MDH 53 | Dream Exchange

 

As an entrepreneur, it’s very important that you know why you are doing what you’re doing. Because that is what investors will look at. If you are a small business trying to raise capital, then this episode will be a treat! Funding the future, Joe Cecala founded Dream Exchange. And he sits down with Victoria Wieck to share how you can attract investors as a small business. Remember, investors invest in passion. If they wanted sure cash flow, they would’ve bought themselves an apartment complex. Learn how to build those investor relationships so that you can make your dreams come true. Join this conversation as Joe provides practical steps to raising capital.

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The Dream Exchange – How To Attract Investors For Your Idea Or Business With Joe Cecala

As I say, week after week, there are two reasons why most small businesses fail. The first reason is lack of funding and the second reason is lack of visibility. That’s my opinion. It’s not something that’s widely understood, but many of you who are tuning in to this show probably can relate to that. At some point in your life, you’ve probably gone through that phase or maybe you’re in that now.

My guest Joe Cecala is an amazing person and also has extreme expertise because this guy has done everything. He has written articles, helped people and had a fund in the stock exchange. I thought I’d invite him over and see what it takes to get some money for your businesses. Without further ado, we’ll get into Joe’s credentials and all the things he’s done, how he became the expert and how he helps you. I want to welcome him and have him tell his story because I think it’s a lot more interesting when it tells you his story rather than me relating it to you. Welcome to the show, Joe.

Thank you so much. Thank you for having me. I’m looking forward to sharing my story. Your audience and the entrepreneurial world are my million-dollar passion.

It’s helping other people with the credentials you have and all the things you’ve accomplished. I’ve been on TV for many years and I’ve met a lot of famous people. I’m not just tooting my horn, but what I want to tell you is that I’ve never known anyone who has written an article in the Oxford University’s Handbook. In fact, I know only two people who went to Oxford. One of them was on a tourist visa vacation and the other one actually attended the school.

You’ve done all of this work. Tell me a little bit about your early background because sometimes your early life shapes what you do later on down the line. Is there any point in your life that shaped you in the financial world and specifically, how you have now shared that knowledge to enable hundreds or thousands of people to transform their lives?

I grew up in North Austin in Chicago, which is widely regarded as one of the most violent and suppressed areas in our country. I’m not a child of privilege. My father was a union worker. I’m born out of hardworking people. I was among the first two people in my family to go to college, go to professional school and become a lawyer.

In many years of my career, I spent representing Angel investors and venture capitalists to evaluate the companies that they were going to invest in. The bulk of my career was representing people with money on how they view a small company or a small opportunity to see how it would proceed. What shaped me was I began to notice that the best ideas and the best companies are not necessarily born of the best pedigree. They come from everywhere. They come from small communities. Entrepreneurs are every one of us now.

The best ideas and companies are not necessarily born of the best pedigree. They come from everywhere.

I began to realize that what we have to do as finance professionals is to help the investors to locate the most imaginative best companies, and usually, when we do that, we find that those are products and services that help the world survive better. The invention of things comes from every area in all walks of life. The things that we need to help one another get along, live a better and more easy life are not always born in expensive laboratories somewhere.

I took my experiences in life and started to channel them into using finance and the expertise that I have in helping those companies learn a very valuable process of how to communicate with investors and how to keep graduating to ever-increasingly more investment funds. The two problems you outlined, at least one of them could disappear entirely, which is we don’t want the ideas to die by virtue of a lack of our own dedication to funding them. That’s how we’ve gotten here.

First of all, for those of you who are reading, I didn’t mention this, but Joe is a licensed CPA and a lawyer. He’s in a perfect position to give you the straightforward financials, but also the legal side of this because anytime and every time you raise money, you put anything on paper. If you try to go get a loan for a home nowadays, it’s like a fund book of things that you have to sign. Having that legal background and making sure that there’s 100% transparency for both the venture capitalist who is investing money in you, as well as the person who is seeking funding, you’re in that perfect position to see potential problems down the road, so you don’t have to go and hire a separate lawyer.

The other thing I love about what you’ve done is that when you were working for this venture capitalist, you had a front seat on what they’re looking for, how they view your type of business and when they’re most likely to fund something. I’m not a venture capitalist. I’ve never looked for money. I should have, but I have not. What are venture capitalists looking for? Is there a good time versus a less desirable time to look for funding?

There is no time like the present. What you have to evaluate is what stage of development you are in, which will then inform you as to what type of investor is needed at your stage. For example, the very earliest stage companies, the Angel investor, people like to call it the family and friends’ rounds of money that those initial launch monies seed investing. It’s always a good practice to begin the communication and transparency.

I can’t emphasize transparency enough, especially the early-stage investor. If they understand your obstacles well and you’re honest about your obstacles, it’s my experience for all the years I’ve been doing this that the investor is rooting for you, especially if they are interested in the investment. That’s the first evaluation. If you’re making something or you have a technology or you’re creating some particular product, those early investors have to be pioneers with you. They have to really have an interest in your version of what help is and then they’ll support you. They tend to support you through the earliest stage struggles.

That’s what’s in Oxford’s Handbook. When you look at what we’ve written, you can identify the particular characteristics of companies that make it. You have to do a bit of your own self-study. There are organizations like ours that are willing to help with that, but the answer is there’s no time like the present and what you want to communicate first is the potential bigness of your idea. How imaginative are you? That’s what they’re interested in.

They’re not interested in something that is going to be average. They’re interested in the extraordinary and I find that there are tens of thousands of extraordinary people with extraordinary ideas, yet they get caught up in all the language of finance and the mechanics of financial data and the legalities. If you’re an entrepreneur, what you want to do is capture the goal of what you’re trying to accomplish in its biggest broadest sense and how your imagination supports that.

MDH 53 | Dream Exchange

Dream Exchange: As an entrepreneur, you want to capture the goal of what you’re trying to accomplish in its broadest sense. It’s how your imagination supports that that will generate interest.

 

That will generate the interest and once the interest is there, be transparent as to what the barriers and obstacles in the road ahead are so you can keep people supporting you through those barriers and obstacles. That’s the primary help that we’re delivering in terms of financial literacy, education and connectivity between investors and entrepreneurs. When we’re all grown up, we’ll have a full-fledged small business stock exchange, but right now, in an immediate form, that’s how we’re helping the entrepreneur and the strategic investor or strategic consultant alike. We’re doing that now.

If you miss this, the one thing I’m going to direct all of you right now reading is to go to the Oxford University’s Handbook on IPO. It’s called the Main Street Growth Act H.R.2899. Is this on your website at DreamEx.com?

Yeah. You can also find links to the legislation.

I’ve been on TV for many years and the only reason I say that is because when you’re not transparent, people find out. You’re one click away from 100% transparent information all the time. The minute you’re not transparent about something, that’s either by misleading inaccurate information or omitting something altogether.

You then lose credibility on everything else you were saying. Transparency is a fair thing to do. I just sold a home in Las Vegas and I have to tell you, when we had to disclose all the things that were wrong with the house, it was 52 pages of a document that I didn’t even know, but I had to put myself in the shoes of the buyer when they come in, “Are these things that they would normally expect?”

It was a fairly large home. I went even as far as documenting where the ants come in when it rains because I didn’t want to be sued later on. I think that the transparency piece is very important, especially if they’re Angel investors. I love what you do and I would love to see a small dream stock exchange for small business owners because they have very specific needs that larger companies don’t have. They have the imagination, the drive and the passion, but the thing that they’re lacking is funding.

Most of the time, when you’re running a small business, unless you’re in the business of finance, we don’t think about finance the way that you guys do in the financial world. I don’t know how many times I talked to entrepreneurs that tell me, “I have so many more customers now than ever before it. My revenue is through the roof, but I don’t know why I have no money.” I’m like, “How is it that you don’t know you have any money?”

I want to emphasize this. It’s almost a little bit profound. It’s, “I’m generating so much interest. I’m generating so many sales, but the financial mechanics are taking over my life because I don’t have $2 million, $3 million and $5 million in profitability.” You’ll get pushed aside by many investors. What I want to say is that the world has changed. Tesla, the largest electronic auto manufacturer in the world, did not have a profitable quarter until last July 2021.

It’s a canary in the coal mine that shows what I’m trying to impart, which is the idea and the milestones toward accomplishing the idea are far more important, especially for the early-stage company than this overwhelming cashflow profitability. If you have an idea whose time has come, that’s of tremendous interest to investors. That’s why transparency is so important.

Investors are actually interested in why you do things, not how you do things.

If you tell them, “If you overcame these three obstacles, then this is how big this can become.” They want to know that. They don’t want to know that everything is fine, “Yes, sir, three bags full,” and I’ve found this to be the case very often. Small companies that are highly profitable are throwing off buckets and buckets of cash. They’re not looking for investors very often because they have cash.

What is the obstacle? The obstacle is, how can I get the funds to expand my idea because it’s bigger than merely, “Can I turn in immediate profit?” Throughout our world now, we know virtually how to solve anything. Human beings are ingenious. We can create solutions or how to solve a problem in hundreds of ways. What the investors are interested in when ideas become big is why. It’s not how we solve it. Why would we do this?

You talked about pets. I think George Carlin once made a joke that he brought home his kitten and he thought, “Why am I doing this? I’m buying a tragedy. Now it is my cat.” I have three pets. We all have them because the reasons why we do things go to the core of the very reason we’re alive. When you’re an entrepreneur and you’re creating something, it goes to that very core. That’s what I mean by looking at the big picture, “Why is this going to be so great?”

There may be many different mechanical ways to solve certain things or to produce something, but people become interested because it enhances their life. It enhances the joy of living or their ability to survive at all. That’s far more important in a discussion with an entrepreneur. You may not even know this about an investor. You may not even realize it at first, but they’re looking for you. They’re hunting for that early company with the great idea that everyone is going to become interested in and that solves a certain equation for how to make life and living a better thing on our planet.

That’s far more important than the financial mechanics. If you get lost in that, you may as well go back to college and get a degree in Accounting. That’s not what they’re interested in. They’re interested in you, your idea, your passion and how your passion will become a big enterprise someday. That’s what they invest in. If they wanted to invest in something that just provided cashflow, they can buy an apartment building.

When you talked about Tesla, I was thinking, “How many years was it before Jeff Bezos turned a profit?” It was years when quarter after quarter, he’d get on CNBC talking about his vision and what it’ll do. In the meantime, he had lost another $100 million for that quarter.

How did he go about losing? Think about that. Who paid for the $100 million loss? His investors. Why? They saw that the convenience of Amazon in all of our lives was practically one of the biggest ideas. There are some big ideas out there now, but it is perhaps one of the biggest ideas ever to circulate in our society. It’s no wonder the company is worth billions and billions. We have companies that are worth over $1 trillion.

What I would say to the entrepreneur is you don’t have to be a trillion-dollar company. You don’t have to have the vision of, “I’m going to be a trillion dollars,” to attract a good investor who wants to help and who sees your niche. “Can we do $50 million?” That would be wonderful from where you are now. That intermediate benchmark is the exact same conversation from raising $1 million to raising $50 million to raising $5 billion. It’s the same interest. You have to think of the big idea and communicate it with a sufficient amount of transparency. I’ve said this more times in the last couple of years than ever in my life. Sometimes, a very good answer is I don’t know the answer.

They appreciate the transparency that you don’t know. You don’t have to know everything.

MDH 53 | Dream Exchange

Dream Exchange: Investors are looking for you. They want to invest in you. If they wanted to invest in something that provides cash flow, they would’ve bought an apartment building.

 

“I’m working on it. This is what we’re working on currently. I invented electricity last week. I’m not exactly sure when the light bulb will be finished.” That’s a perfectly acceptable solution.

There was this thought amongst small business owners, especially minority female business owners, that when you talk about venture capitalists, they’re vultures. What would you say to that? How would you explain to somebody that you’re not there to be a vulture? You’re there to get them the help that they need in exchange for a certain amount of money.

I had a friend who was a fitness instructor. She was having a tough time getting ten people in her living room to teach fitness classes, and eventually, there was an investor who believe in the idea of fitness. This guy invested $1 million in her business, but it was in exchange for a lot of things. When the brand was doing $200 million or $300 million a year, she wanted to change the deal. Growth happened very quickly too.

She cried wolf about the unfairness of the deal. His whole response to that was, “Without me, you’d still be coaching the fitness classes and not being able to pay rent,” because she had these little flyers at the grocery store. She knew somebody who knew somebody who invested this money. I see both sides of it. How would you go about bucking that statement?

Venture capitalist, Angel investor and entrepreneur, everyone alike, you have to take a viewpoint, especially in the earliest stages of your business that you’re creating a relationship. It is a relationship-driven environment. With the years of financial and mechanical training that I’ve had, I’m sure I’d have professors who would scream at me right now, but the point is that the relationship has to have fundamental fairness.

In other words, at the earliest stage, the investor is looking at the idea and the entrepreneur is looking at the need for money and there’s this balance that one has to strike. We have a formula called Equilibrium Pricing, where what is fundamentally fair at the outset of the business may eventually become unfair as time goes by. It’s because the importance of the $1 million when you have a studio of ten people is clearly significantly higher than when the brand is a national brand and it’s all over the United States. The reward for the person who had the idea, very often in the earliest stage, can include terms that are suppressive to the person who is creating.

What’s important about the story you articulated is that the external world to the business is where the real barriers to expansion exist. What you want to make sure of is that internally, you don’t create a disincentive between the investor and the entrepreneur. In other words, if you’re working and it’s so suppressive that the next dollar you make, $0.99 of it, has to go to your investors, what’s your incentive as an entrepreneur to make your idea great any longer? At some point, there’s an equilibrium. It’s like, “When will the things start to turn that they’re not fair for one party or the other?”

Vulture capitalist is an appropriate name to some of them because there are people who do suppress. On the other hand, there are good investors and they say, “Here we are today with my $1 million and your very good idea. In five years, if we’ve gone through my $1 million and your idea turns out to be worth less than what I paid for it, we’ll be sitting with your bad idea and my $1 million will be gone.”

That’s just a justification for an investor not being able to estimate well enough how that entrepreneur will perform. That’s where the transparency, the barriers and you providing enough information to say, “If this, in fact, does go as big as it is, these are the rewards I’m going to expect from you.” It does become unfair where the person who merely wrote a check was their effort. The entrepreneur went through slavery, sweat labor and the worrisome nights of getting that business moving.

Sometimes, a good answer is, “I don’t know the answer,” because that shows transparency.

Someday, if the $1 million is worth $100 million and the whole company is only worth $110 million, it’s patently unfair to say that $1 million created the totality of that business. That’s not true, because his money was just money. Any other $1 million would have done it. Him saying, “I believed in your way back when,” doesn’t somehow create fundamental fairness or resolve the injustice that only the money got really wealthy and the entrepreneur is going to go onto their next entrepreneurship, again, not paying the rent with a new idea. There’s a balance to that. We help with that. One of the things is getting your relationship intact with your earliest investors to assure that they’re aligned behind the purposes and want to see you flourish and prosper as much as they do.

I know several of my audience personally pretty well and they have some crazy and amazing ideas for the next invention. They’re running pretty decent businesses right now. If they’re trying to find money, would you recommend that they do some package together? Is that something you help out with, their vision, mission and all that stuff with what they’re doing?

Yeah. As I said, what are we doing now because we’re not open as a stock exchange and probably won’t be for another year. We do have a social media site called DreamEx Connect. What we’ve designed the social media site to do is to be a menu-driven identity. It’s a menu-driven way that you can put your profile into an environment where you, as the entrepreneur, don’t have to think through all the potential questions that someone’s going to ask. I call it being strategically involved.

We’ve just started. We have 2,000 personalities in there already, both strategic consultants, investors, as well as entrepreneurs. If you follow the menus, there’s also the ability to put in your own PowerPoints, videos and all of the data that you’d normally associate with social media. We also have an internal messaging board so you can search among the investors and people who have created profiles for someone who would be strategically aligned with you.

You can then custom make the packaging. We have other products that are designed to help with the mechanics, because as soon as you start, what’s the package going to look like? What are the key mechanical and financial forecasts and ways to communicate to the investor? We have a lot of resources through DreamEx Connect that will help you if you start your relationship. If you find an investor and the two of you are interested, there are some products we have that will help facilitate how you communicate with one another after you’ve done your online social media exercise and you can search.

The investors have profiles. They say, “I only invest in the earliest stage companies. I’m only interested in environmentally sound companies or companies that do wastewater management.” Whatever their profile says, you can search within the DreamEx Connect environment and begin the relationship process. That will drive what goes into the packaging because you are your packaging. You’re selling some part of your company. You have to put the best appearance on it and transparently let them know what it is they’re going to be involved in eventually. We have a lot of tools to help through DreamEx Connect.

What you’re describing is that the DreamEx Connect is almost like a platform where the investors can search for the right investment that they want to get involved in or the next big idea they want to invest in. You have a bunch of people that have great ideas looking for funding and I think that’s great. What you’re describing reminds me a little bit of the retail environment. I’m in retail and so many people approach me and they want to get on TV. They want their product on TV, and they’ll ask me, “How do I pitch them?”

I tell them the same thing that you said, which is that the buyers of all the department stores like Saks, and Neiman Marcus, all those buyers are busy and I’ve dealt with all of them. The only ones that I haven’t dealt with are Target and Walmart in this country. I’ve done TV, Duty Free and all that. Those professional buyers’ job is to buy something every day. They are looking for the next big thing in their category. Just like people who are professional investors, they’re pretty good at what they do and they know what they’re looking for. They are looking for the next big idea that could be shaped into something that improves lives or adds value.

MDH 53 | Dream Exchange

Dream Exchange: A relationship between an investor and entrepreneur has to have fundamental fairness. The investor is looking for the idea, and the entrepreneur is looking for money. It’s called equilibrium pricing.

 

It’s not like you are begging for their sympathy money. You’re asking to be discovered for your thing. You have given me and my audience a lot of information. I love what you do and how you broke down the funding issue because it’s not necessarily for big companies with all the CPAs and lawyers on their teams. You don’t have to necessarily get to that point before you look for money. You’re creating this stock exchange for small business owners specifically because I think there are so many more small business owners than the big companies out there that could use it.

I love what you do and all the things that you’ve done to make it easy. The financial market is more accessible and easier to understand than before you came on the show. For those of you who think that you are not looking for money, I would say to go ahead and check out Joe’s website because one of the things that small business people are horrible about is having any exit strategy.

I think of so many businesses and I know you can too, in Chicago. There are a lot of family-owned businesses or family-owned restaurants that have been there for 20, 30, or 40 years and the next generation of people come in and they don’t want to have anything to do with that. There’s all that equity, trust and goodwill that goes out the window. Sometimes it’s better to have some idea of what your business is worth and how attractive it would be if you have to get out. Having that pulse on your assets and your branding would be helpful to everybody.

What you said is another profound statement. It takes about a few years of planning to exit properly. When you say exit strategy, you can’t say, “I’m going to sell my business tomorrow.” That’s why catching the earliest involvement you can get to prepare yourself for the eventuality of dealing with the financial professionals, the consultants, the lawyers and all that laboring work is not something you become educated in overnight.

The earliest possible communication and at the earliest possible stage, so you’re planning at every step along the way to properly exit and protect your wealth that you’ve put your life’s work into. That is the main purpose of the Dream Exchange. It’s to create a financial marketplace where people are able to harvest the wealth of years of their life’s energy being poured into a business and not have it, as you said, go by the boards because they didn’t plan to exit properly.

I love your branding of Dream Exchange. It’s catchy and it sticks. Do you have any parting words of wisdom for the audience?

To the entrepreneurs, I have two words. The two words that are near and dear to my heart are to never quit. To the investors, it’s similar but a little more wordy. “You only lose your money when you sell.” There are bad entrepreneurial days. You have to not quit and get through them. The funds and the sales will come. I think it was Thomas Edison who was asked, “It took you 4,000 tries to develop the light bulb. How do you feel about that? You failed 3,999 times.” He said, “No. I learned 3,999 ways not to make a light bulb,” and that’s all it is.

You have to keep the intestinal fortitude to keep going until your light bulb turns on. I meet these people every day. I’m on your side. The world is on your side. You have friends and resources. People who are willing to help. You have to reach for the proper relationship to get the help you need to see your ideas come. That’s the dream. To see your dreams come true with your small business. That’s what we’re all about at the Dream Exchange.

Go check out Joe’s social media, the Dream Exchange and then you can find out all about the articles he wrote and all of his astonishing accomplishments on DreamEx.com. Thank you so much for coming in and sharing your knowledge, expertise and your passion. For those of you who are reading, make sure that you share this episode because when we share our knowledge and our passion, it goes one step closer to living a better world and lifting everybody else. It’s time to stop competing. It is time to collaborate with everyone. Until next time, please stay healthy and happy. As I always say, happiness is your choice and I hope you make great choices.

 

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About Joe Cecala:

MDH 53 | Dream ExchangeJoe Cecala was a lawyer who worked on many small capital transactions for more than fifteen years. In that time, he saw that small capital transactions, however good, always lack a clear exit. Answering the investor question “How do I sell my investment?” was a constant problem. This, and other problems in raising capital, were especially pronounced in the black community as his firm worked with the Chicago Urban League attempting to help the “Next One” entrepreneurship program.

Early in his legal career, Mr. Cecala learned how stock exchanges “hunt” for liquidity because he was the lawyer for the founders of Archipelago, one of the first and the biggest electronic stock exchanges in the world. Archipelago grew and was eventually acquired by the New York Stock Exchange, becoming the electronic infrastructure for the NYSE still used today. Because of his experience in understanding the formation of the world’s greatest electronic stock exchange, Mr. Cecala learned how a stock exchange creates and controls liquidity in the markets.

Following his involvement with Archipelago, Mr. Cecala spent years researching capital markets. In that time, he discovered that the structure of the US capital markets and the current stock exchanges favor only the largest transactions with celebrity companies. Mr. Cecala’s research showed that, prior to Archipelago, the overwhelming majority of IPO’s were $50.0 million and under! By 2004, small capital IPO’s had all but disappeared. After years of working with minority businesses, in addition to this, he realized as well that minority businesses were nearly absent from all IPO and public company listings.

In 2018, Joe Cecala founded the Dream Exchange to solve these long-standing market problems by creating a stock exchange to become completely inclusive and expand access to capital markets for companies with great imagination and foresight into the future as well as make an impact on the lacking diversity in the capital markets. In 2020, a black owned private equity firm, Cadiz Capital Holding LLC, entered an agreement to become the majority owner in Dream Exchange, thus creating the first black owned stock exchange in the history of America.

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