Is Delaware the new California? Tech founders say enough is enough

By Kelly Chapman  

Nevada News and Views

For decades, Delaware has been the go-to place for American businesses to incorporate.

But things are changing fast, and one of the biggest venture capital firms in the country is making a bold move: they’re pulling out of Delaware and picking Nevada instead.

AH Capital Management, backed by top investors Jai Ramaswamy, Andy Hill, and Kevin McKinley, says Delaware courts have gone off track.

“Uncertainty and bias are creeping into decisions that used to be clear and fair,” they wrote in a July 9 statement explaining their exit.

They argue that Delaware’s famous “Court of Chancery” has started making rulings that second-guess business leaders instead of trusting their judgment.

That’s a big deal in the tech world, where companies take big risks and need legal systems that back smart decision-making — not punish it.

So why Nevada?

It turns out the Silver State is quietly becoming a new safe haven for businesses that want fairness, stability, and clear rules.

Nevada’s biggest selling point is that it doesn’t let judges rewrite the rules on a whim.

Unlike Delaware, Nevada has locked in something called the “business judgment rule” by law.

That means if a board of directors acts in good faith and uses reasonable care, courts presume they did the right thing — unless someone proves otherwise with hard evidence of fraud or intentional wrongdoing.

Here’s how that matters in real life:

Say a startup founder wants to give a bold bonus to a key team member, or a board makes a risky but thoughtful bet on a new product.

In Delaware today, that might trigger lawsuits or second-guessing from judges. In Nevada, the law is clearer and more protective of business risk-taking.

Even better, Nevada gives strong legal shields to company leaders. It makes it harder for trial lawyers to go after board members or officers with fishing-expedition lawsuits.

In fact, unless shareholders own at least 15 percent of the company, they can’t even demand internal records. That’s a sharp contrast with Delaware, where even a single shareholder can launch costly legal battles.

Nevada lawmakers are also getting serious about building up their business courts.

In 2023, the state passed a law (AB 239) allowing companies to waive jury trials in complex commercial cases. That’s a huge step toward creating more professional, specialized courts like Delaware used to have.

Another reform (AJR 8) would change the state constitution to let the governor directly appoint judges to the business courts — bringing more expertise and less politics into the system.

This isn’t just a red-versus-blue fight either. Both of those reforms passed with bipartisan support, including backing from Republican Governor Joe Lombardo and Democratic Secretary of State Cisco Aguilar.

That kind of teamwork is rare — and encouraging.

And it’s not just AH Capital. Other big names like Tesla, Dropbox, and Tripadvisor have also ditched Delaware. Nevada is starting to look like a real alternative, not just a second-tier option.

Of course, some critics say Delaware is just fine and that recent court decisions are protecting shareholders from bad behavior.

But Ramaswamy and his team say the pendulum has swung too far. “Startups need certainty and support, not red tape and lawsuits,” they wrote.

This could be a big opportunity for Nevada. At a time when the state is trying to attract more innovation and high-paying jobs, becoming a business-friendly home base makes a lot of sense.

Nevada already has no corporate income tax, no franchise tax, and a straightforward regulatory system. Now it’s adding legal certainty and stronger courts to the mix.

That’s a recipe a lot of business founders — and their investors — are starting to notice.

As Ramaswamy, Hill, and McKinley put it: “We’re leaving Delaware. You might want to consider it too.”

*

Kelly Chapman is the executive director of the Nevada Business Alliance, a candidate for Nevada Assembly District 8, and a 46-year resident of Las Vegas. You can reach her at NevadaBizAlliance@gmail.com or (702) 483-0186. You can follow her on Twitter/X here: @Chapman4Nevada.