Are VCs less likely to fund companies incorporated overseas?

Suppose I incorporate my company in Cayman Islands and then try to seek VC investment. Would VCs be more averse in investing in such companies compared to a company that is incorporated in Delaware?

VCs will invest in the thing that they feel has the best hope of success and what they feel comfortable with.

Some VCs will only invest in companies in their local area, others won't care about geography at all.

I know an Australian company won round 3 funding in the US at the end of last year, so it's not impossible.

The Cayman Islands ... I think you would have to address why in your pitch. I would also answer how it won't be a legal problem.

Yes. I've even seen VCs demand that companies change their states of incorporation, within the US.

Yes (I assume you are referring to VCs in the U.S.).