ABSTRACT
There is a growing concern among regulators and academics about how to regulate unicorns – entities large enough to have a public impact yet remaining in the private domain. An examination of corporate charters within a selected sample of unicorn firms reveals an important finding, a significant revelation emerges: 97% of these entities are incorporated in Delaware. The concentration of these firms in Delaware provides the state with significant leverage to shape regulatory frameworks, especially concerning the protection of parties who may lack the ability to safeguard their interests through contractual means, specifically employees. Delaware’s experience and well-developed approach to fiduciary duties on behalf of all shareholders, including those who may face challenges adequately protecting their interests, has allowed the state to maintain an edge over other states in a manner which cannot be challenged. By creating and maintaining a unique environment – one well suited to addressing complex disputes fairly and professionally – and doing so over a substantial period of time, Delaware has created an environment which not only allows for unicorns to thrive while protecting shareholders, but one which may now be considered an underlying requirement for unicorn creation. This groundbreaking discovery on the dominance of Delaware stands out, showcasing a substantial deviation from the incorporation trends observed in other segments of the business landscape. This figure significantly surpasses the incorporation rates documented for public firms, where only 79% opt for Delaware as their state of incorporation. Moreover, when compared to earlier studies focusing on various categories of private firms, the disparity becomes even more pronounced. In contrast to the 67% incorporation rate for early-stage venture-backed private firms and a mere 2% for small private enterprises, the overwhelming preference for Delaware among unicorn firms emerges as a distinct and unprecedented trend. This stark contrast not only underscores the uniqueness of unicorn firms in their incorporation choices but also raises intriguing questions about the specific factors that drive this exceptional pattern within the broader spectrum of corporate entities. As unicorns evolve, become more prevalent, and continue to develop as companies and market movers, Delaware’s position as their incorporation venue of choice will only continue to rise in importance and relevance.
Anat Alon-Beck, Incorporating Unicorns: An Empirical Analysis, 62 Houston Law Review 891 (2025).
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