Y Combinator Reverses Course on Canada After Founder Backlash
Y Combinator Restores Canada as Eligible Jurisdiction for Startups
In late January 2026, Y Combinator quietly updated its standard deal terms to remove Canada from the list of jurisdictions where it would invest, forcing Canadian startups to incorporate elsewhere if they wanted to participate in the famed accelerator’s program.
But just a week later, in early February 2026, the organization reversed course - adding Canada back to its list of accepted countries of incorporation after strong feedback from the Canadian tech community.
📉 Initial Policy Shift: Canada Dropped from Accepted Countries
In January 2026, Y Combinator’s deal terms page was updated to list only the U.S., Cayman Islands and Singapore as eligible places of incorporation - omitting Canada entirely. That meant Canadian startups would need to reincorporate outside Canada to qualify for funding and the accelerator experience. Many in the community saw this as a discouraging signal for Canada’s startup ecosystem.
💬 Backlash and Community Reaction
The omission sparked widespread conversation among Canadian founders, investors, and tech leaders. Some criticized the decision as a negative message for domestic innovation, while others pointed out that many Canadian startups already reincorporate in the U.S. to access capital and networks. It became a flashpoint in discussions about the strength and competitiveness of Canada’s tech scene.
🔄 The Reversal: Canada Restored
By the first week of February, Y Combinator updated its terms again, reinstating Canada as a permitted jurisdiction for incorporation. In an announcement, YC’s president explained the initial removal was based on data showing Canadian companies that reincorporated in the US tended to raise more funding - but clarified the accelerator wasn’t turning away Canadian startups.
📣 Community Response to the Reinstatement
The decision to welcome Canada back drew celebratory responses from tech leaders and investors who viewed the reversal as a reaffirmation of the country’s role in the global startup landscape. It also highlighted the importance of community feedback in shaping policies at influential global accelerators.
The saga - from exclusion to reinstatement - underscored how even small changes to policy by marquee institutions like Y Combinator can ripple through startup ecosystems. For Canadian founders, the reversal not only preserved access to one of the world’s most recognizable accelerator programs but also sparked renewed conversations about building and supporting world-class companies from within Canada.
