How a small change to Y Combinator’s terms sent waves through Canadian tech | BetaKit
A recent update to Y Combinator’s terms, removing Canada as an investable location, has sparked debate about Canadian startups incorporating in the US.Summary
Y Combinator’s (YC) quiet removal of Canada from its list of permitted investment locations—alongside the US, Cayman Islands, and Singapore—has ignited a discussion within the Canadian tech industry. This change effectively requires Canadian startups seeking YC’s $500,000 USD investment to incorporate in one of the remaining countries, likely the US. While some view this as a negative signal, others argue that Canadian startups have been re-domiciling in the US for years to attract US venture capital.
YC President Garry Tan defended the decision, stating that US incorporation increases access to capital and that Canadian startups that reincorporated in the US have historically achieved higher valuations. However, prominent Canadian tech investor John Ruffolo strongly disagreed, arguing there’s no technical reason for Canadian companies to incorporate elsewhere, especially given potential loss of Canadian government incentives like SR&ED. The debate also touches on historical tax issues and the differing venture capital environments between the US and Canada, with the US being seen as less risk-averse.
Ultimately, the change highlights the ongoing tension between building Canadian tech companies within Canada and the perceived advantages of accessing the US market and investment ecosystem. Several industry figures noted that while US VCs don't necessarily *require* US incorporation, it often streamlines the investment process. The move comes amidst a broader context of economic tensions between the US and Canada, with concerns about US protectionist policies potentially impacting Canadian startups.
(Source：Betakit)
