Silicon Valley venture capital giant Andreessen Horowitz is relocating its corporate incorporation from Delaware to Nevada, citing concerns over bias in Delaware’s Court of Chancery against company founders and boards. According to a report by Bloomberg, the company also urges its portfolio companies to follow suit, signaling a potential shift in the tech industry’s long-standing preference for Delaware. In a blog post published Wednesday, July 10, Andreessen Horowitz’s legal and policy leaders — Jai Ramaswamy, Andy Hill, and Kevin McKinley — slammed Delaware’s Chancery Court for injecting “unprecedented subjectivity” into recent rulings, eroding the state’s reputation as a business-friendly incorporation hub. “Some startups hesitate to leave Delaware based in part on concerns for how investors will react,” the trio wrote. “As the largest VC firm in the country, we hope our decision signals to our portfolio companies, as well as to prospective portfolio companies, that such concerns may be overblown.
When Elon Musk called companies to leave Delaware
”The move comes amid growing frustration in Silicon Valley with Delaware’s judicial system, particularly after a Chancery Court judge blocked Elon Musk’s $56 billion compensation package at Tesla Inc. Musk, a vocal critic of Delaware, reincorporated Tesla in Texas in June, which recently established a business court system, and has shifted other ventures, such as SpaceX, to Nevada. Other major companies, including Dropbox Inc., TripAdvisor, and Bill Ackman’s Pershing Square Capital Management, have also left Delaware, while Meta Platforms Inc. considered a similar move in January, according to Bloomberg.
Andreessen Horowitz on why it is openly telling technology companies to leave Delaware
Andreessen Horowitz, founded in 2009 and incorporated in Delaware until now, had previously advised its startups to incorporate there. The firm emphasized the transparency of its decision, stating, “We could have made this move quietly, but we think it’s important for our stakeholders, and for the broader tech and VC communities, to understand why we’ve reached this decision.Delaware has long dominated as the go-to state for corporate incorporation, hosting over 2 million businesses, including more than 60% of Fortune 500 companies. However, Nevada and Texas are gaining traction by offering corporate statutes with stronger protections against investor lawsuits and greater control for company leaders like Musk. Critics warn that this trend could trigger a “race to the bottom” in corporate governance standards.
