DISCLAIMER: Things I am not: an accountant, a lawyer, a fiduciary to any reader, or a registered advisor. I’m just a guy writing a newsletter so none of this constitutes any tax, accounting, legal, life, or investment advice.

A New Beginning!

Welcome to the first ever issue of The AGM.

We’ll rotate irregularly amongst a few themes in the coming issues. Todays `theme falls under “In the News” where I talk about something making the rounds in the VC/LP/FO world. I’ll introduce the other categories as we hit them. Be forewarned, I’m new to this and things may be change and cadence may (read: will) be irregular. I don’t intend to cover the entirety of the topic — rather dive in to one or two key points I think deserve further highlighting or exploration as way to help get you thinking and diving down new roads for your own independent learning.

In The News

For our first topic we’ll cover the oft talked about Delaware C-Corp and the flight of some well known DE C-Corps to Texas. You may have read about it as SpaceX has filed to move from Delaware to Texas, TripAdvisor is trying to move to Nevada and, the writing is on the wall for Tesla to do the same after a judge in Delaware Chancery Court rejected an executive compensation package citing “entire fairness” test for controlling and related party transactions.

Two of these three instances focus on just one individual for whom herds are known to follow and emulate. Because of that, it’s important to consider the potential that this has to become a real issue going forward for investors with holdings who may be led stubborn and/or control minded founders. Particularly those who are successful at maintaining board control through to later stages of a company’s life.

Remember — we’re not talking about where a company has its corporate offices— the focus of this mailing is solely about where the top company in the corporate structure is headquartered as a matter of law — many Delaware companies don’t have any presence in Delaware. We’re also only talking about entities with multiple non-related shareholders — Nevada and Wyoming are actually generally considered great states for vehicles that are closely held and this is likely a topic I’ll explore in a future newsletter.

If you’re a VC or an LP, this movement outside of Delaware is undoubtedly a very bad thing. I’ve seen some takes on LinkedIn and X that this either doesn’t matter or, is the beginning of a new wave of changes in tech (including one that says it will lead to Texas’s secession from the union  🙄)

Even though we as LPs invest in VC looking to find disruptors, legally we all generally want some form of status quo. In todays world the status quo as a limited partner in a fund or an equity holder in a direct investment is that you hold equity in a Delaware C-Corp and disputes are adjudicated in chancery court. Chancery Court is unique in that it features well compensated judges who are experts in contracts and used to handling these types of disputes. Their higher level of knowledge of contract law leads to informed interpretation of said law, which as written affords rights to minority holders. Delaware is a safe place to invest in companies.