh, like Forrest Gump my way through my life, but really what I found who I am, I really wanted to use everything that I gained in knowledge in my life to help people.Um, I'm fundamentally someone who wants to help others, and we've built an organization that culturally is really designed to bring people together and to help people flourish and prosper. I try to live up to that. That's who I am. I try to live up to helping other people flourish and prosper in whatever they're doing every day. Um, that's, that's kind of my basic personality, and I, I, I'm trying. I, I always get there but I'm trying.
So, then we have to get into what exactly you're trying. And this is obviously the dream exchange. So what is the dream exchange? Let's actually break it down and also let's talk about what was your inspiration behind it.
OK, I mean, the dream, the dream exchange is, it will be uh very, very soon, uh, likely this year, the 8th stock exchange in the country. So, um, I, I'm saying that kind of rolls off my tongue, but to become a national market system stock exchange is a very heavy lifting entrepreneurial task. Um, so we are a fully electronic, um, competitor to the New York Stock Exchange or the NASDAQ.And you know, that's, that's part A, but perhaps leading into your next question, which is what kind of inspired me and our group to do what we're doing, is, uh, we really are dedicated to the small and medium sized business. Um, and we have other phases after we're licensed this year as an exchange that are gonna really target.The small business, the entrepreneur, the emerging company, people who really struggle to find access to capital. And we're gonna use the stock exchange environment that we have to facilitate more companies being able to reach the American investing public with their ideas and with their great entrepreneurial uh imagination.And get the American people to vote with their dollars, to invest in those companies, see them grow and flourish and expand. That's the inspiration for that is I, I was a lawyer. I did many, many venture capital and private equity deals, and I really discovered thatThere's not uh an equal playing field, and it's the playing field. This is about the equality of, of the opportunity access, um, where if you have great relationships and you've gone to an Ivy League school, perhaps, and all of your, you know, friends and colleagues and associates have a lot of money, you can be an entrepreneur and raise a lot of capital.And if you don't have that environment, it's increasingly more difficult because it's a relationship driven private capital market.Uh, the public capital market is very different. So what inspired me was to really help the people that were my clients, and I had a tough time. Like, if I was actually a success at some of the, at some of the things, uh, that I did in the past, helping the people I wanted to help, I don't know that we'd be here. Uh, but the, the failure of the opportunity is really what I focused on. And I wanted to bringThat's everybody. Um, I, I, you said, I come from the west side, my friends, my colleagues, the people that I've associated with my whole life. I think they deserve the same opportunity to succeed. And that's not just the West Side, it's throughout the whole country. We want people with great imaginations and great ideas.To get the capital that they need to make their idea become something we can all use and help help everybody with the best ideas. That's what, that's the inspiration was born out of my career, trying to help people, and this is just the best and most optimal way I think to that I could do it.
I love it, right? Like at the end of the day, right? Having a mission and a goal to create more equitable access, more equitable access to capital is very remarkable, right? I think that when you look at the stock market to the average person, they don't really know the difference, right? Oh, New York Stock Exchange, or Nasdaq, they have no true idea of what it takes to get there. And then there's a why Delta when you're looking at kind of names that are.on the New York Stock Exchange versus kind of those pink slip, penny stocks, etc. And so effectively you're kind of in that middle market realm. Like let's kind of break that down and like truly help us understand like one, that that void that the dreaming change is going to be filling and then like kind of what are thequalifications of a company that has the ability to list and raise capital, you know, publicly on the dream exchange.
Right.So, right, there is, there's a void. Um, we're filling a void that actually at one time was the majority, and when I say the majority, 70, 80%, 90% of all companies that went public, were only raising $50 million. Now that might sound like a lot of money today.ButApple Computer is a $1 trillion company. These, this is not, these are not big companies, OK? So 1020 $30.50 million dollars, uh, that's the lifeblood of the economy and, and small business. So at one time, we would have 7 or 8 or 900 IPOs every year and 90% of them raised $50 million or less.That that's gone. It's been gone for 25 years. So we're restoring that as a target market, because the, the need for it, um, the need is the what I described before, where there's nothing wrong with the system.Auction stock exchanges work. They work. They work just fine.The question is, it's like playing a football game, and you're just not allowed to get into the stadium. Football is a fine game, but if you can't get on the team, you can't get in the stadium, you don't have access, no one will ever discover how good a player you are. And that goes to the second part of your question, which is, well, what are the types of companies? What are we looking for?And we have a very different viewpoint. Clearly, there's some financial constraints where, you know, you have to have a real company, it has to be not just a concept in a, in a drawer. It's a real company, it's producing a product, and those financial characteristics we're gonna publish later because we have to file them with the SEC first. But I can tell you this.What we've discovered, and this is 17 years of research.Is that the small companies that actually have really innovative, great ideas.They generally don't go to the public markets until a very late stage.By the time they're going to the public markets today, all the wealth creation, all the opportunity to quote unquote, get in early and build wealth by making an investment in a, in a company that's emerging, it's gone. So we're restoring that for investors to make good investment choices in a company that'll grow. We're trying to restore the wealth creation to the founders and employees of earlier stage companies because they benefit as well.And, and really, job creation. So, when you have an innovative idea, a great idea, and you're the only one who has it,That makes you uh insatiable to the investing marketplace. So, you could even take a big company like Tesla as an example. They weren't profitable until 18 months ago.But they were already the largest auto manufacturer in the world. Why?The idea, they were able to manufacture in quantity, an electronic car that was affordable at a retail price.If you have that idea and you have that capability, you have the best idea in the market. So their stock price and their capital was easy to get and they had a huge value. We want those companies, we want Tesla before it's Tesla. We want Apple before, we want Apple when it's right out of the garage. We're looking for those people that have the most imaginative and innovative ideas, because first of all, they're the ones who need the capital.And second of all, we have a philosophy that when we give our money to those ingenious people, we all end up surviving better. Because where would we be without wireless communication and now we have electronic cars and, you know, innovations in building, and we have a luxury.Lifestyle for pretty much every person today. It's all been born from the innovators, and we have to really nourish people who are imaginative and have good ideas, get them the most capital they can to create, and then we're all gonna be better off for it. That's the, the, you know, fundamentally, we didn't put the dream exchange here as a quick and dirty, let's hurry up and do this for a couple of years and be entrepreneurs.I expect the Dream exchange to be a household name and to be here for many, many decades to come, uh, long after I'm gone, and continue to really help all the communities in our country. We, we call calling ourselves the People's Exchange because you just don't know where the next great idea is gonna come from.And we're going into the unlikely corners of our society and searching out people who really deserve help, and they deserve to see their idea come to fruition and will build wealth and jobs, and it really is transforming.For the whole country when we succeed. We, I, I know we're going to, we're, we're already past the most major barriers this year. So, when we succeed, we're gonna help a lot of people who deserve to be helped. Get them into the football game, if you will.
I love it. Well, listen, guys, we're gonna take a quick, quick break here and when we come back, we'll have more about the dream exchange with Joe.Welcome back to Financial Freestyle here on Yahoo Finance. And guys, we're talking to Joe of the Dream Exchange, which is going to be the 8th exchange here in the US and I'm curious, right, because you've actually spoken about the importance of legislation, right? Like the Main Street Growth Act. And I'm curious, right, how is that critical to the overall mission of your company?
Yeah, it's vital. So, you know, we started touching on this earlier about what types of companies, what are the sizes of the companies that we could bring into the public market. So the Main Street Growth Act actually allows, it takes legislation to create a new type of stock exchange. That'll be under the umbrella of the DRAM exchange. And what we're able to do with that legislation.I take very small companies where the financial mechanics are less important. Not that they're irrelevant, but, you know, a company that has had no profits, maybe had very little revenue, uh, is 3 years old, but maybe they have the cure for cancer. Maybe they're in a laboratory in a university and they're in phase two of getting their FDA approval for a miracle drug.These companies, because they don't have the exact financial mechanics, need a special protected stock exchange environment. So we can bring them to the public market, and everyone in America can invest in them in their earlier stages before they're being bought up by, you know, Procter and Gamble or before they're bought up by Merrick, you know, they're at a stage where believing in the idea is something really important. So with the legislation,And the new type of exchange.Number 1, the retail investors are allowed to come. #2, the application process for the company is very extensive. So we actually get to look at the veracity of the idea and actually make sure that what is being represented in the company is in fact the, the, the holy grail or the, the real McCoy, if you will.So once we have those companies, retail investors are allowed to support them and usually they don't need a billion dollars. In fact, if some of them got a billion dollars, they wouldn't know what to do with it. They need $10 million.20 dollars, $30.50 million dollars, as little as $5 million. And with those smaller amounts of capital, you can have a high enough stock price with a small enough audience of investors that protects the value of the company.And here's the most important part about it.It's not private investing, it's public capital, which means when you make your investment.And the investment does reasonably well, you can sell it.There's what they call secondary liquidity.So today, if you invest it and you're an angel investor or a seed investor, or even venture capitalists, private equity, once you make the investment, the investment, your shares can't be resold unless everybody agrees, unless the whole company is being bought up by another company, or unless you go in and personally negotiate to sell your shares. Well, in the public markets, you can sell your shares for any reason or no reason at all.If you decide that you've made a bit of money and it's good enough for you, uh, there's a liquid public market that's always available, that gives you the value of your shares. It gives opportunity to other people who might want to take the next step and the next step in the next proverbial round. So that secondary market for liquidity for company stock today doesn't exist.And bringing secondary liquidity to small cap companies is a brand new industry. We are the inventors of it, and that industry, I think, really saves uh the uh broad American investing public because they get to invest. And today, if you don't have a relationship with a VC or somebody and you don't know, how, how would you even find the company on the menu? You can't even, can't even find the companies.So we'll have a vetted menu of really good companies for which individual investors, you know, Robin Hood, you wanna go, you'll be, it'll be right to a stock exchange, just like you're buying IBM.That's the real innovation of the legislation, and I think it's uh it's the the legislation is really an idea whose time has come. It's working its way through Congress. Uh, hopefully it'll pass before the end of this Congress, but the Main Street Growth Act is vital to us reaching into the markets that we really want to help.
And obviously you have a few things you're working on from legislation to uh filing with the SEC, etc. So like, what have been some of the biggest challenges, both operationally, financially, etc. to actually take this idea and turn it into a reality.
I mean, I would say that one of the biggest challenges we've had to overcome, um, and we've done this with our team, isUh, making sure that we communicate the confidence that the team itself is on par with the the teams at NASDAQ and New York Stock Exchange and, and our team is fantastic. We have, uh, you know, our lawyer, our chief of operations, our architect, they were all chief operations, lawyers, architects of other stuff.Exchanges. I started out in this business by helping to create what was the first equity trading um exchange called Archipelago. Archipelago merged with the New York Stock Exchange in 2005. So the New York Stock Exchange is actually called NISAA.So we have to explain, look, you should have confidence in us for one reason.We have not uh taken an investor pool of our customers. So all the other stock exchanges in the country are owned and controlled by the brokerage industry.When I say we're the people's exchange, it's not just because we're helping individual companies and individual investors, it's because we're the only stock exchange to be owned by individual investors ourselves. So Joe, what's
it look like, right? Like I've, I've visited the New York Stock Exchange. In fact, I used to have a show from the Florida New York Stock Exchange. For the Dream Exchange, are there traders? What's it look like here?
So, you know, we, we are literally um electronically nearly identical to every other exchange. So,We're in the same data center in Secaucus, New Jersey electronically. Our customers are the same customers. When a buy sell order comes to our exchange and it's the quotes are listed out into the market, they're side by side with every other exchange, and when the buyer seller match, they match just like any other exchange. So we're exactly the same.As NASDAQ, uh NYSE, CBOE were the same exact product with one exception.We're smaller, we're leaner, we can charge a different rate sheet. We're, we're much more customer service service. So if you call here, you're gonna get a human being, not an AI but and so our customers are really gonna get a lot of service from us, and then the main differentiating factor is this.Our target marketplace to bring new companies to list on our stock exchange is very different than any other stock exchange. We're talking to people that they're, they're just not talking to, they're not interested in. And a lot of it actually is what we call the rust belt.We have Wisconsin, Illinois, Indiana, Michigan, there's a lot of ingenious companies. There's a, I, I'll talk about this without disclosing who it is, but there's a technology company in Detroit in the um electronic vehicle uh service, it's a, it's a, it's a woman, she's a Princeton engineer who invented something, um, no one else is really talking to them right now.So those are our constituents, OK? Those are the people we want to see come to the public markets, and, you know, we'd like to create thousands of small cap listings that have real credibility, not a pink sheet company, not somebody whoYou know, kind of doesn't always comply with the securities laws. We want, you know, quality listings and quality, uh, investors, and, and the investor market really comes through our customers. So, you know, if you have an account at uh Fidelity or at Schwab or at, uh, you know, Robin Hood, when you buy,You're actually, you don't know what stock exchange your trade matched on. That customer does. So, our customer is just there like everyone else, with one exception.We're generating the new menu.So the only place you'll be able to go to get at our listings is our stock exchange. So that's where our our customers get an advantage, and that's where their retail customer who's at Fidelity and wants to invest in the new thing, he's gonna do the same thing he does today. He goes into his Fidelity account, he finds the listing symbol, he knows that that's the company he wants to buy or sell, and he puts in his order in his Fidelity account. Well, Fidelity does the trade on the exchange.The difference is today, the listing symbols we intend to attract, they don't exist. So when we put those companies into the marketplace through cultivating our our marketing and advertising from our exchange, there's an entire new marketplace for small caps that is gonna come through dream exchange. That's, that's really the main differentiating factor.
Well, Joe, that's it for our time and I cannot say thanks enough for joining us. And most importantly, we're wishing you on behalf of all of the financial freestyle community, the best of luck. But guys, that's it for this episode. Make sure you guys like, subscribe, share this with a friend or relative, whomever. And remember, these episodes are coming out each and every Friday. So then guys, take care.
This content was not intended to be financial advice and should not be used as a substitute for professional financial services.
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