3

In Europe the start-up investor climate seem quite different from what investors and entrepreneurs experience in the US. As I am being part of a few different EU based startups I am confronted with some startup companies who have already registered their companies as Delaware C-corps (Let's call it DCC from here and on.). (See here, here and here for a few definitions.) However, this introduces what seem as unnecessary complexities for European investors. (Legal, contractual, cultural etc.)

I would like to know from other (mainly) European investors, how they perceive these types of companies, and whether or not it's worthwhile hopping through all the hoops to deal with the aforementioned complexities. From my own experience of having talked to several EU VCs about the DCC model, it seem mostly unknown and VCs seem skeptical, but perhaps it's just lack of statistics?


Specific Example:

A hardware oriented startup company is registered as a DCC, but the founders are located (and living in the EU). The company registration data is very hard to find and when found, the ownership/share distribution is masked by a law company. The initial value put into the shares is $100. The majority shareholder (of course) values the company to billions. Although the business idea is very good, there are already operating competitors, while this company is still in the development stage. The founder is not willing to open a EU based subsidiary or simply register a new company in the EU.


Question:

What are the risk and rewards for the European investor?

  • Why do you care where the company is registered? The obvious benefit of this structure would be easier access to US capital markets... – quid May 24 at 14:49
  • 1
    @quid of course you'd care. It adds a huge amount of additional complexity to any legal agreements or contracts, which means international business lawyer expenses. – not2qubit May 27 at 6:26

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Browse other questions tagged or ask your own question.