In the past, incorporating in Delaware was considered an obvious choice for most companies. However, recent decisions by Delaware’s Court of Chancery have raised concerns. These rulings have added a level of subjectivity and unpredictability, which has weakened the court’s long-standing reputation for fairness and expertise. What was once seen as the “gold standard” for corporate law in the U.S. now feels uncertain. In contrast, Nevada has taken a more structured, technical, and non-political approach to handling business disputes. As a result, our main company — AH Capital Management — has decided to move its state of incorporation from Delaware to Nevada. This state has a long-standing track record of being business-friendly, with fair and balanced policies.
We could have made this change quietly. But we believe it’s important for our partners, and the broader tech and venture capital community, to understand why we’ve made this decision. Many startup founders hesitate to leave Delaware, often out of concern about how investors might react. As the largest VC firm in the country, we hope our move shows founders and future portfolio companies that these fears might be overstated. While we’ll still invest in companies incorporated in Delaware, we believe Nevada is a real alternative that many founders should take seriously.
Delaware gained its reputation through a specialized business court system and the “business judgment rule,” which assumes that directors act in good faith and make informed decisions. Over the years, Delaware courts created a small number of practical exceptions to this rule. But recently, those exceptions seem to be becoming the norm. For example, courts have questioned whether boards acted independently when awarding large compensation packages to outstanding founders. In one case, the court even tried to stop a company from leaving Delaware — quoting lyrics from the song Hotel California. That decision was eventually reversed, but it added to the uncertainty. It’s no surprise that startup founders are now questioning whether Delaware is still the best place to incorporate.
Delaware’s lawmakers have made some effort to address the issue, but the changes haven’t gone far enough. There is growing concern that courts may be biased against tech founders and their boards. Even if a lawsuit is defeated, it can still drain time and money — resources that startups can’t afford to waste. This uncertainty is worrying not just for entrepreneurs, but also for the professional investors who serve on their boards. As a result, more companies and founders are rethinking their options — especially as major tech companies like Tesla, Dropbox, and Tripadvisor have left Delaware.
Nevada has chosen a different path. It has made the business judgment rule a part of its legal code. This reduces the risk of it being changed or weakened by judges. The Nevada Supreme Court has clearly ruled that this law — and only this law — applies when it comes to director and officer responsibilities. Unlike Delaware, which relies on court-made rules that can shift over time, Nevada’s laws offer more predictability. While Delaware has recently introduced a “safe harbor” to protect some decisions, it mostly applies to public companies — not private startups. Other states, like Texas, have also written the business judgment rule into their laws, but still allow courts to apply additional legal standards, which can weaken its effect.
Protection for directors and officers
Nevada law offers strong protections for company leaders. By default, directors and officers can only be held financially responsible if two things are proven: (1) that they did not act in good faith or make informed decisions, and (2) that they acted with fraud, intentional misconduct, or knowingly broke the law. These legal protections make it easier for companies to attract skilled and experienced board members. Delaware also allows some protection, but it depends on court interpretations. And since courts in Delaware seem to be taking a stricter approach to startup founders and boards, the risks are growing. Many of our general partners are rethinking whether they want to sit on the boards of Delaware companies. Other states, like Texas, have similar legal frameworks to Delaware — and similar risks.
Access to corporate records
Nevada only allows shareholders who own at least 15% of a company to inspect its books and records. This limits the ability of certain law firms to file unnecessary lawsuits. By contrast, Delaware allows any shareholder to inspect records if they can show a “proper purpose.” While Delaware recently made changes to limit these requests, Nevada’s rule is clearer and more straightforward.
Business court system
Delaware’s top strength has been its Court of Chancery, known for its expertise in business law. But that strength has weakened as court decisions appear less focused on technical legal matters. Nevada is working to close that gap. Today, Nevada has a business court system. Judges are elected for 6-year terms, and those who serve on the business courts are specially chosen based on their qualifications. Recently, Nevada passed AB 239, a law that allows companies to waive jury trials in civil cases — meaning judges, not juries, can decide complex business issues. Another measure, AJR 8, proposes a constitutional change that would allow the governor to directly appoint business court judges. Both laws received strong bipartisan support from Nevada’s governor, secretary of state, and top lawmakers. While more progress is needed, these are promising developments that signal Nevada is serious about becoming a top choice for business incorporation.
