Venture capitalist Oren Zeev's sharp warning: why Israeli startups must incorporate in the US
"I've never met a founder who regretted a US incorporation, and I often meet founders who regret an Israeli incorporation", claims Zeev against the common practice of startup incorporation in Israel
"I've never met a founder who regretted a U.S. incorporation, and I often meet founders who regret an Israeli incorporation." A LinkedIn post published by prominent venture capitalist Oren Zeev attacking the common practice of incorporating startups in Israel has ignited a passionate debate within the local high-tech and venture capital communities. Zeev launched a sharp attack on the practice, warning that a founder's decision to register a company in Israel rather than in the U.S. (in Delaware) could cost them millions of dollars in personal taxes — and, in some cases, even jeopardize the company.
In a post Zeev published on LinkedIn, he wrote that although he generally doesn't do "thought leadership" and "advice to entrepreneurs" posts, he decided to make an exception after recently seeing too many cases of founders who made the decision only to regret it almost immediately. According to him, he has never met a founder who regretted a US incorporation, and often meets founders who regret an Israeli incorporation.
Zeev explicitly criticizes local lawyers and accountants in Israel who advise incorporating in Israel, noting that the advantages of this step are all pretty small. The cynic in him, he adds, believes that those accountants and lawyers might benefit from the Israeli incorporation, as their services will be needed for longer.
In his post, Zeev presents at least two big reasons to incorporate in the US. The central and most significant argument concerns the massive personal tax benefit known as QSBS, which provides a huge personal tax benefit for shareholders in a US startup. While the exemption is officially limited to a cap of $15M, through proper tax planning it can actually be stacked so the effective cap can be much higher.
Zeev explains that this benefit is only available to US companies. Since when you start a company in Israel, there is a very good chance that one of the founders will at some point relocate to the US and become a US tax person, raise capital from US investors, and employ US employees, the decision to incorporate in Israel simply robs the founders, the investors, and early employees of this benefit for no good reason.
The second reason, which he notes is relevant to a smaller percentage of companies but is critical, concerns the commercial and regulatory advantage of a US company when selling to a US government entity. Zeev noted that he recently saw a company that could very well go out of business because of complications that could have been avoided had they been US incorporated.
Beyond that, being a US company, typically Delaware, just simplifies things from a legal and corporate governance perspective on a number of topics.
In response to concerns that incorporating in the US harms state revenues, Zeev emphasizes that Israel still benefits from taxes, both on an ongoing basis and, of course, upon exit, as seen with giant deals like the Wiz exit which reportedly generated several billions in tax revenue for Israel. This is also the reason Israel makes it very easy to change the incorporation to the US (sleeve inversion/flip), at least early in the life of the company. However, Zeev warns that this does NOT help the founders, as QSBS only applies to shareholders who originally received their shares in a US company.
The public discussion quickly expanded on the platform, attracting active participation from key industry figures—ranging from local lawyers and accountants facing criticism over their advice to incorporate locally, to investors.
Responding to the discussion on Zeev's LinkedIn post, Adam Fisher, a partner at Bessemer Venture Partners, presented a dissenting view. Fisher argued that US incorporation only has tax benefits for US tax persons, offering no advantages to Israeli founders who remain in Israel, and warning that an unexpected return could expose them to double taxation. He noted that major US venture capital firms do not require US incorporation to invest, as both VCs and founders focus on business growth rather than tax optimization. Fisher also raised a patriotic point, stating that an American top company robs Israel of vital taxes and talent essential for the next generation of the local tech ecosystem.
Also joining the LinkedIn debate, venture partner Roni Bonjack strongly supported Zeev's stance, emphasizing corporate governance as a key factor. Bonjack pointed out that Delaware provides a much more mature, predictable, and flexible governance framework, which becomes critical as companies scale and boards become more complex. With a deep body of established case law regarding fiduciary duties and shareholder rights, she argued that this predictability provides a meaningful commercial advantage during complex financing rounds or M&A discussions, rather than being mere legal housekeeping.
