For decades, Delaware has reigned supreme as the default state of incorporation for startups and VCs in the U.S. But now, Andreessen Horowitz (a16z), one of the most prominent venture capital firms globally, is breaking with tradition.
The firm announced that it is moving its primary business entity, AH Capital Management, from Delaware to Nevada—citing growing legal uncertainty and judicial subjectivity in Delaware’s once-revered court system.
“We used to take it for granted: incorporate in Delaware. But recent court decisions have introduced an unprecedented level of subjectivity,” the firm wrote. “It’s no longer the unbiased legal environment it once was.”
Why Delaware lost its shine
Delaware’s reputation was built on its Court of Chancery—an efficient, non-jury court system known for expertise in corporate law. At the core of this was the “business judgment rule,” a legal presumption that directors act in good faith unless proven otherwise. Over time, however, a16z argues that Delaware courts have expanded exceptions to this rule so far that they “have begun to swallow the rule.”
In particular, cases questioning board independence, especially when granting outsized equity to founders or making bold corporate moves, have raised concerns. One case even rejected a board’s decision to relocate from Delaware—invoking the chorus from Hotel California: “You can check out anytime you like, but you can never leave.”
While some of these rulings were later overturned, the signal was clear: the legal environment in Delaware has become more unpredictable and, in some cases, adversarial toward founders.
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Nevada: A rising legal safe haven?
In contrast, Nevada has taken deliberate steps to establish itself as a business-friendly jurisdiction. Its courts have codified the business judgment rule into statute, meaning judges have limited ability to reinterpret or narrow its protections. Additionally, Nevada has passed new laws to upgrade its business courts and make them more specialized.
Notably, Nevada now allows companies to waive jury trials in civil cases, ensuring complex commercial disputes are resolved by expert judges. The state is also pursuing a constitutional amendment that would allow governors to directly appoint judges to business courts—further aligning with Delaware’s historically effective judicial model.
Legal clarity and founder-friendly statutes
Beyond codifying the business judgment rule, Nevada offers:
- Stronger liability protections for directors and officers, limiting personal exposure unless misconduct is proven.
- Tighter restrictions on shareholder inspection rights, preventing frivolous lawsuits driven by plaintiff attorneys fishing for evidence.
- Broad support from both political parties, with reform measures passing with overwhelming bipartisan majorities.
According to a16z, these reforms “represent a critical step in making Nevada a destination of choice for entrepreneurs.”
What this means for founders
While a16z will continue investing in Delaware-incorporated startups, the move is meant to signal that founders should no longer assume Delaware is the only legitimate option. With other high-profile exits—like Dropbox, Tripadvisor, and Tesla also shifting away from Delaware—the tide may be turning.
“Litigation—even if defeated—is costly and time-consuming,” the firm writes. “And in today’s climate, legal predictability is as important as capital.”
For founders weighing where to incorporate, a16z’s decision is likely to carry weight. And while incorporation decisions should always involve legal counsel, the era of Delaware as an unquestioned standard may be coming to an end.
