Delaware Court of Chancery: Why VCs Prefer Delaware

What the Court of Chancery is

The Delaware Court of Chancery is one of the oldest and most respected business courts in the world. Established in 1792, it is a court of equity — meaning it handles business disputes, fiduciary duty claims, and corporate governance matters. Unlike regular courts, Chancery has no juries. Cases are decided by judges (called Vice Chancellors) who specialize exclusively in business law.

This matters because business disputes are complex. A jury of non-specialists may produce unpredictable outcomes. Chancery judges have deep expertise in LLC governance, fiduciary duties, operating agreement interpretation, and corporate transactions. Their decisions are faster, more predictable, and create clearer precedent.

Why VCs require Delaware

Venture capital attorneys have decades of case law from Chancery to reference. When drafting investment terms, they know exactly how Chancery will interpret protective provisions, drag-along rights, liquidation preferences, and fiduciary duty disputes. This predictability reduces legal risk for both the investor and the founder. Over 60% of Fortune 500 companies are incorporated in Delaware specifically for Chancery access.

When a VC attorney says "we need Delaware," they mean they need Chancery. The anonymity, the franchise tax, the filing process — those are secondary. Chancery is the product. Everything else is the cost of accessing it.

Chancery vs regular courts

When Chancery does NOT matter

If you are not raising institutional venture capital, not planning for a corporate acquisition, and not expecting complex business litigation — Chancery provides no practical benefit. A solo e-commerce operator, a freelancer, a real estate investor, or a holding company will never use the Court of Chancery. For these use cases, Wyoming provides identical anonymity at $240/year less in ongoing cost.