Startup Incorporation Playbook for VCs: Where to Start, When to Flip, and What to Avoid?
A VC’s Guide to Structuring for Investor Access, Tax Efficiency and Exit Readiness
Choosing the right jurisdiction for startup incorporation isn’t the sexiest topic - until it costs a founder millions at exit. From hefty dry taxes to catastrophic flips, the startup graveyard is littered with tales of corporate structuring missteps that could have easily been avoided.
💡 Want to avoid these mistakes and become a more strategic VC?
Join us for our next masterclass May 28, 12:00 PM GMT+1. Spots are limited to keep it interactive - don’t miss your chance to join live.
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At EUVC, we believe that expanding access to venture doesn’t just mean more capital - it means better knowledge, better networks and better decisions from day one. Helping VCs guide founders through these early, high-impact structuring choices is exactly the kind of upstream leverage that makes ecosystems stronger and more globally competitive.
Yet, despite the clear stakes, founders (and let’s be honest, many investors too) often delay or neglect this crucial decision. As Rena Kakon, co-founder of Kara Ventures and founder of Shado, puts it:
Founders of early-stage startups are allergic to legal, finance, and admin. At best, they dedicate some time to it on Friday afternoons - usually too late.
Honestly, that line hits home. As a founder myself, I literally have a monthly slot in my calendar titled “Management Report, Accounting & Tax” - and more often than not, it gets cannibalised by meetings or pushed aside by whatever urgent-but-not-important fire needs putting out. It’s a mirror moment.
But it’s precisely this early negligence that creates enormous headaches down the line. Incorporation isn’t merely admin - it’s a strategic decision shaping everything from fundraising success and investor appetite, to operational flexibility and ultimate exit potential.
Cross-Border Complexity: More Than Just Paperwork
Our own research suggests the growing complexity global founders face:
Over 80% of global businesses report cross-border compliance complexity as a decisive factor limiting their market expansions.
For high-growth startups, particularly those reaching turnovers between €100K - €1M, nearly half report significant struggles with customs duty, import calculation and cross-border payment hurdles.
These aren’t theoretical concerns; they're daily operational realities impacting growth and scale-up potential. Investors need to understand these implications deeply, as they increasingly shape startup success and failure.
US vs Europe: Navigating the Jurisdiction Maze
While Delaware remains a popular go-to for its speed and investor familiarity, European jurisdictions like the UK, the Netherlands and now increasingly Estonia, offer compelling alternatives that are often better aligned with long-term operational, tax, and exit considerations - especially for companies staying rooted in Europe.
Each region brings its own trade-offs:
Delaware (US): Offers fast setup, flexible governance, and founder/investor-friendly tax incentives. But it comes with international tax complexity, including GILTI and Subpart F rules and can create exit friction for European-based founders.
United Kingdom: Strong tax treaty network, gold-standard equity incentives and generous R&D credits. A practical choice for early-stage startups looking to balance operational ease with investor readiness - though post-Brexit changes have introduced uncertainty.
Netherlands: Optimized for later-stage European scaleups. Its Participation Exemption and Innovation Box offer powerful tax efficiency for IP-heavy businesses. But the red tape, lack of standardized equity schemes and notary requirements can be painful upfront.
Estonia: Known for its digital-forward governance, simplicity and deferred corporate tax system - making it an intriguing contender for lean, product-led startups operating remotely or across borders.
Choosing the right jurisdiction isn’t about finding the “best” answer. It’s about aligning structure with strategy - and that’s where VCs can be transformative advisors from day one.
The Cost of Getting It Wrong: Horror Stories from the Front Lines
The horror stories are real - and painful:
European startups with a US holding company and no physical presence slapped with heavy US exit taxes.
Founders trapped in jurisdictions requiring cumbersome government approvals for seemingly straightforward flips.
Teams hit by unexpected double-taxation due to poorly considered incorporation locations.
Each story is a cautionary tale underscoring the necessity of strategic advice early in the startup lifecycle.
The VC’s Crucial Role: More Than Just a Check
At EUVC, we firmly believe investors are builders, not mere spectators. Your role as a VC extends beyond deploying capital - you're a strategic advisor, mentor and early guide. Helping founders navigate critical early incorporation decisions positions you as a high-value partner in their journey, enabling them to avoid catastrophic pitfalls and position for global growth from day one.
Yet, according to Shado’s analysis, nearly 70% of early-stage European startups defaulted to US entities in 2022, often without fully understanding long-term implications. This oversight underscores the educational gap we aim to fill through our ecosystem efforts.
Announcing Our Upcoming Masterclass: Empower Your Founders
To bridge this gap, we're hosting a deep-dive masterclass on Wednesday, May 28 (12:00 PM - 2:00 PM GMT+1).
This session - led by Rena Kakon and Tom McGinn (General Counsel at Northzone) - offers VCs comprehensive, practical frameworks to:
Understand and communicate the strategic impact of incorporation decisions clearly.
Identify and navigate jurisdiction-specific trade-offs effectively.
Leverage real-world case studies and Shado’s proprietary Matchmaker tool to guide portfolio startups.
Advise confidently on when and how founders should consider jurisdiction flips.
Why Attend?
Beyond practical frameworks, this masterclass aligns deeply with EUVC's mission:
Expanding access to critical venture knowledge - democratizing the strategic insights traditionally reserved for larger, well-resourced funds.
Empowering VCs as strategic partners - equipping you with tangible insights to add immediate value beyond financial capital.
Strengthening Europe's tech ecosystem - by educating investors to prevent costly structural mistakes, we strengthen the collective resilience and global competitiveness of our startups.
Your Call to Action: Join the Conversation
If you’re a VC investing in globally ambitious founders, this masterclass will give you the edge to guide them through one of their most consequential early decisions.
The session will be held live on Wednesday, May 28 (12:00 PM - 2:00 PM GMT+1) and is open to all investors. Tickets are priced at €200, but EUVC Community Members enjoy a 50% discount. Spots are limited to keep it interactive - don’t miss your chance to join live.
👉 Not yet a member? Join now!
You’ll get immediate access to this and all future masterclasses at member pricing, plus full access to recordings, slides, curated resources, and our library of past sessions with Europe’s top GPs and LPs.
💬 The EUVC community exists to equip European venture builders - LPs, VCs and ecosystem enablers alike - with the tactical knowledge and network to go from good to great.
Join us. Expand your toolkit. Become the kind of VC founders remember.
Event Details
When: Wednesday, May 28 | 12:00 PM - 2:00 PM GMT+1
Where: Online, interactive format
Speakers: Rena Kakon (Kara Ventures), Tom McGinn (Northzone), moderated by David Cruz e Silva (EUVC)