• October 2019
    M T W T F S S
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Would a Startup Not in Delaware Have Problems Finding Investors?

A recent LawTrades user asked: Would a C-Corp Startup Incorporated in a State Other Than Delaware Have Any Problems Finding Investors?

Not necessarily. It really depends on what type of investors you are going after. If you’re pursuing VCs, angel investors, and other types of institutional investors, then you should probably form your C-corp in Delaware. VCs and angel investors typically like the familiarity and benefits of Delaware’s corporate laws (more here on what makes Delaware preferable and the pros and cons of incorporating as a C-corp). But some well-known companies are beginning to sour on Delaware as the number one place to incorporate (more on that here).

More recently, Nevada has become an attractive state in which to incorporate and find investors, especially since it is using Delaware as the model to develop its corporate laws (more on the advantages of incorporating in Nevada here) Wyoming is considered to be a corporate friendly state as well, in particular because it does not levy corporate or personal income taxes.

If your startup is local to where you live and work and you intend for your business to stay local or regional, then you will likely attract local investors (e.g.., family and friends) who are perfectly fine with your startup’s being incorporated outside of Delaware. If you are using crowd investing platforms to fund your startup, your investors likely will not have any input as to where your startup is incorporated. In any case, like others have said, you can always reincorporate in another state, including Delaware, if you are unhappy with the state you initially selected.

However, to get some clarity on these issues from the very beginning, it really is in your best interest to consult a legal professional to help you determine the best state to incorporate your startup, as well as how to best posture your startup in order to attract investors (see here). 

Have more questions? Feel free to visit LawTrades.