VC Fund Raising via Incorporating in the U.S.

Absolutely! – Not only that, but we can also provide you with a business address, registered agent and a business bank account for your Delaware C-corporation. In addition, if you have a company formed in another State, we can help convert that to a Delaware C-corporation to help you with your venture capital fund raising round.

If you’ve already formed your company and you did not form a Delaware C corporation, you can easily convert your LLC or non-Delaware corporation to a Delaware C corporation. Delaware allows all types of companies from any other U.S. state to convert their company into a Delaware C corporation with a simple filing, which can be filed and approved in one day. That’s another advantage of Delaware—fast filings are the norm and expedited service can ensure same day, two hour or even one hour service when you need it.

The Delaware legislature pays close attention to developments in business law, which means there are frequent amendments to keep the state’s regulations and statutes up to date. Delaware has a special incentive to maintain this reputation, as it receives several hundred million dollars per year (approximately 15-20 percent of the state’s budget) from corporate franchise taxes. In contrast, other state legislatures lack either the expertise or the incentive (or both) to update such laws with the same frequency as Delaware.

Investors Prefer Delaware Corporations – For many reasons, venture capital firms, angel investors, and startup accelerators prefer— or even require — that startups be incorporated in Delaware before they will make an investment. Investors prefer Delaware for a multitude of reasons, and not being a Delaware corporation can be a potential roadblock startups face when attempting to close a financing.

Nearly 1.4 million legal entities are incorporated in Delaware (including over two-thirds of Fortune 500 companies), and approximately 80 percent of U.S.-based initial public offerings choose the state as their corporate home. As a result, there is broad familiarity with Delaware law among many companies, investors, and attorneys.

A startup that incorporates in another state immediately differentiates itself from other companies just by incorporating in a state other than Delaware – which is not a particularly helpful way for a startup to stand out when seeking capital.

There are myriad reasons for this. For starters, investors prefer corporations over LLCs because it is difficult to sell or transfer membership or ownership in an LLC; however, it is fairly easy to trade shares in a corporation. In addition, corporations typically offer more consistency on managerial duties and responsibilities.

Stock is a key aspect of a Venture Capitalist’s investment. C-Corporations appeal to VCs since Delaware law allows for two or more classes of stock. Typically, a venture funded company will have common stock, founder’s stock and several classes of preferred stock, including some convertible preferred stock which allows an investor to convert stock to common if/when the company goes public.

Delaware C-Corporations are also able to distribute stock options as incentives to employees, board members and directors, which VCs approve of because smart, successful and innovative employees are an essential element of success in a startup company leading to growth and profitability. Stock options are a proven and inexpensive means of motivating and rewarding ambitious and hard-working employees, board members and directors.