Can a new stock exchange backed by the Bay Area’s most powerful players take on the NYSE and Nasdaq?
On a drizzly San Francisco day in December, Eric Ries is stationed inside the Succession-worthy offices of Orrick, Herrington & Sutcliffe. Here, at the billion-dollar law firm — whose clients include Oracle, Microsoft, Intel, Cisco, Pinterest, and Stripe — guys dressed VC chic in V-neck cashmere sweaters and soft loafers shush across carpeted floors. It’s a frictionless world, all potential irritants engineered away. If you want to be where it happens in Bay Area tech, this is a good place to start.
Ries, in black glasses and a chinstrap beard, looks like a poli sci professor who’s wandered in from Berkeley. The 41-year-old’s 2011 bestseller, The Lean Startup, introduced the masses to product/market fit, minimum viable product, and the pivot. It also vaulted Ries into nerd celebrity status, a coach and mentor to Silicon Valley’s elite. Between his speaking gigs — which now earn him upwards of $40,000 a pop — book royalties, and consulting work for companies like Procter & Gamble and GE, “Lean Startup Inc.” could have allowed Ries to carry on in low-key rich mode indefinitely. Instead, Ries is now focused on his most ambitious — and risky — venture yet: a new stock exchange called the LTSE, or Long-term Stock Exchange.
Ries’s words and time are now tightly guarded by a personal assistant and the LTSE’s head of communications, Steve Goldstein, whose last job, as Rex Tillerson’s Under Secretary of State for Public Diplomacy and Public Affairs, ended in dismissal via presidential tweet. (Ries, for the record, was a prominent supporter of “Nerdz 4 Hillary,” a 2016 tech-world fundraiser for Hillary Clinton.) Today, Ries is at Orrick — his LTSE cofounder, John Bautista, is a partner at the firm — for a full day of closed-door meetings with CEOs and institutional investors, talking up the LTSE.
The LTSE is a controversial new exchange that, Ries argues, will create a fundamental shift in the capital markets. Founders and CEOs will be able to focus on long-term value creation, innovation pipelines, and sustainability goals, while retaining tighter control over the destiny of their companies. But to its critics, the LTSE is either an unnecessary marketing exercise for a handful of Silicon Valley players, or a ploy to let companies profit from public markets while avoiding the accountability of market forces.
When it launches — sometime late in the first quarter of this year, Ries hopes — the LTSE will be the 14th U.S. exchange registered for trading securities, but only the third active exchange that is approved for both trading and listing of public companies. That means, instead of IPO’ing on the NYSE or Nasdaq, companies will now have the option of listing shares, aka “going public,” on the LTSE. Ries has been in roadshow mode for the past year, but since May 2019, when the Securities and Exchange Commission green-lit the LTSE’s application to operate a public exchange, he’s shifted into high gear — pitching the LTSE at trending, still-private companies, and hosting, so far, three of these daylong “investor coalition” meetings in San Francisco.