Stock is a key aspect of a Venture Capitalist’s investment. C-Corporations appeal to VCs since Delaware law allows for two or more classes of stock. Typically, a venture funded company will have common stock, founder’s stock and several classes of preferred stock, including some convertible preferred stock which allows an investor to convert stock to common if/when the company goes public.
Delaware C-Corporations are also able to distribute stock options as incentives to employees, board members and directors, which VCs approve of because smart, successful and innovative employees are an essential element of success in a startup company leading to growth and profitability. Stock options are a proven and inexpensive means of motivating and rewarding ambitious and hard-working employees, board members and directors.