How Eric Ries is rebuilding public markets for the long term

Executive overview

Public markets are structurally broken for companies that want to think long-term. Algorithmic trading, passive index funds, and activist investors mean governance is controlled by shareholders with holding periods measured in minutes. Companies stay private for 15 years — or go public with extreme dual-class structures — as rational responses to this broken infrastructure.

The Long-Term Stock Exchange (LTSE) is Eric Ries's attempt to fix this by giving companies a way to formally reward patient investors with superior voting rights and economics, backed by enforceable, legally binding pledges. Market infrastructure is a human creation, not a law of nature — and it can be redesigned.

From Lean Startup to long-term markets

• Ries built an anonymous blog, Startup Lessons Learned, to avoid being yelled at in VC portfolio meetings — it became the seed of the Lean Startup movement
• The LTSE idea appeared in the final two pages of The Lean Startup (2011); a test reader said it destroyed the book's credibility — which Ries took as a signal he was onto something
• A decade of working with companies from two-person startups to governments revealed one universal complaint: short-termism
• He tried to give the idea to incumbent exchanges for free; they passed
• LTSE was SEC-approved in May 2019 — the fastest Form 1 approval in history, and only the fifth national securities exchange license ever granted

Why public markets broke

• Most trading is algorithmic; some firms hold securities for an average of 10 minutes — governance rights tied to that ownership are governance by tourists
• Index funds moved active decision-making from managers to index-provider algorithms, concentrating influence while removing accountability
• Activists can borrow shares just before proxy votes, move a stock 10%, and exit — causing management to scramble and change strategy based on noise
• Long-term institutional investors are chronically underweight their best holdings: block trades are expensive, road shows exclude them, rising prices mean missed allocations
• Public companies pay for "stock surveillance" services just to find out who owns them — unthinkable in a private company

How LTSE works

• Companies make binding pledges to operationalise long-term principles; failing to follow through is a securities violation, not a PR problem
• LTSE tracks ownership in real time so companies always know their long-term investors — a prerequisite for rewarding them
• Long-term holders can earn progressive voting rights (multiplier accruing per quarter held) or superior economics (progressive dividends)
• Principles-based: each company designs its own implementation; LTSE certifies it as substantive
• Protections travel in the company's charter, following the security wherever it trades — full liquidity is preserved
• Secondary listing is allowed alongside NYSE or NASDAQ; no need to abandon existing venues

Business model and early-stage tools

• Traditional exchanges make money per trade, incentivising volume and short-termism; LTSE's revenue comes from selling services to companies and long-term investors
• Runs what it calls the largest corporate governance platform for startups under accessible brand names: captable.io, hiringplan.io, startuprunway.io
• All early-stage tools are free or freemium; compensation benchmarking by stage, geography, and role is available at no cost
• The hiring plan tool surfaces demographic pay gaps in offer letters before they become WSJ stories
• Strategy: build deep software relationships from seed through IPO, so companies arrive at the exchange already inside the platform

Failure modes and the long game

• Entrenched incumbents profit enormously from the status quo and have resources to resist regulatory change — LTSE was "sabotaged multiple times" during SEC approval
• The first-mover problem: every company may prefer to "go second" — watching to see the model validated before committing
• The private market boom creates a competing equilibrium; the more attractive private markets stay, the longer companies avoid listing
• LTSE's countermove: directly connect long-term asset owners with founder-CEOs, bypassing intermediaries who have no incentive to facilitate that relationship
• Success might mean industry-wide governance reform without LTSE capturing much value — Ries describes this outcome as explicitly acceptable