Fixing the ‘Brain Damage’ Caused by the I.P.O. Process
The idea, at its core, is to change the dynamic between the stock exchange and whom it serves, Mr. Ries explained, suggesting
that traditional stock exchanges focus more on investors — and all associated trading revenue — than on the companies listed.
But if his company acquires a business five to 20 times its size through a reverse merger, he said, the fee is the same as or smaller than a banker’s fee —
and it is all in stock, so unlike the banks, Mr. Palihapitiya’s interests are aligned with the company’s.
At the same time, Spotify, the streaming music company worth some $13 billion, has been exploring a plan to list
its shares on the New York Stock Exchange directly, without raising any new money from public investors.
It seems like a way of living in hell without dying.”
That was the way James Freeman, the founder of Blue Bottle Coffee, described the process of taking a company public in the modern era —
and the way he explained why he sold his company instead to Nestlé last week.
Mr. Ries, who wrote a book titled “The Lean Startup,” is hoping to create an exchange
that is focused on the needs of companies with a long-term vision and investors who are similarly aligned.
process but also “the lived experience of being a public company.”
Perhaps the most unusual part of his exchange’s approach — which is still working to get approval from the Securities
and Exchange Commission — is how much influence and voting power investors would have over companies
