About the Author, Mirko Novakovic
Mirko Novakovic is a serial tech entrepreneur. He co-founded Germany-based codecentic AG and was the Founder and CEO of Instana Inc. (acquired by IBM in 2021). He is also the founding Partner of New Forge, a European VC firm focused on making angel investments in early B2B tech companies.
Armed with a powerful idea in one hand and a commitment to changing the world in the other—European founders can impact global markets like never before. The first step in that process; however, is more mundane and more influential than you might think: choosing a company form.
For European entrepreneurs, you may think that a local company formation is the default path forward (for German entrepreneurs, for example, that would be a GmbH). But for SaaS companies in particular, my advice is to think globally right from the beginning. Here’s why I think European founders should register their startups as Delaware C Corporations (C-Corp).
1. The SaaS Market is the US Market
With the United States being the largest SaaS market, it’s always going to be necessary to have an American presence. Once you set up shop in the US, you’ll have the legal foundation for accounting and taxes, as well as processing any necessary contracts.
2. Break Down Borders not the Bank
Creating a C-Corp is a much cheaper option than pursuing local formations. The incorporation process is completely digital and only costs a few hundred dollars. Although there are many services to choose from, I went with firstbase.io for my startup. It handles every step, plus will give you a useable American address.
3. Avoid Unnecessary Costs
A hidden cost most European founders don’t know about is notary fees. I’ve seen German seed rounds where the notary alone received EUR 50,000! When you file as a C-Corp you won’t need a notary for the foundation or for any changes (i.e. shareholders, addresses, managing directors, etc.). Everything is done digitally via DocuSign. Whether it’s working with legal or navigating funding rounds with US VCs: filing as a C-Corp makes things easier, cheaper, and more streamlined.
From the VC perspective, even those with global offices recommend the Delaware filing. I spoke with Next47’s Global Managing Partner, Lak Anath, about his perspective on local company formation vs. C-Corp. He added that the American filing adds credibility and attractiveness to prospective deals: “We love European entrepreneurs who have the ambition to win global enterprise categories. That is not only in how you build product, team, and execute but also in how you get the basics like corp structure right from the beginning.”
4. Creating the Possibility of Stock Options
With a C-Corp it’s easy to set up stock plans for employees. Unfortunately, this is still impossible to do in Germany, as well as other European countries. Yes, there are phantom shares, but those aren’t real shares. This will make hiring even harder—especially in the US where traditional stock options are the norm.
5. Build the Best Toolkit
The tools you need to make your company a success are already in place. By filing as a C-Corp, the path forward is standardized and readily available. Whether it’s Carta for share programs and 409A valuations, Brex or Mercury for banking, or Expensify for travel expenses—everything is already in place for you. This even extends to services like legal and accounting (e.g. NetSuite and Bill).
With HR tools like Remote and Deel, you can hire candidates in Europe and Germany without being founded there (unlike a GmbH in Germany). This will reduce your overhead enormously, plus you only get one bill a month. Everything you need to build out your organization’s toolkit is simple, integrated, and ready to use if you create a C-Corp.
If you’ve read this far and are feeling nervous because you’ve already started a local listing: don’t worry, you can make the switch. It’s possible, albeit a bit difficult. It will have some major tax implications for the shareholders, especially when the IP is low. So if you want to change into a C-Corp, you need to start the process as early as possible to reduce the ramifications.
That said, it may also be worthwhile to remain a local formation if Europe is your primary market. If the majority of your employees and customers are local, then there’s no need to go through the effort of switching to a C-Corp.
Many of the decisions you make at the beginning of your business will have lasting impacts—others won’t. Filing my company in Delaware as a C-Corp was one of those choices that helped set me up for success and I hope it can for you as well.
