Andreessen Horowitz (a16z), one of Silicon Valley’s most influential venture capital firms, is formally shifting the state of incorporation for its parent entity, AH Capital Management, from Delaware to Nevada. This move signals broader discontent within the tech and venture capital sectors about Delaware’s evolving corporate legal landscape. The firm outlined its rationale in a public post, arguing that Delaware’s judiciary has begun undermining long-held principles of corporate governance, particularly the business judgment rule.

Once considered the gold standard for U.S. corporate law, Delaware is increasingly seen as a less reliable jurisdiction for tech startups, largely due to recent decisions from its Court of Chancery. These include rulings that questioned the independence of directors granting large equity packages to founders and a controversial attempt to block a corporate redomiciling effort, later reversed by the Delaware Supreme Court. A16z’s full analysis highlights these and other developments as drivers of its decision.

The firm draws a stark contrast between Delaware and Nevada, the latter of which has taken legislative steps to entrench founder and board protections. For instance, Nevada has codified the business judgment rule, eliminating the uncertainty inherent in Delaware’s common law approach. This codification was validated by the Nevada Supreme Court, which held that the statutory framework preempts subjective standards such as “entire fairness” when assessing director liability.

Nevada also offers broader protection against director and officer liability. Under Nevada law, officers and directors are shielded from monetary damages unless plaintiffs can both overcome a presumption of good faith and prove intentional misconduct or fraud. While Delaware permits similar exculpation through charter amendments, these are still subject to evolving judicial doctrines that have, in recent years, been applied with apparent skepticism toward founder-led boards.

Inspection rights further illustrate the divergence. Delaware law grants inspection rights to any stockholder who can demonstrate a “proper purpose,” a standard that has enabled a surge in Section 220 demands and pre-suit fishing expeditions. In contrast, Nevada limits inspection rights to shareholders owning at least 15% of the company—effectively curtailing the volume of potential litigation.

Perhaps most significantly, Nevada is taking active steps to upgrade its business courts. Through legislative measures like AB 239 and AJR 8, the state seeks to waive jury trials for civil cases and to authorize gubernatorial appointments for business court judges, mirroring Delaware’s Chancery Court model. These reforms passed with bipartisan support, signaling strong political momentum behind efforts to attract corporate reincorporations.

While Andreessen Horowitz emphasizes that its move is not prescriptive, it clearly intends to nudge other tech founders to reevaluate the default preference for Delaware. The firm’s decision follows high-profile departures by companies such as Dropbox, Tripadvisor, and Tesla.