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Silicon Valley startup incubator Y Combinator (YC) will restart investing in Canadian-incorporated companies, backtracking on its decision to remove them following complaints from tech entrepreneurs and investors in Canada.
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“Going forward, YC will once again invest in the U.S., Canada, Cayman and Singapore corporations,” YC chief executive Garry Tan said in a blog post on Thursday. “We don’t want to suggest that we no longer fund Canadian startups or Canadian founders. In fact, we invest in dozens of Canadian startups each year and have hundreds of Canadian founders in our alumni network. If you’re a Canadian founder, we welcome you to apply to YC.”
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Patrick Lor, managing partner at Montreal-based venture capital firm Panache Ventures, said YC’s reversal shows that Canada produces world-class entrepreneurial talent that global platforms cannot afford to ignore.
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“The response from the startup community reflected a deep confidence in our founders, our culture and the ambition that drives them to build globally relevant companies,” he said.
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Lor said reducing friction for startups accessing the world’s largest market is a net positive for Canadian tech.
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“Canadian founders would have adapted to any policy change, but this outcome aligns incentives,” he said. “Founders can build faster, and YC can continue investing in top-tier companies without slowing its pace.”
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YC struck Canada from its list of accepted countries last fall. Tan justified the decision by saying in a public memo that “we noticed our top-performing Canadian companies reincorporated in the U.S.”
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But some in Canada’s tech industry wondered whether the change was meant to encourage Canadian companies to move south.
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Scott Stevenson, cofounder and chief executive of St. John’s, N.L.-based Dialog Enterprises Inc. (Spellbook), which makes artificial intelligence-powered legal software, said Canadian companies incorporating in the United States would miss out on Canadian tax credits and other benefits.
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“After pitching over 100 investors, no U.S. (venture capitalist) has ever raised being a Canadian entity as a concern,” he said last week. “Ten years ago, you would hear about it coming up, but not anymore in my circles.”
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