1 Delaware incorporation matters for new ventures: Evidence from venture capital investment and the going public process

In the United States, corporate actors choose their state of incorporation and are only subject to the law in the state in which they are incorporated. The dominance of Delaware in the market of corporate law has generated a great deal of attention. This study uses information from privately held, venture-backed companies to examine the incorporation decision and determine whether Delaware incorporation has any impact on access to external financing and the process of going public. Results from a large sample of privately held venture-backed firms reveal that companies incorporated in Delaware receive more venture financing and attract more involvements from different venture capitalists than entrepreneurial firms incorporated elsewhere. In addition, we document the positive impact of Delaware incorporation on the performance of entrepreneurial companies, proxied by the rate of going public. There are more venture firms involved in the investment. When Delaware incorporated companies go IPO or are acquired, either the offering sizes or transaction value are higher