Y Combinator website no longer lists Canada as a country it invests in

Posted by TheLegace 3 days ago

Comments

Comment by throwup238 2 days ago

This whole move is about corporate governance. The US makes it really easy to start or manage corporations and the courts are (mostly) streamlined and predictable, especially the chancery courts in Delaware. Cayman Islands adopted much of Delaware's legal approach to corporations in 2016 to make the island more business friendly rather than just a tax haven, and they've got a foot in the Latin American market. Singapore is the SEA equivalent of Delaware.

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.

Comment by pjc50 2 days ago

Many, many years ago I was the first non-founder employee at a UK startup. That meant hearing quite a lot (but not all) of the corporate discussions about finance, company structure etc. Fairly early on in the fundraising process we settled on "Delaware parent company, 100% owner of UK private limited company". This meant that US investors could invest in the Delaware entity happily, while the tax and employment aspects were handled locally in the UK. Stock grants were made from the US entity (under US law), but also eligible for UK tax relief (since the options were being assigned to UK residents).

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.

Comment by compiledkoala 2 days ago

This exactly. Canadian common law has some very odd implications for corporate governance. Much higher risk of governance deadlock due to recent rulings.

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.

Comment by am3141 2 days ago

This is simply not true. Canadian founders lose massive Canadian tax benefits by incorporating in the US. The only way out of further tax complications (and it’s not because of Canada, it’s just how international tax laws work) the founders have to permanently move to the US. Source: I have founded both Delaware and Canada federal co.

Comment by compiledkoala 2 days ago

I understand how SR&D works - I've filed for it several times.

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.

Comment by bryanlarsen 2 days ago

Banks are generally happy to factor SR&D for you if you need to get your money faster

Comment by Onavo 2 days ago

What are some of the recent rulings that make it high risk?

Comment by garbawarb 2 days ago

I wonder if Canada needs a Delaware. Delaware's system works because they have such a small population that offering a low cost and high volume solution to the rest of the country is the right strategy. I could see a case for a smaller Canadian province like Newfoundland or PEI doing the same.

Comment by captnFwiffo 2 days ago

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Comment by captnFwiffo 2 days ago

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Comment by wilson090 3 days ago

This is extremely misleading. YC still backs Canadian founders (and other international founders). There must have been one too many painful experiences investing in companies based in Canada. Creating or converting to a US-based entity is a standard ask for most international founders who want to participate YC and I suppose something has changed such that Canada is no longer an exception to that.

Comment by tptacek 3 days ago

Important added context here: the list went from US, Cayman, Singapore, Canada to US, Cayman, Singapore. It's not as if YC was generally investing in non-US based entities before. Canada was an exception and isn't anymore.

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.

Comment by trollbridge 3 days ago

It's a weird change though. Canada is one of the most investor-friendly and startup-friendly jurisdictions I can think of. If you want to grow quickly, you need to be thinking about how to get an office set up in places like Calgary (lots of machine-learning talent there), Toronto, and Vancouver, and when you do so you'll find the government incentives and lower wages lead to you spending about half on total compensation versus a typical American startup hub.

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.

Comment by curmudgeon22 3 days ago

There are definitely still health insurance benefits (I'm Canadian). Yes, our doctor and hospital visits are covered, but many things are covered by employer paid insurance (or not at all):

- prescription medicine

- dental

- vision

- mental health

- things like physiotherapy

Comment by trollbridge 2 days ago

Yeah, correct, but it's not going to be a $4000/mo line item expense for the employer per employee.

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.

Comment by lotsofpulp 2 days ago

>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.

Comment by red-iron-pine 2 days ago

I live and work in Canada. My very generous healthcare coverage for optional stuff including dental is ~$5300 CAD. I've got kids / dog / spouse / etc. and usually opt for the extra coverages including life insurance. Work covers about half of that. 4% tax (which funds the socialized medicine) plus the 2k, call it 5.5% of salary and I get good healthcare in a large Canadian city.

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.

Comment by chris_wot 2 days ago

If only there was single-payer universal healthcare, huh?

Comment by tokyobreakfast 3 days ago

> Canada is one of the most investor-friendly and startup-friendly jurisdictions I can think of.

Other comments in this thread make it sound like an absolute nightmare. So which is it?

Comment by gucci-on-fleek 3 days ago

Much like the US, the regulations and culture varies depending on which province (state) you're in, so someone starting a business in Alberta could have a very different experience than someone in Ontario.

Comment by 1attice 3 days ago

Somewhat. Our provinces have fewer rights, powers and responsibilities than US states. The experience is more homogenous.

It's only a nightmare if you hate all taxes and labour rights. So, you know, YC

Comment by tptacek 3 days ago

You can still run a company from Canada under these terms, the same way every international YC batch company runs --- you can just go to the YC directory and select for EMEA, LATAM, APAC, &c. There's hundreds of them.

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.

Comment by gucci-on-fleek 3 days ago

> You can still run a company from Canada under these terms, the same way every international YC batch company runs

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.

Comment by tptacek 2 days ago

I'm sure a lot of British people want to run UK-registered companies! I'm not saying Canadians wouldn't rationally prefer to have the option of taking investments in a Canadian corporation, just that it doesn't look like there's a lot more to this than details for your finance person, and that it's the same deal every other country gets.

Read the thread: clearly a lot of people are reading this as "you can't HQ in Canada, your team has to move".

Comment by gucci-on-fleek 2 days ago

Right, I agree with you that where the business is incorporated has essentially zero bearing on where its HQ is, where it can operate, hire staff, etc.

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.

Comment by ragall 2 days ago

> We're a US company with employees in Europe (not even an HQ in Europe, just employees there)

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.

Comment by gucci-on-fleek 3 days ago

> Our provinces have fewer rights, powers and responsibilities than US states.

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...

Comment by am3141 2 days ago

What labor laws are you encountering with a 10 person software company in Canada?

Comment by 1attice 2 days ago

Who said 10?

Comment by tptacek 2 days ago

Again: what does any of this have to do with labor laws? I get that you're just responding to the comment there, but you kind of started this thread with your "you know, YC" thing, and it's still totally unclear what any of this has to do with operating a company in Canada. You can still operate YC companies in Canada!

Comment by 1attice 2 days ago

Not new ones? Unless I misread the OP?

Comment by tptacek 2 days ago

Ah, see. Here's the problem. Yes: you misread the OP. You've misunderstood what's happening here. YC still funds Canadian startups. They don't have to move. They retain their Canadian HQ. Their operations remain in Canada.

Comment by 1attice 2 days ago

Then explain their messaging. Canada no longer listed.

Comment by tptacek 2 days ago

Neither is the UK, Germany, Spain, or India, all places with with YC companies in them. None of those locales have ever been in the standard YC deal terms.

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.

Comment by sbarre 3 days ago

> There is also, of course, no health insurance benefits to worry about.

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".

Comment by jleyank 3 days ago

Well, it's fully possible to be self-insuring in these areas. Prescription assistance is probably the one significant benefit as physio, mental health and the like can be of limited reimbursement (judging from what I've seen).

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.

Comment by tptacek 3 days ago

Doesn't it seem likely that tax treatment has more to do with this than benefits? People are reading this like YC isn't investing in companies HQ'd in Canada, but there's no evidence of that! I look at a set {US, Singapore, Cayman} and what I think is "this is about taxes". Maybe especially tricky for YC since such a huge fraction of their portcos are pre-revenue.

Comment by jleyank 3 days ago

The key question is whether they make non-US-ians move to the Valley to participate. Or, rephrasing, leave their home country to move to whichever piece of YC is cutting the check.

Comment by tptacek 3 days ago

Again: there were 4 countries, total, in the standard YC deal terms. Now there are 3. There are many hundreds of YC companies headquartered overseas.

The standard move in this situation is that you form a US Delaware C Corp and make your HQ a subsidiary.

Comment by walterbell 3 days ago

Delaware vs. Cayman for LatAm startups: https://news.ycombinator.com/item?id=46686745

Comment by sbarre 2 days ago

You are correct but I think you missed the point of the post I was responding to, which was claiming that employers don't need to worry about paying for health insurance for employees in Canada, which is inaccurate.

Comment by jleyank 2 days ago

You can get by without private health insurance in Canada. This is not the case in the us.

Comment by JimmaDaRustla 2 days ago

[flagged]

Comment by wilson090 2 days ago

The only mental gymnastics required are those to make this about "recent events"

Comment by garbawarb 3 days ago

> “It’s the Valley-or-bust mentality that breaks the ecosystem and really hurts Canada,” Gomez said.

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.

Comment by tptacek 3 days ago

Presumably it continues to support them the same way it supports 386 companies headquartered in Europe, 218 in South Asia, 217 in Latin America, 106 in Southeast Asia, 87 in Africa, 71 in MENA, 23 in East Asia, and 14 in Oceania, all locales where you previously had to do a flipped company structure to participate in YC.

Comment by kdazzle 3 days ago

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Comment by jojobas 2 days ago

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Comment by RobRivera 2 days ago

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Comment by jonway 2 days ago

Well he got mad about the Canadian version of “A letter to our colleagues” and then endlessly harped on that in social media. Like, years and years later he got a board review, but it’s not like a “some stuff I tweeted” or some “opinions shared on social media”, it was trading on his professional credentials to ply a self-help business scheme among other stuff iirc

Comment by SirSavary 2 days ago

Yes, because when you hold credentials granted by a board of professionals that require you to sign a code of ethics, using those credentials to amplify your personal opinions comes with accountability.

To be specific: telling people "you're free to leave at any point" when they express concerns about humanity's impact on the planet is the kind of thing psychology boards take issue with, particularly when it comes from someone with a large platform and professional credentials in mental health.

Comment by greazy 2 days ago

You are equating government audits with social media outrage.

One is not like the other.

Comment by RobRivera 1 day ago

Fair enough

Comment by mrtksn 2 days ago

[flagged]

Comment by am3141 2 days ago

Well it’s the USA / Valley pride what built that ecosystem there. It wasn’t always like that even in the US. A long time ago, the US congress had to pass a law to incorporate a company. It went from there to whats its now because of that pride. We want that pride here in Canada to build our own ecosystem.

Comment by PostOnce 3 days ago

Economic incentives are only one of the many incentives weighing on the scales. There are others.

Comment by garbawarb 3 days ago

Like which?

Comment by ooooppppppp 3 days ago

Attractiveness to talent?

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.

Comment by jleyank 3 days ago

If you have skills in one of the many categories, and with 20 years in tech you should, get the offer. Once armed with an offer from a Canadian company you can handle the visa at the border. For Quebec-based companies you have to have a handle on French but for the rest of Canada it's a skills and education based system for getting permanent residency.

Comment by Joel_Mckay 2 days ago

The wage difference for IT workers is often 3:1 or higher in the US economy, as Canada has 1/10th the population with higher ratios of university alumni.

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

Comment by garbawarb 2 days ago

The lifestyle difference is real but the income difference is enough to sway most people to the US. If Canada can close the gap on that I'd say it can become an even more attractive place for global tech talent than the US because of its overall better livability.

Comment by Roscius 2 days ago

Live in Canada and work remotely into the US. Been doing it for the last 6 years...

Comment by Joel_Mckay 2 days ago

Or be a digital nomad in a tropical paradise, and avoid the 46% income-tax rate.

Depends how secure your position is I guess... =3

Comment by newlifehelp 2 days ago

It's not just about the tax rate; make sure you properly understand the residency requirements and where your tax domicile will actually be. Many "digital nomad" visas still have an income threshold or require proof of foreign income, so double-check the fine print.

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.

Comment by Joel_Mckay 2 days ago

Canada taxes on residency, and not citizenship. The number of days in the country directly affects your tax obligations.

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

Comment by garbawarb 2 days ago

Can you still earn the same salary as you would in the US though?

Comment by anon291 2 days ago

It is difficult to take anyone worried about the US seriously when their solution to protect themselves is to move to Canada.

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

Comment by oooopppppppp 2 days ago

It's a step improvement: It gets you over the border to a comparable place while being close enough to family for now. The risk of "borders are secure now, nobody gets to leave" is non-zero in the US' future. The way political litmus tests are affecting civil rights here is scary as hell too.

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.

Comment by anon291 1 day ago

> borders are secure now, nobody gets to leave

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.

Comment by mlrtime 2 days ago

Let them have their opinion, the number is so small it's meaningless.

People have been saying they are moving to Canada for decades due to whatever recent events, statistics say otherwise.

Comment by anon291 1 day ago

If everyone who wanted to move to Canada actually moved to Canada, Canada would be filled to the brim. It's like the modern day Shangri-la. A mythical land.. far far away.

Comment by cowpig 2 days ago

[flagged]

Comment by throwup238 2 days ago

> Suddenly YCombinator no longer invests in Canadian startups.

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.

Comment by tptacek 2 days ago

Well, that theory is pretty easy to debunk, because Archive.org exists.

Comment by dang 3 days ago

I haven't talked to anyone at YC about this, have no inside information, and can't read the article*, but I imagine this is some technical change about where startups are incorporated. I'm sure applications from Canadian founders are as welcome as ever and there will be no change on the level of which applications get funded.

(* edit: I originally posted this in https://news.ycombinator.com/item?id=46772809 but have since merged the thread hither)

Comment by Sanzig 3 days ago

Seems like a very bizarre move, considering Canadian-domiciled corporations have access to very generous financial incentives (SR&ED) at both federal and provincial levels.

Can't help but think this is a move meant to satisfy the US admin.

Comment by dang 2 days ago

Again, I have no inside info, but I'm pretty sure it's got nothing to do with that.

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!

Comment by motohagiography 3 days ago

Whether it's significant or not, YC's basic model of seed funding with ~$100k could be reproduced in Canada with $10MM or less. Unsure how this is a problem.

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.

Comment by Yeroc 3 days ago

What are the trivial changes Canada could make if it wanted to be serious about startups?

Comment by motohagiography 2 days ago

briefly: cap gains reductions. at will employment. competitive top line corporate rates that attract HQ's and IP the way Ireland did. reduce the public sector talent tarpit, tariff goods from countries that use slave labor. abolish the dairy, wheat, and syrup boards and other agriculture cartels. enforce money laundering laws against retail businesses to normalize commercial rents. reduce immigration to levels where people can integrate and actually want to make things for each other and to take the pressure off home prices. pro natal policies that create more young people with a stake in their country. make math education a national project. to name a few.

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.

Comment by 5 hours ago

Comment by Sanzig 2 days ago

All Canadian jurisdictions, as far as I am aware, are at-will employment. Unionized environments are an exception because they have layoff procedures in their collective agreements, but that's the same in the US.

Comment by bpye 2 days ago

> 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.

Comment by am3141 2 days ago

we have at will employment here in Canada, do you know much about Canada? Most of the things you have mentioned are not real issues here.

Comment by Joel_Mckay 2 days ago

Canada could risk 1:22 odds of a startup return, or get near certain double digit growth from real-estate, and revenue-property holdings.

People are just far too risk-averse up north to actually properly fund a real startup. =3

Comment by Rupok 3 days ago

That's truly saddening. I hope there will be more VC backing in Canada because the talent is definitely there.

Comment by ivl 2 days ago

I have to disagree.

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.

Comment by alephnerd 3 days ago

We in the VC, PE, and Growth Equity space invest using other people's money.

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...

Comment by Marsymars 3 days ago

> 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.

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.

Comment by garbawarb 3 days ago

Or Canadian real estate.

Comment by alephnerd 3 days ago

Most institutional investors limit real estate to around less than 5% of their portfolio.

Comment by Joel_Mckay 2 days ago

Not in Canada, the investment holding companies are leveraged 17:1 in some markets.

Keep in mind the 2008 correction never happened in Canada. =3

Comment by 3 days ago

Comment by EGreg 3 days ago

So what's the upshot? No Canadian VCs? I guess there's always ClearCo LOL

Comment by alephnerd 3 days ago

> No Canadian VCs

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...

Comment by sbarre 3 days ago

I think our biggest problem in Canada is total addressable market is small.. We're 40M people (compared to what, 350M in the US, and 900M in the EU), and we're directly next door to the largest startup economy in the world.

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.

Comment by garbawarb 3 days ago

Israel, like the parent poster said, is even smaller. I don't think an Israeli founder would have trouble moving to the US if they wanted to.

Comment by sbarre 2 days ago

Yeah but Israel doesn't have the proximity (in culture, media, advertising, entertainment, etc) that we do to the US.

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.

0: https://en.wikipedia.org/wiki/Canadian_content

Comment by alephnerd 2 days ago

> Israel doesn't have the proximity (in culture, media, advertising, entertainment, etc) that we do to the US

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...

Comment by Joel_Mckay 2 days ago

There are a lot of "odd" things that happen to non-US citizens businesses that no one likes to talk about in public.

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

Comment by garbawarb 2 days ago

Why are those more common for noncitizens?

Comment by Joel_Mckay 2 days ago

It is still illegal to steal IP from fellow citizens. =3

Comment by michelmyara 1 day ago

This is a win from a tax perspective. Canadian founders pay Canadian income tax on their salary, regardless of where the company is incorporated. The Delaware C corporation pays its own income tax in the US using form 1120.

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

Comment by adfm 3 days ago

Is it politically motivated or does it have to do with Canadian tech not requiring investment because of its stability?

Comment by alephnerd 3 days ago

I can't speak for YC, but legal overhead is an operational pain.

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]

[0] - https://www.firstbase.io/partnership/y-combinator

Comment by Onavo 2 days ago

Is it even possible to get a stripe account as a Cayman entity?

Comment by buckle8017 3 days ago

Shopify is basically the only really successful Canadian start-up.

It's very hard to run a very small business here.

Comment by JimmaDaRustla 2 days ago

What an ignorant thing to say. Clio? Wealthsimple? 1Password? Hootsuite? Lightspeed? Ecobee? SkipTheDishes? Those are just off the top of my head.

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.

Comment by TMWNN 2 days ago

>Shopify is basically the only really successful Canadian start-up.

I've heard that Shopify is by itself 10% of all Canadian tech jobs paying >$100K.

Comment by cowpig 2 days ago

> It's very hard to run a very small business here.

What do you find makes it hard to run a small business in Canada?

Comment by JimmaDaRustla 2 days ago

They don't know, they're just projecting.

Comment by PacificSpecific 2 days ago

Isn't slack and Flickr Canadian?

Comment by steve_adams_86 3 days ago

It's actually remarkable how difficult it's made. My only experience is here in BC. In a couple of years I've learned that it's practically punitive, and you have to want to do it really badly. The risk to reward ration is abysmal. I only continue because it's more of a passion project than an economically viable, sensible project. It could become one eventually, but my god, I'd hate to be doing this without a full time job to depend on.

Comment by wahnfrieden 3 days ago

Can you give more details? I'm simply a sole proprietorship in Canada so not sure what I'm getting myself into.

Comment by StayTrue 3 days ago

Don’t worry too much. I’ve incorporated in AB and BC. Neither is difficult to setup or maintain. My regulatory burden amounts to about one weekend of effort per year including corporate tax filings. That’s a baseline. Harder if you employ a team (not just subcontractors) or in regulated industries where you might have environmental compliance or similar.

Comment by steve_adams_86 3 days ago

This is a much better summary than mine. It really is fine if you don't venture into places where various types of compliance come into the picture.

Comment by steve_adams_86 3 days ago

I think some things could make your work far easier than mine, but in my case there are a lot of hoops to jump through. I initially wanted to bootstrap myself in my garage, but discovered over time that this is essentially illegal and I'm required to operate out of a business address. This is also virtually forced on me because there are a variety of compounds I can't order without a registered business and accompanying business address, which is manually verified. Fine, I totally get regulations around hazardous chemicals, though in my case it seems excessive. But, if I were to summarize the things that have been most frustrating:

  - 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

It probably sounds like I don't understand what regulations are for and I hate red tape, but that's not the case at all. I think small businesses are disproportionately slammed by some of the requirements they create, though. I also wonder if there are blanket policies which cause some people to be pressed much harder than necessary. It makes you wonder if any of it is worth it at all.

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

Comment by abdullahkhalids 2 days ago

Thanks for your comment. I have in my mind to start a hardware focused business in Ontario. I am a little afraid now, but hopefully, I have better luck than you.

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.

Comment by steve_adams_86 2 days ago

In my case I need phytosanitary certificates, with the complexity and overhead varying by destination. It isn't hardware like electronics or manufactured goods, but sterile plant cultures in jars. The main requirement is having the products and pipeline inspected by the CFIA.

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?

Comment by abdullahkhalids 2 days ago

Thanks for the detailed answer.

> What kind of hardware are you manufacturing?

Simple electronics. Think a flashlight or something a bit more complex. Product contains a lithium ion battery.

Comment by steve_adams_86 2 days ago

Nice, that sounds fun! Some day I'd love to explore that kind of product development and manufacturing. I think there's certification involved there too, though I'm not sure if there is if it's not a home appliance. I hope it's smooth sailing!

Comment by Sanzig 2 days ago

Hardware should be much easier, especially if you get your boards fabbed and assembled at a CM (which you probably should, very few companies have a good reason to move assembly in-house).

Comment by steve_adams_86 2 days ago

> especially if you get your boards fabbed and assembled at a CM

I wasn't aware that this simplifies things. How does that work?

Comment by adfm 2 days ago

Sounds like an opportunity for co-working lab spaces.

Comment by Johnny_Bonk 3 days ago

I would bet it's politically motivated, YC strikes me as money at all costs, and very dismissive of the techno feudalism they help support

Comment by 3 days ago

Comment by ChrisArchitect 2 days ago

Earlier: https://news.ycombinator.com/item?id=46772809

https://news.ycombinator.com/item?id=46771213

https://news.ycombinator.com/item?id=46723068

https://news.ycombinator.com/item?id=46773242

Comment by ensemblehq 3 days ago

There could be many factors at play here so it’s not clear what the main issue is. However, from experience, US VC funds typically come from other US institutions and so it’s an easier sell when the corporation is US-based. Rules and regulations are more well understood and less complex for funds. The article states the requirement is to flip the structure to have the parent company based in one of the 3 countries mentioned. Presumably, better business/returns/policies

Comment by 2 days ago

Comment by pjjpo 2 days ago

Interesting - I was surprised to see a note on Wefunder, though the opposite direction that Canada residents aren't allowed to use the platform to invest. For context, no problem from Japan.

It sounds like Canada has some unique regulations here, wouldn't have expected that.

Comment by throwpoaster 3 days ago

Probably de-risking (or front-running) capital controls (tariff on FDI).

Comment by tamimio 2 days ago

Yeah, except Canada really sucks for innovation and startups. Canada's [[[insert any sector here]]] is basically controlled by 2-3 companies that will either kill your idea before it happens, or you must get their “blessing” to penetrate the market. The government doesn't help either. I remember seeing some programs that require 3 years of profit and at least 5 full-time employees to get support of, say, $100k Canadian dollars, which is even less than the US one. The only time you can do something in the Canadian market is when you are already a very well-established company with big capital; only then can you survive there. I have seen government contracts mostly always given to corporations rather than promising startups simply because the conditions required only apply to large corporations.

Comment by metalman 2 days ago

"y combinator website no longer lists canada as a country it invests in"

they say it like it's a bad thing

Comment by ericzawo 3 days ago

Disappointing.

Comment by BergAndCo 2 days ago

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Comment by JimmaDaRustla 2 days ago

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Comment by jleyank 3 days ago

Wonder if the founders not being US citizens or possibly even residents will hinder their ability to maintain their company. Or, whether this change increases the likelihood of being replaced when the startup shows some success.

Also, being foreign in the US is a concern at the moment. Hell, being native in the US is a concern at the moment...

Comment by trollbridge 3 days ago

There's probably no nationality easier for tech workers to migrate to the U.S. with than Canada, though. (And vice versa.)

Comment by garbawarb 3 days ago

Not at all. The only benefit Canadians get compared to others is the opportunity to work for employers on TN status which is a temporary non-immigrant-intent work visa. You're not even allowed to want to immigrate if you have one. And given the political climate there's a chance it will go away at any time.

Comment by egourlao 3 days ago

> The only benefit Canadians get compared to others is the opportunity to work for employers on TN status which is a temporary non-immigrant-intent work visa.

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.

Comment by jleyank 3 days ago

Yup, such visas (going both ways) are based on the NAFTA/CUSMA agreement and probably live or die with that agreement. Uncertainty limits what businesses and people can/will do, and the sudden loss of work/residency permission would be really annoying for the families involved.

Comment by tptacek 2 days ago

I don't believe anybody is being asked to migrate anywhere.

Comment by greenavocado 3 days ago

Canada's economy is dominated by a few big companies because the government makes too many rules. It costs too much to start a business here. In politics, only two parties really matter. This creates a closed system where big players stay big and new competition is crushed by red tape. Regulatory frameworks impose prohibitive compliance costs, favoring established incumbents over startups. Key sectors like banking, telecom, and aviation function as protected triopolies. Political power remains centralized between two parties with overlapping establishment interests. These structural barriers effectively suffocate competition and exclude new market entrants.

Comment by jdalgetty 3 days ago

What do you mean it costs too much to start businesses here? I’ve founded 3 start ups and have not had any issues with things costing too much. Not a single one of those startups needed much to get going and there was no red tape or mysterious taxes that got in the way.

Comment by willhslade 2 days ago

Just want to post my favourite business interview of all time: https://www.cbc.ca/news/business/wind-mobile-backer-regrets-...

Comment by kijin 3 days ago

The U.S. also has only two parties that really matter, with overlapping establishment interests. What makes the difference?

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Comment by am3141 2 days ago

"It costs too much to start a business here"

what sort of business are you talking about? You can start a software company within few minutes in Canada.