Y Combinator website no longer lists Canada as a country it invests in

[throwup238]

This whole move is about corporate governance. The US makes it really easy to start or manage corporations and the courts are (mostly) streamlined and predictable, especially the chancery courts in Delaware. Cayman Islands adopted much of Delaware's legal approach to corporations in 2016 to make the island more business friendly rather than just a tax haven, and they've got a foot in the Latin American market. Singapore is the SEA equivalent of Delaware.

Nothing else much to it. In reality they're all going to have to register to do business in Canada/California/whatever and pay their taxes anyway. Structuring the parent in one of those jurisdictions just makes the legal wrangling about ownership and stock classes safer and more predictable to both investor and founder.

[pjc50]

Many, many years ago I was the first non-founder employee at a UK startup. That meant hearing quite a lot (but not all) of the corporate discussions about finance, company structure etc. Fairly early on in the fundraising process we settled on "Delaware parent company, 100% owner of UK private limited company". This meant that US investors could invest in the Delaware entity happily, while the tax and employment aspects were handled locally in the UK. Stock grants were made from the US entity (under US law), but also eligible for UK tax relief (since the options were being assigned to UK residents).

While I think this was obviously more complicated than a single entity and probably required two sets of specialists rather than just one, it certainly worked and I would expect something similar is possible with Canada?

The founders were not required to move to the US, but ended up doing so anyway.

[compiledkoala]

This exactly. Canadian common law has some very odd implications for corporate governance. Much higher risk of governance deadlock due to recent rulings.

VCs are not going to know that when evaluating a company. YC as the incubator and the first check in has an obligation to vet the situation for future investors. The easiest way for them to do that at scale is to ensure they are experts in a very small number of jurisdictions that are predictable.

Honestly, it makes sense.

[garbawarb]

I wonder if Canada needs a Delaware. Delaware's system works because they have such a small population that offering a low cost and high volume solution to the rest of the country is the right strategy. I could see a case for a smaller Canadian province like Newfoundland or PEI doing the same.

[captnFwiffo]

[flagged]

[wilson090]

This is extremely misleading. YC still backs Canadian founders (and other international founders). There must have been one too many painful experiences investing in companies based in Canada. Creating or converting to a US-based entity is a standard ask for most international founders who want to participate YC and I suppose something has changed such that Canada is no longer an exception to that.

[tptacek]

Important added context here: the list went from US, Cayman, Singapore, Canada to US, Cayman, Singapore. It's not as if YC was generally investing in non-US based entities before. Canada was an exception and isn't anymore.

We're a global employer, and just employing people in different jurisdictions is kind of a nightmare (totally worth it, though). I can't imagine how much of a pain it must be to try to manage investment stakes in foreign corporations.

[JimmaDaRustla]

[flagged]

[garbawarb]

> “It’s the Valley-or-bust mentality that breaks the ecosystem and really hurts Canada,” Gomez said.

Canadian pride isn't enough to keep a company in Canada. There are real and significant economic incentives to move elsewhere. That said, it's disappointing that YC no longer supports Canadian companies.

[tptacek]

Presumably it continues to support them the same way it supports 386 companies headquartered in Europe, 218 in South Asia, 217 in Latin America, 106 in Southeast Asia, 87 in Africa, 71 in MENA, 23 in East Asia, and 14 in Oceania, all locales where you previously had to do a flipped company structure to participate in YC.

[kdazzle]

[flagged]

[am3141]

Well it’s the USA / Valley pride what built that ecosystem there. It wasn’t always like that even in the US. A long time ago, the US congress had to pass a law to incorporate a company. It went from there to whats its now because of that pride. We want that pride here in Canada to build our own ecosystem.

[PostOnce]

Economic incentives are only one of the many incentives weighing on the scales. There are others.

[cowpig]

[flagged]

[throwup238]

> Suddenly YCombinator no longer invests in Canadian startups.

There's nothing stopping a Canadian from starting (or redomiciling) their startup in the Cayman Islands. That's basically the Cayman Islands' raison d'être ever since the war on terror and the crack down on international anonymous banking.

[tptacek]

Well, that theory is pretty easy to debunk, because Archive.org exists.

[dang]

I haven't talked to anyone at YC about this, have no inside information, and can't read the article*, but I imagine this is some technical change about where startups are incorporated. I'm sure applications from Canadian founders are as welcome as ever and there will be no change on the level of which applications get funded.

(* edit: I originally posted this in https://news.ycombinator.com/item?id=46772809 but have since merged the thread hither)

[Sanzig]

Seems like a very bizarre move, considering Canadian-domiciled corporations have access to very generous financial incentives (SR&ED) at both federal and provincial levels.

Can't help but think this is a move meant to satisfy the US admin.

[motohagiography]

Whether it's significant or not, YC's basic model of seed funding with ~$100k could be reproduced in Canada with $10MM or less. Unsure how this is a problem.

If Canada wanted to be serious about startups it could make trivial changes to enable it. However it's committed to becoming a dutch diseased resource colony with no value add and a macquiladora for US software companies. Relative to capital and assets, it's the least productive place on earth. The whole thing runs on riding the coattails of like 5 undergrad profs at waterloo, and a certain bank everyone knows launders cartel money and facilitates capital flight out of China.

Judging by its impact, YC is one of the greatest companies of all time. Canada isn't in that game imo.

[Yeroc]

What are the trivial changes Canada could make if it wanted to be serious about startups?

[Rupok]

That's truly saddening. I hope there will be more VC backing in Canada because the talent is definitely there.

[ivl]

I have to disagree.

Canada loses a lot of its top talent every year to the US, mostly because of the TN visa. Canadian talent leaves Canada every year, and less investment is not going to help.

This is made worse by Canadian investment culture being very conservative, and not loving startups in general.

[alephnerd]

We in the VC, PE, and Growth Equity space invest using other people's money.

The people who have capital in Canada are uninterested in funding Canadian domiciled GPs - they mostly end up choosing American asset classes because of high returns.

Institutional investors like the Ontario Teachers Pension Plan and CDQP tend to target asset classes outside of Canada due to their returns requirements being in the double digits range.

Edit: Can't reply

> TBF, the OTPP has a huge home bias - they’ve got more Canadian investments than they do US investments despite the market being less than a tenth the size

Huge by institutional investor standards but not in aggregate.

The majority of OTPP's assets are not in real estate [0] - out of $209B AUM, only $29.4B is invested in real estate globally.

Most of their Canadian assets are fixed income investments, and even then their overall Canadian assets are dwarfed by their transnational investments (primarily US and Asia).

[0] - https://www.otpp.com/content/dam/otpp/documents/reports/2024...

[adfm]

Is it politically motivated or does it have to do with Canadian tech not requiring investment because of its stability?

[alephnerd]

I can't speak for YC, but legal overhead is an operational pain.

It's safe to assume YC will continue to fund Canadian founders, but they'll now require them to incorporate in Delaware, Singapore, or the Cayman Islands - none of which is significantly difficult for a founder. You could literally make a US Corp via Firstbase in a couple of minutes [0]

[0] - https://www.firstbase.io/partnership/y-combinator

[buckle8017]

Shopify is basically the only really successful Canadian start-up.

It's very hard to run a very small business here.

[Johnny_Bonk]

I would bet it's politically motivated, YC strikes me as money at all costs, and very dismissive of the techno feudalism they help support

[michelmyara]

This is a win from a tax perspective. Canadian founders pay Canadian income tax on their salary, regardless of where the company is incorporated. The Delaware C corporation pays its own income tax in the US using form 1120.

The personal tax rate is the same. The corporate tax rate is actually lower.

US: 21% (federal only). Canada: 23% to 31%, depending on the province.

I'm the co-founder of looch, a US SMB financial platform. Our Delaware incorporation package is $249, all-in. https://looch.money/start

[ChrisArchitect]

Earlier: https://news.ycombinator.com/item?id=46772809

https://news.ycombinator.com/item?id=46771213

https://news.ycombinator.com/item?id=46723068

https://news.ycombinator.com/item?id=46773242

[ensemblehq]

There could be many factors at play here so it’s not clear what the main issue is. However, from experience, US VC funds typically come from other US institutions and so it’s an easier sell when the corporation is US-based. Rules and regulations are more well understood and less complex for funds. The article states the requirement is to flip the structure to have the parent company based in one of the 3 countries mentioned. Presumably, better business/returns/policies

[pjjpo]

Interesting - I was surprised to see a note on Wefunder, though the opposite direction that Canada residents aren't allowed to use the platform to invest. For context, no problem from Japan.

It sounds like Canada has some unique regulations here, wouldn't have expected that.

[throwpoaster]

Probably de-risking (or front-running) capital controls (tariff on FDI).

[greenavocado]

Canada's economy is dominated by a few big companies because the government makes too many rules. It costs too much to start a business here. In politics, only two parties really matter. This creates a closed system where big players stay big and new competition is crushed by red tape. Regulatory frameworks impose prohibitive compliance costs, favoring established incumbents over startups. Key sectors like banking, telecom, and aviation function as protected triopolies. Political power remains centralized between two parties with overlapping establishment interests. These structural barriers effectively suffocate competition and exclude new market entrants.

[jdalgetty]

What do you mean it costs too much to start businesses here? I’ve founded 3 start ups and have not had any issues with things costing too much. Not a single one of those startups needed much to get going and there was no red tape or mysterious taxes that got in the way.

[willhslade]

Just want to post my favourite business interview of all time: https://www.cbc.ca/news/business/wind-mobile-backer-regrets-...

[kijin]

The U.S. also has only two parties that really matter, with overlapping establishment interests. What makes the difference?

[am3141]

"It costs too much to start a business here"

what sort of business are you talking about? You can start a software company within few minutes in Canada.

[paleotrope]

Can't help but read this as "Canada's today is the US in 10 years..."

[tamimio]

Yeah, except Canada really sucks for innovation and startups. Canada's [[[insert any sector here]]] is basically controlled by 2-3 companies that will either kill your idea before it happens, or you must get their “blessing” to penetrate the market. The government doesn't help either. I remember seeing some programs that require 3 years of profit and at least 5 full-time employees to get support of, say, $100k Canadian dollars, which is even less than the US one. The only time you can do something in the Canadian market is when you are already a very well-established company with big capital; only then can you survive there. I have seen government contracts mostly always given to corporations rather than promising startups simply because the conditions required only apply to large corporations.

[metalman]

"y combinator website no longer lists canada as a country it invests in"

they say it like it's a bad thing

[ericzawo]

Disappointing.

[jleyank]

Wonder if the founders not being US citizens or possibly even residents will hinder their ability to maintain their company. Or, whether this change increases the likelihood of being replaced when the startup shows some success.

Also, being foreign in the US is a concern at the moment. Hell, being native in the US is a concern at the moment...

[trollbridge]

There's probably no nationality easier for tech workers to migrate to the U.S. with than Canada, though. (And vice versa.)