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.
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.
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.
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.
I worked at a place that expanded into Calgary and picked up a bunch of ML engineers with oil-and-gas backgrounds (who were eager for something outside the energy sector) and the government picked up half of the payroll tab for several years. There is also, of course, no health insurance benefits to worry about.
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.
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.
(* edit: I originally posted this in https://news.ycombinator.com/item?id=46772809 but have since merged the thread hither)
Can't help but think this is a move meant to satisfy the US admin.
Most Canadian YC founders incorporate their startups in the US (sctb and I did that, way back when), just like other international founders do and of course U.S. founders do, so the number of companies being affected by this change must be very small—small enough that it would be of little interest to the US govt.
Most probably the change is because the number was too small to justify all the paperwork, legal hoops to jump through, compliance tracking, etc., that inevitably come with cross-border investments. The startups that YC funds are almost always so early-stage that it ends up being easier for everyone if the founders just incorporate in the US. (It would be like a software team saying "why are we putting all this extra effort into supporting platform X when we only have 3 users on platform X and they can all easily switch to platform Y".)
But please understand that I'm just guessing here. The reason I'm posting at all is that I'd hate for any Canadian founders (or potential founders) to read a misleading headline and say "welp, I guess YC doesn't want us then". That is certainly not the case!
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.
if you talk to anyone in canada who is from here and doesn't work in the public sector, the conversation quickly turns to whether they're planning to leave and how far along they are. the way it's going, they're going to have to bar the exits.
People are just far too risk-averse up north to actually properly fund a real startup. =3
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.
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...
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.
They couldn’t target a higher proportion of Canadian assets while remaining reasonably diversified.
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]
It's very hard to run a very small business here.
And what's this about running a small business? I run one, no issues here. Couple employees, file my taxes...nothing special about running a business.
I've heard that Shopify is by itself 10% of all Canadian tech jobs paying >$100K.
What do you find makes it hard to run a small business in Canada?
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
It sounds like Canada has some unique regulations here, wouldn't have expected that.
what sort of business are you talking about? You can start a software company within few minutes in Canada.
they say it like it's a bad thing
Also, being foreign in the US is a concern at the moment. Hell, being native in the US is a concern at the moment...
That doesn't strike me as "not at all" when the TN status is 1/ effectively a work visa, whether you like the strings attached or not, and 2/ a foot in the door that lets you move to a more permissive status down the line. A Waterloo or UofT grad can go from applying to a US job to their first day in a few weeks, and the only interaction they'll have with the immigration system will be getting asked for paperwork at the border. Compare that to a British or Japanese new grad, for whom there is essentially very few options unless they have excellent connections or that they display enough extraordinary abilities to be eligible for O-1.
My hot take: given the 1 year delay on receipt of funds and the fact that it has the biggest impact on small teams, if you are going to scale a VC backed startup as fast as you need to - SR&D won't be the reason you succeed. If you are not scaling fast enough to make it - SR&D won't save you.
If you stay in Canada and raise from Canadian VC's you'll get half the cash at half the valuation. The government makes that up to you in SR&D a year later.
Found in Canada because it's your home and you love it. That's the only real reason. And it's a good one.
It sounds like that is just your bubble. I live in Vancouver, BC, and am a Canadian citizen. Yes, lots of people agree that things could be (and should be!) better - but I don't know many folks that are actively planning to leave.
These days I'm finding people are very much against relocating to the USA more than 4-5 years ago.
Keep in mind the 2008 correction never happened in Canada. =3
Pretty much.
Israel [0], China [1], and increasingly India [2][3] worked on resolving this issue by establishing funds of funds that partnered with private sector players by matching dollar-to-dollar with them to help build a VC ecosystem.
It's the same problem in the EU as well despite ECB proclamations. Heck, Norway's (ik not EU, it's EFTA) PIF has been conspicuously absent from any sort of statment of solidarity for Greenland unlike their Swedish, Finnish, and Danish peers because 25% of Norway's budget is dependent on the PIF maintaining double digit performance.
Edit: can't reply
> I think our biggest problem in Canada is total addressable market is small [...]
Israel is even smaller than Canada - 9 million people versus 40 million - and the median Israeli remains poorer [4] than the median Canada [5]. That didn't stop Israel.
Size of home country doesn't matter. The only difference is vision (and moreso lack thereof amongst Canadian and European decisionmakers).
> I don't think an Israeli founder would have trouble moving to the US if they wanted to.
They don't. In fact, Israel had an India-style brain drain to the US until the 2010s.
Heck, a little over a decade ago I had acquaintances of mine in TLV seriously considering moving their entire family to Sunnyvale for a $150k base salary job instead of earning $90k. They ended up deciding to become founders instead.
> 900M in the EU
The EU only has a population of 450M people.
[0] - https://www.yozmagroup.com/overview
[1] - https://english.www.gov.cn/news/202512/26/content_WS694e4e56...
[2] - https://idtalliance.org/
[3] - https://rdifund.anrf.gov.in/
[4] - https://www.ynet.co.il/economy/article/bjn8ppfz2
[5] - https://www03.cmhc-schl.gc.ca/hmip-pimh/en/TableMapChart/Tab...
So not only do we have fewer customers, we're competing against an economic juggernaut that shares our broad business rules, our culture and language (with one exception) and can market to us through all our media channels with very little friction.
So unless you're in health care or some other regulated field that a US startup can't just expand into easily, it's a tough go.
Indeed, if you are a Canadian Business getting market traction: the common scenario is acquisition by a US firm, or utter destruction by policy shifts and replacement by an opportunistic competitor. =3
- Rents in industrial spaces are absurd in my area, and I suspect they are for most of Canada in any HCOL area. If you can't wing it out of your garage, your burn rate just exploded
- Getting permits has been exorbitantly slow and complex
- WorkSafeBC cooperation and inspections are a major time sink (gets better after the first stretch)
- Getting certficates to export plants is—in my opinion—unnecessarily complex and slow, such that I don't think I'll even bother at this rate
- Inter-provincial regulations and standards can be hard as hell to nail down. Asking random people on forums can yield better results than extensive google or LLM querying
- Keeping track of things like write offs and deductions can span years for single costs. I understand why, but I don't like it
- Admin and oversight often feels like half the job. I need to be on top of so many things that aren't 'the work', and it takes a lot away from focusing on making a better product
- Shipping things is expensive as hell, and I anticipate this problem will worsen over time. Not a big deal if you don't ship anything
- Depending on the type of business you've registered, the admin overhead at different times of the year can be significant
Again though, if you just go around repairing things or you provide software services, your life will be orders of magnitude simpler. I used to have a sole proprietorship here in BC providing software consulting services, and it was fine. I had one tax hiccup in something like 10 years, and it wasn't a big deal. I rarely had to think about it.
I do wonder if this friction could be part of why Canada arguably has a lack of interest and innovation when it comes to producing material goods. It's genuinely a pain in the ass to be allowed to do it by the books, and to continue operating accordingly.
Caveat: I could be lazy and stupid
Can you expand a bit more on how difficult it is to deliver hardware product orders to other countries? Whichever countries you have experience in.
All that US-centric stuff overshadows us constantly. And it's not just in the startup landscape.
We literally have laws on the books [0] that force our media companies to maintain a certain amount of Canadian content on TV/radio/streaming/etc so we're not only consuming US content.
This isn't a comment on whether that's good or bad, it's just a fact, and it has a real impact on our society at all levels.
Have you been to Israel?!?
NBA and NFL is everywhere, the Israeli dream before tech began booming in the 2010s was "immigrate to Boston, Brooklyn, or Miami", and Jewish Americans like Seth Klarman, Sheldon Adelson, Ronald Lauder, and Bill Ackman have had an outsized stake in media and entertainment ownership before the Mizrahi cultural boom in the 2010s.
Literally the only reason Canada fell behind was because the political leadership in countries like Israel decided to work on building a domestic tech VC ecosystem in the 1990s-2000s while their Canadian equivalents during that era had no economic vision aside from resource extraction.
Additionally, the Canadian equivalents of Shlomo Kramer (Checkpoint, Palo Alto Network, Imperva, Cato Networks, Cyberstarts), Nir Zuk (Palo Alto Networks, Cyberstarts), and Gili Rannan (Sequoia, Wiz, Cyberstarts) - David Cheriton (Google, Arista), Chamath Palihapitiya (Facebook, Slack, Groq), Joseph Tsai (Alibaba), Changpeng Zhao (Binance), Chip Wilson (Lululemon), and Ryan Cohen (Chewy) - are all hard MAGA. Heck, even Big 5 banks like Scotiabank are pro-Trump [0] because their LatAm business benefits from Trump power projection in the region.
[0] - https://www.bloomberg.com/news/articles/2026-01-06/scotiaban...
Fairly senior dev, US citizen here (20 years experience).
After what I've seen this past year, but more the past month, I will work for peanuts for a path to citizenship in Canada. US in 5 years is not a place I want to be, looking into all options and very serious.
Starting a business in the USA is often far more lucrative, but people usually still incorporate in both countries for tax and liability reasons.
Things like the Canadian youth tax-credits also mean anyone over 28 gets pushed down the list for entry-level positions. The US is far easier to find a reasonable job, and the cultural tradition of entrepreneurship is far better. =3
Not saying anyone's right or wrong but the idea that, should America go psycho, Canada would somehow be okay is a pipe dream. Canada is essentially an outpost of the United States. Yes, I have Canadian family (even old stock "Loyalist" Canadian family) and they all feel the same way.
People need to be real.
If you actually want to be able to declare independence from America you'd need citizenship in a country with actual nuclear capability. France, the UK, China, etc
On the military angle, I'd much rather live in a country without nukes. But I'm willing to kick the nuclear blackmail risk can down the road, my own government's threats are way more immediate.
People have been saying they are moving to Canada for decades due to whatever recent events, statistics say otherwise.
This is honestly insane.
> On the military angle, I'd much rather live in a country without nukes.
That's because the majority of the typical American with these views is extremely privileged and has never actually had to live in a country without nukes. Ukraine is the future of countries without nukes -- forced to choose between great powers or made into buffer zones without any prospects. It's all so tiresome really.
- prescription medicine
- dental
- vision
- mental health
- things like physiotherapy
I don't have to deal with this as we are a (very) small business but it's a major headache for larger small businesses. Basically, as an employer it simply isn't fun to be forced to be in the "providing access to healthcare" business when that's not your core business.
It is for most large employers as it helps depress salaries and reduce competition from startups. Employees will want to work for a large employer that lets them pay for health insurance with pre-tax dollars, among other tax advantaged benefits that having a well funded HR department can provide. And employees cannot easily compare compensation at other employers so they are more likely to stick around than shop around, reducing the need to increase pay to keep up with the market.
Employers can also tweak compensation by modifying deductibles/out of pocket maximums/healthcare provider networks, and most people's eyes will glaze over before they can figure out if they got an increase or decrease in their total compensation.
My US benefits were middling in terms of coverage and package when working for a large F500 and went about $16k USD on a 180k salary -- converted is about $19k CAD at todays rates. Including co-pays and fees it's like 10% of salary. At the time I was in a big city with great hospitals and doctors, but not noticeably better than Canada even at the higher price.
Other comments in this thread make it sound like an absolute nightmare. So which is it?
It's only a nightmare if you hate all taxes and labour rights. So, you know, YC
Uhh, we don't have universal coverage for everything health up here, we still have private benefits that our employers pay for as part of our compensation plans.
Life insurance, dental, vision, prescriptions, physio, mental health, critical illness etc..
It might be less than in the US, but it's not "no health insurance benefits to worry about".
The key issue is that the core of one's health insurance is not dependent on the employer or even being full-time employed. This provides tremendous flexibility. And I suspect not having things like pregnancy being seen as preexisting conditions is a big win for parents-to-be.
Age or low-income (I think) provide provincial or federal assistance independent of employment also. Medical expenses are also far easier to deduct on taxes in Canada vs. the US.
The primary tension and strain comes from deciding where your market is, I think. You can simplify your overhead in obtaining certificates and building your workflows by choosing to sell to a market where these factors are minimally taxing (like just selling in Ontario or across Canada), but in my case this limits my market too much. Not that many people in Canada are buying what I sell, but there are large markets in other countries that are underserved.
I have a feeling hardware is much easier. What you're developing is probably not illegal or considered high risk where you want to sell it. In my case, some of the products I sell are banned outright because the province or state it's going to considers it invasive. Even with the certificates, I can't sell some species in some locations. Figuring out all of these requirements and rules in advance is essential so your shipments don't end up rejected and destroyed at the border.
What kind of hardware are you manufacturing?
> What kind of hardware are you manufacturing?
Simple electronics. Think a flashlight or something a bit more complex. Product contains a lithium ion battery.
I wasn't aware that this simplifies things. How does that work?
Depends how secure your position is I guess... =3
When you're ready to seriously explore options, NewLife.Help (https://newlife.help) has a solid Move Planner and an excellent cost-of-living comparison tool that can help you weigh different paradises against each other.
If you are a dual US/Canadian citizen, than you may still be expected to file a US return or face fines. Similarly, if your business sells products or services to US customers there are transactional and fiscal state-specific grace levels than can trip tax obligations.
Best of luck =3
The standard move in this situation is that you form a US Delaware C Corp and make your HQ a subsidiary.
Since this is purely about ownership structure and equity governing law, I'm curious what the intersection you're seeing between these terms and "labour rights" are. We're a US company with employees in Europe (not even an HQ in Europe, just employees there), and I've learned more about European labor law idiosyncracies over the last few years than over the whole rest of my career, because I've had to.
Having a Canada-registered company is usually required to get government grants and loans from Canadian banks, although that's probably not very important to VC-backed companies. There are also some tax advantages to running a Canada-registered company if you're based out of Canada, plus it's much easier to find a local professionals (lawyers, accountants, etc.) familiar with Canadian corporations than US corporations.
None of these issues should cause too many problems, but if given a choice, as a Canadian I'd certainly prefer to run a Canada-registered company over a US-registered one.
Read the thread: clearly a lot of people are reading this as "you can't HQ in Canada, your team has to move".
I don't think that's true. You can't have employees without a local subsidiary. If you're going through an EOR agency, they're contractors not employees.
It's complicated. In theory, US states have more rights and powers ("The powers not delegated to the United States [...] are reserved to the States" [0]), but in practice, the Commerce Clause lets the Federal government do essentially anything that it wants. Canada's provinces are only given control over a specific set of topics [1], but their powers are almost absolute in these areas, since the courts almost never let the Federal government interfere.
So for labour code specifically, US companies need to adhere to both Federal and state labour codes, while Canadian companies only need to follow a single provincial labour code. (There is a Canadian Federal labour code, but that only applies to Federally-regulated companies, and those companies don't need to follow the provincial labour codes)
[0]: https://en.wikipedia.org/wiki/Tenth_Amendment_to_the_United_...
[1]: https://en.wikipedia.org/wiki/Constitution_Act,_1867#Part_VI...
But I think that it counts for a little bit more than just "details for your finance person", since the tax and grant eligibility implications could mean that some startups would be better off incorporating in Canada and not taking the Y Combinator money. But if you're taking the VC funding route (which most applicants to Y Combinator are), then I agree that none of this should really matter very much.
What founders in Europe (say, in the Netherland, where YC invested in Servo7 in the W26 batch) do to accept funding from YC is a "flipped structure": they create a new Delaware Corporation, which then acquires the original company and runs it as a subsidiary. The founders retain the same ownership of the new DE company as they would have had they been in the US. Literally nothing else changes about the operation of the company.
This structure is so standard that Canadian YC companies already tended to do it. You've got Dan in this thread talking about how he and Scott did it with Skysheets back in the mid-aughts. Whatever else YC is OK with, future priced-round investors want companies incorporated in the US.
I'm sorry, but you were wrong; your analysis of what this change meant was based on a wildly false premise. The prospects of founders in Canada have not changed; the only thing that's changed is how the paperwork is managed if they are invited to a batch and accept.