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.
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.
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.
- prescription medicine
- dental
- vision
- mental health
- things like physiotherapy
Other comments in this thread make it sound like an absolute nightmare. So which is it?
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".
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.
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.
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.
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.
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.
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...
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.
