Trading Short-Term Thinking for Long-Term Value
March 3, 2020 | Scott Murphy
Most people picture the stock market as a bustling room of traders buying and selling as quickly as possible in reaction to market trends. The reality of modern exchanges isn’t far off, and it’s created a high-pressure, short-sighted system at the expense of both companies and shareholders.
AVG portfolio company, LTSE, is aiming to transform and improve the public stock markets with a new “Long-Term Stock Exchange” built around innovation and sustained value creation. Additionally, the company’s LTSE Tools suite provides thousands of companies with advanced operations software, capable of everything from cap table management and runway planning to promoting diversity and inclusion in hiring.
Next-Gen Listing Standards
A deal with LTSE presented AVG with a unique opportunity to invest in one of a handful of SEC-approved stock exchange companies in the US. LTSE developed its Exchange as an alternative to current exchanges, which the company believes are fixated on managing short-term stock transactions at the expense of long-term thinking.
Through the Exchange, companies will be able to adopt a set of governing practices that prioritize a broader group of stakeholders, long-term decision making, and aligned executive and board compensation with long-term performance. While investors can sell their shares at any time, they can also disclose their intentions to be long-term shareholders.
LTSE believes this dynamic creates a stronger partnership between companies listed on the Exchange and their investors. Founders can provide dedicated investors with extra voting power or other enhanced stockholder benefits, a win-win for founders and stakeholders equally invested in the company’s long-term success.
“[Listing] standards set the minimum for what companies must do; companies can still choose to do more,” said LTSE Co-Founder and CEO Eric Ries in a CNBC interview. “I think this next generation of companies is likely to do that.”
Ries is uniquely positioned to lead a company like LTSE. Through his background leading and advising startups, venture capital firms, and large companies, he has developed relationships on both sides of the capital markets table.
As LTSE rolls out its Exchange, the company is further advancing its LTE Tools platforms. The software suite supports companies through their entire life cycle, from initial launch through operating in the public markets. LTSE estimates that >20% of US companies that raised a Seed, Series A, or Series B round in 2019 used one or more tools from the platform.
Disrupting an Exclusive Industry
Like many Alumni Ventures Group deals, the firm’s relationship with LTSE began with an alumni connection. In 2017, Green D Ventures Partner Lacey Johnson met fellow Dartmouth alum Michelle Greene, President and Chief Policy Officer at LTSE. They stayed in touch as LTSE grew and positioned itself to disrupt an industry with limited competition.
LTSE Co-Founder and CEO Eric Ries is also a Yale alum (Y’00), which helped start a conversation between LTSE and Blue Ivy Ventures, AVG’s fund for Yale alums. As LTSE’s latest round progressed, Blue Ivy Ventures was in touch with the company’s executive team about securing an investment.
AVG ultimately was able to access and invest in the round through its alumni connections, led by its Blue Ivy Ventures fund with participation from AVG’s Green D Ventures (Dartmouth alums), Purple Arch Ventures (for Northwestern alums), The Yard Ventures (for Harvard alums), and AVG’s Total Access Fund.
AVG co-invests alongside leading venture firms. In the case of LTSE, the company is backed by several strong investors who have worked closely with LTSE over the last few years, including Founders Fund, Collaborative Fund, Obvious Ventures, and Andreessen Horowitz.