The short version, as he put it on stage, is that corruptability of companies is driven by a force he calls financial gravity. That somewhere along the line, people have found a way to make money without creating value. And that it is beatable with smart governance practices, so long as you install them before you need them.

His words of wisdom to founders is the one that stuck with me on the other side of the fence as a VC: "As founders, most of us are frankly naive. We do not understand that the more successful a company the more valuable it becomes as a target. And so we build these companies in a way that is structurally weak and easy to commandeer. And then we act betrayed, like, oh, I can't believe that happened to me.".

For those not in the startup world, it’s worth looking at how this phenomenon plays out in other fields. One that I hold close to my heart is cricket, and the somewhat shambolic governance of it that has plagued the sport in recent years as the administrators sell off the game to foreign investors in the spirit of growing the game (i.e. lining the pockets of those in charge). 

Essentially, the England and Wales Cricket Board sold stakes in all eight Hundred teams, with four of the buyers owning IPL franchises and three of them being US money. Then on 8 September, the day before I sat listening to Eric Ries, Cricket Australia opened the Big Bash and the Women's Big Bash to private ownership. Melbourne Renegades are first into a sales process and the chairman called it "a defining moment" intended to "strengthen and secure the long-term future of the game".

Both boards exist to protect the game, and both have now sold parts of it to people with no particular interest in the format that made it worth protecting in the first place. Nobody involved thinks of themselves as the villain and the money is real, which is precisely the same financial gravity point that Eric Ries is making. I’ll save the ranting on about the state of cricket administration (and many other sports caughts that have been so-called corrupted), ending this by saying that in optimising the game for growth, money, sponsors, TV rights deals, we risk losing the very core of what watching and following cricket is all about: caring. This potentially sorry state of affairs, possibly too late to fix, is a lesson to those in any line of business.

Like every VC we have seen mission drift in our own portfolio too, though not in one company and not as a single dramatic event. This can also stem from leadership, where the promise of growth in new markets leads to a misalignment with the core vision or self-interest corrupts the founders' intended outcomes. Meanwhile investor influence turns up as patterns across more than one business, usually slowly: this ranges from dominant later stage investors on a cap table attempting to reshape a board without the founder being in the room through to investors eventually taking so much ownership that they are in total command of the business and, crucially, of its exit opportunities. Those investors aren't individually bad; they were trying to do what they thought was best for the company at the time. That’s a critical part of Ries’ point: financial gravity doesn't need bad actors; it works perfectly well through people trying to do their jobs properly.

Full disclosure, I haven't read the book yet; I've ordered it and will come back with a proper view once I have. So treat what follows as my understanding from the evening and from the coverage since, and do correct me where I've got it wrong. His proposals, as best I understand them:

• A two-tier structure, where a normal commercial business is owned or controlled by an independent trust or foundation that holds the power to appoint and remove directors, on the model of Novo Nordisk, Ikea and Patagonia

• Charters with teeth, meaning concrete operational boundaries written into the legal documents rather than a mission statement on the wall. He is fairly brutal on this one: "if I read your mission statement, over here, and I look over here at your articles in the corporation, and I find shareholder primacy written on line one. Then you are lying."

• Appointing a mission guardian, which is a named role or entity whose only job is to protect the core vision across generations of leadership

• Screening for capital that will sign off on dual-class voting or long-term trust structures, rather than raising first and hoping

• Long-term market infrastructure, drawing on his own experience founding the Long-Term Stock Exchange (some conflicts to be aware of here)

• Rejecting shareholder primacy early, including in fundraising agreements. This means asking the people writing your first cheque to agree to slightly less influence than is ‘market standard’ (not that there really is such a thing).

The principle he says matters most is not which technique you use but when: it's always too early until it's too late. He walks you through the sequence where your lawyer says it's too early and to save the legal fees. Your VC says we're so aligned that you can do that later. Your board says it'll make you look weird to later stage investors so leave it for the IPO. Then your CFO says the IPO is scheduled and it's too late now. Nobody ever tells you the right day.

The concept and book does however warrant some pushback, namely: most startups never get the chance to go bad because they run out of customers first, so day one governance reads very differently to a founder with six months of runway, and those who try it often get told they're uninvestable. Structure isn't free either: red tape slows people down, and startups die of slowness far more reliably than they die of takeovers. 

The examples he uses are hand-picked survivors too (Patagonia, Novo Nordisk, Ikea), and when pushed at the event he conceded that in several cases the structure went in at the end of the founder's life rather than the beginning, which is the opposite of the day zero advice; his counterexample for first time founders was Anthropic, which now has its own challenges. Lastly the returns claim isn't yet evidenced: the best work I could find, Industrial Foundations as Long-Term Owners (2018) on Danish industrial foundations, shows these companies last longer and behave more conservatively, which isn't the same claim as better returns. For a fund with a ten year life those aren't the same objective, because VCs are set up to require exits, and a structure designed to make a company hard to buy isn't one investors will be desperate to adopt.

Early stage investors are still perhaps better placed than anyone to set these expectations, because company formation happens once, right at the start, in a room with a couple of founders and a lawyer.

That said, it’s also no secret that, despite all the merits of being contrarian, VC is still often plagued by herd mentality. My sense is that until enough of us believe the same thing at the same time (i.e. making startups Incorruptible), this is going to be a difficult one to shift. Part of our job is also judging whether a business will be backable by others in future, which makes it hard for anyone (apart from those with extremely deep pockets) to stand alone on something like this even when the intention is there. Ries's own answer to this is that great founders are scarcer than capital, so whatever founders clearly believe and run with, investors will come to believe. If he's right, this shifts from the founder side rather than ours, and the funds that move first will simply have seen it earlier.

We intend to be deliberately mission tolerant. We see our job as working for founders rather than the other way round, backing people to find the white space and build the world they want to see. As for what’s next:

• If you're a founder building an incorruptible business, come and pitch us through the website or message me directly. I'd like to find out how many mission-driven founders there are building with this in mind.

• If you're an investor grappling with the same thing, do get in touch.

Ries is right that it's always too early until it's too late, and he's also probably right that his part is done and the rest is somebody else's job. My sense is that it's more our job than most.

Wishful thinking or the start of a movement? Ask me again once I've finished the book...