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.
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.
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.
Plus you don’t have to worry about getting audited if you tweet the wrong thing.
One is not like the other.
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.
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
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
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.
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
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...
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.
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.
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".
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.
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 standard move in this situation is that you form a US Delaware C Corp and make your HQ a subsidiary.
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...
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.
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.
I've heard that Shopify is by itself 10% of all Canadian tech jobs paying >$100K.
- 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.
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.
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.