For founders, formation can sometimes feel like a formality.
You may have had this conversation already. Someone says, "just form a Delaware C-Corp" and you can move on to more important things. The reality is that formation is not a throwaway decision. Getting this wrong can create lots of downstream pain and suffering.
Get it right, and you are on the glide path to clean fundraising, smooth exits, and fewer surprises. The alternative can be a mess that can get expensive and time-consuming to fix.
Investors (and Regulators) Are Reading Your Structure
The entity you chose sends a signal—use that to your advantage.
If your structure is clean and familiar, it gives investors confidence. If it's novel or hard to understand, it raises eyebrows and questions. Complexity is not your friend in early fundraising. You don't want to spend your time answering questions about this.
Founders who didn't think much about formation can find that their setup is slowing them down when they are raising money. Worst-case scenario it can cost you a deal.
Formation doesn't have to be perfect. But it does need to make sense—and be ready for scrutiny.
Delaware C-Corp Isn't Always Right — But It Usually Is
Let's be honest: for most U.S.-based startups, Delaware C-Corp is the easy button. It works. Investors and acquirers are familiar with it; they almost expect it. Also, it plays nicely with SAFEs, stock option plans, and venture term sheets.
But crypto and fintech don't always follow the playbook.
We regularly get questions about Cayman foundations, Swiss associations, and hybrid structures. These can solve specific problems—like issuing tokens or supporting decentralization—but they're not magic. They often bring their own issues:
- Regulatory complexity
- Tax headaches
- Harder investor onboarding
- Difficult transitions to traditional capital raises later
The best structure is the one that works for your business today and won't block you tomorrow. That could very well be Delaware. Sometimes it's more. But it should never be decided without thinking about your overall strategy.
Multi-Entity Structures: When to Build Them (and When Not To)
More entities = more problems, unless you have a reason.
Token issuance, international regulatory strategy, or separating IP and operations? Those are reasons. Trying to look sophisticated? Not a reason.
Early on, simplicity usually wins. Especially when talking to investors who just want to know you have your house in order.
If it's not clear that you need a multi-entity setup, default to no—and get advice early if your situation starts to get more complicated.
Why This Matters (a Lot)
Formation sets the stage for everything else:
- Who owns what
- How easy it is to raise money
- How hard it is to sell the company later
When formation is clean, it becomes a non-issue and lets you focus on growth. When it's not, it becomes a huge (and often expensive) distraction—usually at the worst possible moment.
Founders who take formation seriously now avoid cleanup crises later. They also show investors they're serious about building something lasting.
Final Thought
Formation isn't just paperwork. It's your foundation. Done right, it makes the rest of your startup journey easier.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
