Policy U-turn eases worries for Canadian founders seeking early-stage us capital
Y Combinator has put Canada back on its list of acceptable incorporation jurisdictions, a fast reversal that matters for Canadian founders who still see the US market as the deepest pool of early‑stage capital.
According to Y Combinator’s website, the accelerator will “once again invest in US, Canada, Cayman, and Singapore corporations,” after briefly dropping Canada from that list.
Bloomberg reported that the shift came “after hearing feedback from Canadian founders” who raised concerns about the signal it sent to the local tech ecosystem.
Business Insider reported that a Canadian outlet first spotted Canada’s removal from Y Combinator’s standard deal terms, which had previously listed “US, Canada, Singapore, and Cayman” as acceptable jurisdictions.
Y Combinator CEO Garry Tan initially defended the move on X, saying YC‑backed Canadian startups that reincorporated in the US had roughly double the average valuation of those that did not, and arguing that “where you are incorporated increases your access to capital. That’s it.”
In a subsequent blog post cited by Bloomberg, Y Combinator said it had observed that its “top‑performing Canadian companies reincorporated in the US,” likely because US incorporation gives “easier access to investor capital at Demo Day.”
At the same time, the accelerator stressed that it did not intend to step back from Canadian founders, saying it invests in “dozens of Canadian startups each year” and has “hundreds of Canadian founders” in its alumni network, including co‑founder Trevor Blackwell.
Wealth Professional previously reported that Y Combinator’s standard terms require startups incorporated outside the US, Cayman and Singapore to “flip” into a parent company in one of those jurisdictions, with the original entity becoming a subsidiary that continues to operate at home.
Under that deal, YC invests US$500,000 in each company — US$125,000 for 7 percent equity on a post‑money safe and US$375,000 on an uncapped safe with a Most Favoured Nation clause — while stating that it does not charge fees and avoids “gotcha” downside terms.
Canadian investors had warned that removing Canada from the list risked entrenching the idea that ambitious founders must formally shift south.
Vancouver venture capitalist Boris Wertz of Version One Ventures called the change “not a great signal,” according to Bloomberg, noting that Y Combinator had already encouraged Canadian startups to move.
He acknowledged that AI companies may find it easier to hire and raise in San Francisco, but maintained that the US is “not better for everyone” and that “you can build amazing companies anywhere.”
