January 30, 2026 Y Combinator has removed Canada from the list of countries where it will invest. The San Francisco–based accelerator, known for backing companies such as Airbnb, DoorDash and Coinbase, updated its standard terms to exclude Canada as an eligible jurisdiction. Canadian startups applying to Y Combinator would need to “flip” their parent company and incorporate in the U.S. or other eligible countries to participate.
The policy change comes amid strained Canada–U.S. economic relations, including recent tariff threats from Washington. It leaves only the United States, the Cayman Islands, and Singapore as permitted locations for companies seeking Y Combinator’s standard investment of $500,000 and access to its fundraising network.
The revision has reignited long-running concerns about founder and capital flight from Canada to the U.S., particularly as access to large venture rounds remains concentrated south of the border. While some founders and investors described the move as symbolic, others said it formalizes a reality that has existed for years.
Garry Tan, the Winnipeg-born president and CEO of Y Combinator, defended the decision in a series of posts on X. He said the accelerator continues to fund Canadian-founded startups, but argued that reincorporating in the U.S. materially improves access to capital.
“We’re not saying Canadians should leave Canada. Where you are incorporated increases your access to capital. That’s it,” Tan said.
But not everyone agrees with the investor. John Ruffolo, co-founder of Maverix Private Equity and vice-chair of the Council of Canadian Innovators, disputed the idea that success requires relocating corporate headquarters to the U.S.
Ruffolo noted that a long-standing tax issue that once discouraged U.S. investors from backing Canadian companies was resolved more than a decade ago, eliminating the original rationale for Delaware incorporation. He also pointed to federal programs such as the Scientific Research and Experimental Development (SR&ED) tax credit, describing it as “free non-dilutive capital” that companies risk losing if they move.
Other industry figures say exit taxes and investor familiarity with U.S. legal structures may still influence decisions. Melody Kuo, co-founder of the nonprofit Build Canada, suggested on X that differences in capital gains treatment can affect investor preferences.
Toronto-based Radical Ventures, which invests in Canadian AI companies such as Cohere and Waabi, said incorporation decisions should be company-specific. “For Canadian teams, there are very meaningful benefits to being incorporated in Canada,” partner Sanjana Basu wrote in an email, citing talent access and tax incentives.
Y Combinator has historically attracted dozens of Canadian startups, with at least 144 graduate companies listed as headquartered in Canada. That share grew during the pandemic as remote participation lowered geographic barriers.
But there has been a shift. According to a September 2025 study by Leaders Fund, only 32.4 per cent of Canadian-led “high-potential” startups founded in 2024 were headquartered in Canada, down from about 70 per cent between 2015 and 2019. Nearly half were based in the U.S.
