Eric Ries, chairman of the Long-Term Stock Exchange, spoke to the Wall Street Journal on what it takes to foster socially responsible investing.

Wall Street Journal

Eric Ries, chairman of the Long-Term Stock Exchange, spoke to the Wall Street Journal on what it takes to foster socially responsible investing.

Originally appeared in the Wall Street Journal

By Corrie Driebusch

In Personal Board of Directors, top business leaders talk about the people they turn to for advice, and how those people have shaped their perspective and helped them succeed. Previous installments from the series are here.

Eric Ries has spent the past two decades as a go-to mentor in Silicon Valley and the founder of a David-size stock exchange trying to take on twin Goliaths: Nasdaq and the New York Stock Exchange. But a “humiliating” startup failure at age 20 almost took him out of the game entirely.

Mr. Ries jumped into entrepreneurship while he was an undergraduate at Yale University during the dot-com boom. He temporarily dropped out, against the advice of mentors, to work for a startup building a database of college students’ résumés. The business, Catalyst Recruiting, failed, and Mr. Ries realized the value of good advice.

Two decades later, Mr. Ries is chairman of the Long-Term Stock Exchange, a stock-trading venue based on sustainable-investing principles he dreamed up more than a decade ago. LTSE, founded in 2016, has just 68 employees and only two companies’ shares listed. It pitches itself as a new framework for encouraging companies to commit to longer-term principles, such as improving the environment or adhering to higher-than-usual corporate-governance standards. It requires companies seeking listings to commit to a set of such principles.

Mr. Ries for years has preached in blogs, podcasts, and in boardrooms that startups need to be managed differently than more established companies, and that their success also should be measured differently. He also has mentored dozens of Silicon Valley founders on how to build and grow their businesses. However, his exchange has struggled to gain traction. There are more than a dozen stock exchanges in the U.S., but the majority of all trading and listings are dominated by the New York Stock Exchange and Nasdaq Inc.

“We’re up against incumbents who provide a service customers don’t find all that satisfying,” he said. “Because of the financial security we have now, we are hiring new people, we’re excited for the new year.”

In 2021, LTSE seemed to be on the upswing, winning its first two listings, from software companies Twilio Inc. and Asana Inc. Then, rising interest rates, soaring inflation and fears of a U.S. recession hit, setting back its growth ambitions. Nonetheless, LTSE surprised even its own executives by raising roughly $100 million from a venture-capital firm funded by James Walton, one of the members of the family associated with Walmart Inc., even when venture-capital firms were pumping the brakes on investing in startups.

This is a critical juncture for the exchange. The economic backdrop led to Twilio pulling its listing for 2023, citing cost. The memory of his past youthful “colossal failure”—when he thought he’d never work again—feels more relevant than ever, and Mr. Ries said he’s leaning on his personal board of directors frequently. Despite the challenges of 2022, Mr. Ries remains upbeat. LTSE added a new listing from ThredUp Inc. in late 2022.

“Staying alive in difficult times is winning,” he said. “I’m very proud of the fact that we’re still standing.”

Here are four of his most trusted advisers:

Ken Duda

Chief technology officer, Arista Networks

Mr. Ries met Mr. Duda nearly two decades ago when the former landed his first job out of college at, one of the first virtual-world startups. It ended up being a flop, but Mr. Ries said he left with valuable lessons—and a lifelong mentor.

“Ken shaped my perspective,” said Mr. Ries. When creating a commercial offering, “Ken says you just need to build a 10-times better product,” said Mr. Ries, something he thinks about often.

When cloud-software company Arista Networks Inc. was first founded, few people thought it could compete with giants like Cisco Systems Inc. But by focusing on the product, it has.

Christy Fletcher

Co-head of publishing, United Talent Agency; co-founder of Authoritive, an interactive messaging platform

Mr. Ries is perhaps best known in Silicon Valley circles for propagating the idea of a “lean startup” for how to encourage more productivity among tech workers. He started an anonymous blog in 2008 about how entrepreneurs can make their employees—and capital—more efficient. The blog was a hit, and Mr. Ries started fielding book offers. He was intrigued, but many Silicon Valley mentors discouraged him from publishing a book, he said. Then Mr. Ries met Ms. Fletcher, an accomplished New York City literary agent.

Mr. Ries wanted to take an unconventional approach to a book project, field-testing material by asking potential readers if what he was writing about resonated with them. He said some publishers balked at that idea. Ms. Fletcher believed in his ideas and helped him navigate the publishing journey.

“Most publishing people are only interested in doing things the traditional way. Not Christy,” he said. “There are so many people who just tell you want you want to hear. She keeps me tethered to reality.”

She helped him publish his book “The Lean Startup” in 2011, and remains his book agent to this day.

Annette Nazareth

Senior counsel, Davis Polk; former SEC commissioner

Mr. Ries says it wasn’t until he met Ms. Nazareth that the idea for the Long-Term Stock Exchange moved from the hypothetical to something real.

When it comes to creating a stock exchange that encourages long-term holders, the big question Mr. Ries and his early backers had: Is it legal to reward investors who hold on to shares longer? Mr. Ries went from lawyer to lawyer asking for guidance, and he said he’ll never forget the first time he sat across from Ms. Nazareth in 2017, shortly after founding LTSE. Within five minutes of hearing Mr. Ries’s idea for LTSE, the former regulator identified the provision in a Securities and Exchange Commission rule that permits investors to register securities directly on the books of a company, which would enable LTSE to track how long someone had been an investor in that company. A reason she knew—she had previously headed the SEC’s Division of Trading and Markets, which wrote the rule.

“A lot of Silicon Valley people approach regulators like a game. Annette doesn’t,” said Mr. Ries, who said he’s turned to her often over the years for an educated voice.

Todd Park

Co-founder of Devoted Health; former chief technology officer of U.S. Department of Health and Human Services; co-founder of Athenahealth and Castlight Health

When Mr. Ries was still in the early days of building LTSE, Mr. Park asked him for help. Mr. Park was working on a program while at the U.S. Department of Health & Human Services that brought startup founders together with insiders at the U.S. government, and Mr. Park, a big fan of the lean startup culture, wanted Mr. Ries to participate.

“He’s a real kindred spirit,” said Mr. Ries. “He takes on big problems and tries to solve it all.”

Mr. Ries says he has found inspiration from Mr. Park’s approach. He said he’s learned from Mr. Park that it’s easier to communicate your message when you have a big vision, and it’s easier to recruit talent.

“It’s been a really tough year, and Todd is a really positive person,” said Mr. Ries. When some funding fell apart for LTSE due to the tough market, Mr. Ries said Mr. Park told him to view it as a blessing. “He said ‘Yes, it may be harder to raise money, but you dodged a bullet. You don’t want people who don’t see the big vision,’ ” Mr. Ries said.

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The information contained above is provided for informational and educational purposes only, and nothing contained herein should be construed as investment advice, either on behalf of a particular security or an overall investment strategy. Information about the company is provided by Asana or Twilio, or comes from the companies’ public filings and is not independently verified by LTSE. Neither LTSE nor any of its affiliates makes any recommendation to buy or sell any security or any representation about the financial condition of any company. Statements regarding LTSE-listed companies are not guarantees of future performance. Actual results may differ materially from those expressed or implied. Past performance is not indicative of future results. Investors should undertake their own due diligence and carefully evaluate companies before investing. Advice from a securities professional is strongly advised.
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