Andreessen Horowitz, a top VC firm, has left Delaware and urged others to consider doing the same.
The entities it moved to Nevada aren’t corporations, so the move is more about sending a signal.
One lawyer said a16z’s move could advance its founder-friendly reputation.
Andreessen Horowitz wants startup founders to reconsider their relationship with Delaware — but the venture firm’s own breakup with the state is more complicated than it seems.
On July 22, the VC giant executed the plan it teased in a blog post earlier in the month, registering three new entities in Nevada: a16z Capital Management LLC, a16z Holdings LLC, and a16z Development LLC. The move wasn’t just administrative — it was meant as a signal, part of the firm’s effort to convince founders that Delaware shouldn’t be the default choice for forming their companies.
Andreessen Horowitz, often called a16z, cited several reasons for moving to Nevada: stronger legal protection for corporate directors, tighter limits on shareholder lawsuits, and a business-friendly court system. It said this sets Nevada apart from Delaware, where an outsize share of America’s business lawsuits are filed.
Some critics say a16z’s beef with Delaware’s corporate laws don’t make much sense because it’s not a corporation; all the entities that it moved to Nevada are LLCs, or limited liability companies.
“They’re either being accidentally imprecise or intentionally disingenuous,” said Samantha Prince, a law professor at Penn State University. “Andreessen is criticizing Delaware and its statutory corporate framework, but that doesn’t apply to LLCs.”
Not all businesses are corporations
Laypeople don’t often draw distinctions between corporations, limited liability companies, partnerships, and other legal entities. Even lawyers and judges sometimes can’t keep it straight; a 2023 paper Prince co-authored found over 9,000 references to “limited liability corporations,” which don’t exist, in court documents.
But the differences matter. Corporations are bound by corporate law that sets baselines for what directors must do and the rights of shareholders. Delaware’s corporate laws — and judges’ decisions interpreting those laws — are what have some so angry.
By contrast, limited liability companies are “largely creatures of contract,” said Ben Edwards, a corporate law professor at the University of Nevada, Las Vegas, which means they generally write their own rules in their operating agreements and other agreements among their members.
While states also have laws that outline how LLCs work, they can often be overridden by agreement, said Prince.
Founders rule
Delaware’s body of corporate law has attracted big businesses for more than a century. Lawyers see the law as responsive and reliable because of the large number of cases interpreting it, and they generally praise the smarts and sophistication of the state’s judges.
Recently, some have said Delaware court rulings could upset its business-friendly reputation. In 2024, two rulings challenged pro-CEO actions at Tesla and Moelis & Co., and another hit the brakes on Microsoft’s acquisition of Activision Blizzard. Elon Musk responded by convincing investors to reincorporate Tesla in Texas.
In its blog post, Andreessen alluded to its interests in other companies. “For founders considering a similar move, there is often a reluctance to leave Delaware, based in part on concerns for how investors will react,” said the post, written by in-house lawyers Jai Ramaswamy and Andy Hill and government affairs partner Kevin McKinley.
“As the largest VC firm in the country, we hope that our decision signals to our portfolio companies, as well as to prospective portfolio companies, that such concerns may be overblown,” they continued.
Just because Andreessen Horowitz isn’t itself a corporation, it still needs to care about changes in corporate law, said Edwards, the UNLV professor.
The firm “makes lots of investments in corporations, and so I think the criticisms that are saying, ‘They’re not giving their real reasons because they’re not a corporation themselves’ are really misplaced,” Edwards said. “I think they have a strong and vibrant interest in the content of corporate law.”
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