The U.S. government on Friday approved the formation of a new Silicon Valley stock exchange following regulatory criticism late last year.

Backed by top Valley figures such as venture capitalist Marc Andreessen, the Long-Term Stock Exchange was born out of concern from the nation's tech elite who were frustrated about the public market's focus on near-term profit. Its mission is to create a "market that reduces short-term pressures and encourages a steady cycle of innovation and investment in long-term value creation would benefit companies and their investors alike," according to its website.

"We welcome the approval, which advances our vision of a new way of being public for a generation of companies that aspire to build their businesses and generate value for decades to come," said Zoran Perkov, the top operations executive at the exchange.

The LTSE said in a release that it anticipates being ready to accept listings and start trading later this year after completing administrative and technical steps.

"Today's announcement from the SEC is a huge step," LTSE Holdings CEO Eric Ries told CNBC.

Ries, an author and venture capitalist who first floated the idea of the exchange in 2011, holds a significant stake in the exchange's holding company and helped raise funds for the venture, according to government filings.

Prior filings indicated that a key aspect of the exchange could include scaled voting power the longer an investor holds a stake in a company. Firms listed on the exchange may also required to abide by certain rules, including a ban on tying executive pay to the company's short-term financial performance.

"It sounds too good to be true for people out here," said Ries about the exchange's mission.

The exchange filed with the Securities and Exchange Commission on Nov. 9, though the company faced criticism by Commissioner Robert Jackson Jr., who said the structure of the exchange could grant founders and early investors in startups excessive power at the expense of other shareholders, according to a Wall Street Journal report.

Asked about Jackson's concerns, Ries told CNBC that he believes the next wave of companies looking to go public "wants to share power broadly."