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Why is Delaware a Home for Most Tech Startups?

Delaware is one of the few states that is gradually moving towards a truly startup innovation economy. The interesting aspect is that there are more and more venture capitalists and angel investors participating in what we can call the Delaware tech startups revolution that is probably going to change the future business landscape of the state. A recent CB Insights MoneyTree and PricewaterhouseCoopers (PwC) report revealed that the total amount of venture capital that has been invested in startup industries in Delaware is $136 million. This article provides an insight into the key startup industries in Delaware including Fintech industries and why tech startups incorporate in Delaware.

Tech Startups in Delaware

The attractive incorporation laws in Delaware are responsible for drawing in some of the biggest venture capitalists to the state and this is where the seed for startups started to germinate. The startup industries in Delaware look promising with a growing IT sector as the state government shifts its focus towards fostering an environment that enables technology growth. In fact, some of the Delaware tech startups have become national success stories thus inspiring others. The state of Delaware has worked towards creating the perfect environment for IT or fintech startups like creating a Delaware Innovation Space, which is a $6 million growth space based in Wilmington DE. The Economic Development Administration (EDA) has provided a funding of $3 million for creating collaboration spaces and new private lab pods thus providing capabilities and tools to early-stage biotech and healthcare startups.

Key startup industries in Delaware

There has been a steady rise in the use of technology and innovation to provide a wide variety of products and services that is changing the existing business and consumer landscape. The startup environment is rich with many opportunities including funding competitions, entrepreneurship venture support and commercialization programs, startup one-on-one consultations, Hen Hatch startup funding competitions, gap funding and training programs etc. Whether it is deep learning, and big data or innovations in environmental biotechnology products and health care services, you can incorporate in Delaware in any of the following key startup industries in Delaware.

Fintech Industry

Delaware is home to some of the largest financial sector companies like Capital One, Citibank Delaware, JPMorgan Chase, Fair Square Financial, WSFS Bank, PayPal, M&T Bank, and SoFi. The state is gradually moving towards becoming a nationwide leader in fintech and one of the reasons driving the fintech industry in Delaware is the Financial Management Act of 1981. There has been a steady rise in the fintech industry wherein there is a higher use of technology and innovation for providing financial products and services. Innovations and new ideas are being introduced within the financial services industry and they are actually changing the way a company deploys their financial services and products and how users interact with it. This has transformed the financial services landscape and created a long-term growth opportunity for startups keen to incorporate in Delaware. Some of the major highlights of the Delaware fintech industry are:

  • Delaware has been one of the top locations for traditional banking but now even international fintech companies have started looking at this state as a favorable destination
  • The fintech industry in Delaware ranks quite high on different measures of innovation in this industry. In the year between 2009 and 2018, almost 199 fintech patents were assigned to several Delaware based companies, entrepreneurs and individuals.
  • Delaware is known to have the highest relative concentration of fintech industry services jobs as compared to any U.S. state and this is because of the high number of companies opting to incorporate in Delaware in this sector.
  • Nearly one-fifth of Delaware’s GDP is driven by finance making it the largest contribution by any single sector.
  • The investment by the U.S in 2018 was $52.5 billion in the fintech industry with the fintech industry in Delaware accounting for approximately $50 million in investments.

Delaware’s rapidly changing regulatory landscape offers Delaware tech startups a unique advantage for developing innovative financial solutions.

Biotech Industry

The Biotechnology (biotech) industry is considered as one of the top startup industries in Delaware and it comprises companies that derive their products through extraction of living organisms. The fact is that we have been employing biotechnology since the ancient times mainly in improving crops and breeding animals. Biotech as it is known comprises research, development, and production of different types of commercial products and a majority focuses on agricultural or medical applications. According to expert projections, the medical biotechnology industry is slated to reach revenue potential of $500 billion and one of the reasons for this is the proximity Delaware shares with New York, Philadelphia, and Washington D.C. This is one industry you can incorporate in Delaware as some of the biotech companies that have shown excellent growth include Incyte, Adesis, W. L. Gore & Associates, Prelude Therapeutics, and Agilent.

Biotech is now being seriously considered as the future of the state of Delaware and is one of the top catalysts in the existing vibrant science economy. Let us look at some of the salient highlights with respect to the Delaware biotech industry.

  • The Delaware Biotechnology Institute is targeting an expansion of 70,000 square feet of space that will house offices, labs, Delaware tech startups, shared research instrumentation facilities, and collaborative space. This $160 million Biopharmaceutical Innovation Building will be the home to National Institute for Innovation in Manufacturing Biopharmaceuticals (NIIMBL).
  • The University of Delaware’s Science, Technology and Advanced Research (STAR) Campus is working towards creating a biotech ecosystem that will support and feed the future startup industries in Delaware especially in the biotech industry. The STAR campus is replete with incubators and labs, health innovation design lab, CHS demonstration kitchen, and health care simulation lab.
  • Bioscience-Related Patent Distributions are among the highest in the state of Delaware at 249 per 1 million populations. There were 193 bioscience-related patents assigned to Delaware based companies, entrepreneurs, and individuals between 2016 and 2019

Edtech Industry

The Edtech Industry is one of the fairly new startup industries in Delaware. Edtech stands for “education technology”, and entails the use of IT tools as well as educational practices to enhance and facilitate learning. The concept of Edtech had started as an experimental method of education initially but now it is being transformed completely by modern day entrepreneurs so much so that it is not anymore about reformatting training manuals and books but about using digital technology effectively for delivering a brand new form of educational or learning architecture. In the current scenario, Edtech is in its nascent stages and is being used for teaching and learning, as assistive technology. A State Educational Technology Plan has been created by the task force on Delaware state educational technology, Delaware Department of Education. There are five important components of this plan and they are learning, teaching, leadership, assessment, and infrastructure. The Edtech industry is slowly coming into prominence as more Delaware tech startups are registering in this industry but it still does have a long way to go.

Healthcare Industry

The U.S. News & World Report revealed that Delaware is ranked 6th for quality of Healthcare and is ranked 15 in the list of the best states for Healthcare. The ranking is driven by the healthcare policy and the rise of a new age of digital healthcare research. It is one of the first states to launch the first standardized, operational, interoperable, real-time statewide health information exchange in the country in 2007 opening the door for startup industries in Delaware healthcare. The primary objective of this health exchange is to connect hospitals, physicians, and reference laboratories across the state. You can incorporate in Delaware in the healthcare industry as it is considered a keystone growth industry.

Delaware healthcare services along with educational services contributed $5.53 billion to the Gross Domestic Product (GDP) of Delaware in 2019. Some of the top healthcare companies in the state include Beebe Healthcare, Psychotherapeutic Services, Prelude Therapeutics, Intervet, Inc., and Nanticoke Health Services among others. The Delaware Department of Health and Social Services (DHSS) is trying to implement a State Health Care Innovation plan relying on state specific Innovation Models to bring about a change in the current healthcare system and to create a platform that will enable startup industries in Delaware to grow within this system while adding value to the system.

Start a tech startup in the Delaware pro-business environment!

Why Tech Startups Incorporate in Delaware?

Today, Delaware is home to some of the largest tech startups and is also favored by investors or venture capitalists. There are several advantages and reasons why entrepreneurs opt to incorporate in Delaware. The availability of several opportunities and a robust innovation platform makes the state perfect for startups or new businesses. The fintech industry in Delaware along with biotech is considered to be growing at a rapid pace. The advantages that make the state so attractive to entrepreneurs are:

Delaware business laws

One of the top advantages to Delaware tech startups is the pro-business laws. The primary aim of the business laws in Delaware is to provide investors as well as businesses (managers, members etc.) with laws that are optimal for engaging in a highly ethical and profitable business. Unlike other states, business cases in Delaware are not tried by juries but by judges highly experienced in corporate law. The Delaware judges are considered to be extremely impartial and highly efficient thus providing that extra-legal edge to Delaware tech startups.

Investors prefer Delaware startups

There are many reasons for investors and venture capitalists preferring startup industries in Delaware and one of the important reasons is the business law. The Delaware General Corporation Law (DGCL) due to its predictability and stability is considered pro-business by investors. The DGCL not only helps in governing new business entities but also helps in protecting venture capitalists and investors.

Favorable taxation for startups

Delaware has one of the most favorable taxation for startups because of the low or no tax environment. Some of the tax benefits for Delaware tech startups include:

  • There is no Delaware corporate tax on interest or any investment income
  • Delaware business taxes are not applicable on intangible income
  • New businesses in the fintech industry in Delaware or any other industry are not required to file use tax, unitary, or inventory tax
  • There is no corporate tax on goods or services provided by a Delaware corporation operating outside the state
  • If you incorporate in Delaware then you will not be required to file any personal property tax
  • The state does not have any ad-valorem or value-added taxes (VATs)

Flexibility in corporate structuring

If you incorporate in Delaware then you will be able to leverage the advantages related to arrangement of management structures as well as economic rights of businesses. The corporate statutes of Delaware provide a high degree of flexibility in terms of structuring your corporation and board members for example, directors, officers, and shareholders of a corporation are not required to be residents of Delaware. The state allows startup industries in Delaware to have a single person be the only officer, director, or shareholder of a business corporation as compared to other states where a minimum of 3 people are required to hold such positions.

Easy company formation process

You can opt from different types of businesses in the state of Delaware based on your requirements and preferences. Delaware tech startups can form a limited liability company, corporation, limited liability partnership, general partnership, and sole proprietorship among others. Whatever the type of business, the company formation process is easy and efficient in the state. If you are planning to form a new business then you will have to apply to the Delaware Division of Corporations or you can save your time and form a new business with the help of IncParadise, which can assist you with the entire process of starting a new company in Delaware. We also offer you service of process and several other services like notifying you for filing of annual report, assisting with submission of annual report, helping you apply for a tax ID (EIN), and help you to avoid penalty by ensuring you are able to meet the due dates for all your business requirements related to the fintech industry in Delaware or any other industry.

Ready to Form Your Tech Startup in Delaware?

Whether you plan to start a business in the fintech industry in Delaware or any other industry; forming a new business in the state of Delaware has its own set of advantages including tax benefits and pro-business laws. As an entrepreneur planning to incorporate in Delaware, you can hire IncParadise as we are one of the top registered agents in Delaware and an expert incorporation provider. We can help you with the process of starting your tech startup and also handle all your Delaware state annual compliances.

IncParadise also offers additional services for Delaware tech startups so that they can fulfill their legal or state based requirements. Our additional services include Delaware domestication, foreign qualification, EIN or Tax ID, and Certificate of Good Standing among others.

Incorporate your Delaware Startup Today!