Several weeks ago, a first-time entrepreneur called. He had read that venture capitalists prefer investing in Delaware corporations, and he sought my input on the subject.
I replied that, in my experience, incorporation either here in California or in Delaware is fine. Then I started wondering why what the entrepreneur read differed from what I had experienced.
I did some research and conducted an informal survey of a few VCs. Here are my tentative conclusions:
- California-based VCs are comfortable investing in corporations that are formed in either CA or DE (thus my experience, because the vast majority of the VCs whom I know are here in the Bay Area).
- VCs outside California have a preference for investing in Delaware-based corporations, though that preference can be weak or strong, depending on the VC. Even with a strong preference, however, a Delaware-preferring VC will invest in a corporation in another state if it is the right deal
- Why (not) Incorporate in Delaware?
- Why are So Many Corporations Formed in Delaware?
- In which State should My Startup Incorporate?
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact an attorney directly.