Mr. Palihapitiya said the lament of many employees had become this: "I can't pay for my house on 'mission and values.' I actually need current compensation. Silicon Valley is now one of the most expensive places to live." So many employees, he explained, have been hopscotching from one company to the next in search of an elusive I.P.O.
"Now you have these attrition rates of like 20-plus percent," he said. "How are you supposed to build an iconic legacy business when your entire employee base walks out the door every five years?"
Mr. Palihapitiya's answer is to eliminate the I.P.O. process and its year and a half of "distractions trying to craft a bogus narrative," as he described it, to entice investors. Instead, through his publicly traded vehicle, a unicorn company — shorthand for a $1 billion-plus private technology company — could reverse merge into it, instantly becoming public.
Unlike an initial public offering, in which employees and early investors all have certain "lockup" dates for when they can sell stock, he can write the rules however the company wants. Certain employees, for instance, could sell early, or the sales could be staggered so there isn't an "overhang" on the stock that would depress the price before a major lockup period expired.
Mr. Palihapitiya also was able to choose most of the company's big investors, who have agreed to their own lockups, making them much more oriented toward the long term. For all this, he takes a tidy fee: 20 percent of the $600 million. 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.
But Mr. Palihapitiya's approach is just the tip of the iceberg. The most provocative plan floating around Silicon Valley is Mr. Ries's LTSE. "It's an intellectually thoughtful idea," Mr. Palihapitiya said.
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. That, he believes, leads to short-term thinking and trading.
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. He believes the problem facing private companies isn't just the I.P.O. 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.
Currently, an investor who owns one share for a month, or even a day, has the same voting power as someone who has owned a share for years. Mr. Ries wants what he calls "tourists" — short-term shareholders — to have less voting power than long-term shareholders, whom he calls "citizens of the republic." Over time, shareholders of companies on the LTSE would gain more votes based on their length of ownership.
Such a system might make dual-class structures, like at Snap (or The New York Times) less attractive to its founders. That would also help end another problem that has emerged: Dual-class companies pay the chief executive, on average, three times as much as companies with a single share class.
Mr. Ries also takes aim at compensation plans. He wants companies that list on his exchange to have stock vesting programs of at least five years and recommends 10 years, even for executives who leave the company.
Now, this may be very hard to put into practice, and it's tough to know whether it would work. "It's very difficult," Mr. Palihapitiya said. "Ours is not as intellectually ambitious." But all of these efforts are meaningful attempts to fix the system. Even if they don't work as advertised, hopefully the establishment will take notes.