Y Combinator picked a fight with Canada — and quickly backtracked

• The startup accelerator Y Combinator recently removed Canada from its list of acceptable countries for incorporation.
• Canadian investors and founders sounded off after YC's Garry Tan said US-incorporated startups had easier access to capital.
• Y Combinator has since reversed the decision, putting Canada back on the list.

Y Combinator cut Canada from its acceptable countries of incorporation. Now, it's backtracking.

Last week, a Canadian news outlet noticed a change to Y Combinator's standard deal description. The site used to list the US, Canada, Singapore, and Cayman as acceptable countries of incorporation for YC startups. Canada was suddenly gone.

Y Combinator CEO Garry Tan initially defended the choice on X. YC-backed Canadian startups that reincorporated in the US had twice the average valuation as those that didn't, he wrote.

"There are lots of reasons to build great companies in Canada, and there are lots of great YC and non-YC startups that thrive and are making the Canadian tech scene great," he wrote a few hours later. "Where you are incorporated increases your access to capital. That's it."

Tan wrote that "clout farmers" were trying to "make it drama." The online backlash was indeed swift. Canadian investors and founders sounded off, and some accused the choice of being politically motivated.

The development also happened at a time when Canada's relationship with the United States has fractured over the last year. Canadian travelers are visiting the US less, while interest in buying domestically produced goods has surged.

Now, YC is reversing course. While the site has yet to be updated, the accelerator has since changed its policy to allow Canada-incorporated startups back in.

"We don't want to suggest that we no longer fund Canadian startups or Canadian founders," Tan wrote in a blog post. "If you're a Canadian founder, we welcome you to apply to YC."

Tan wrote that the accelerator chose to remove Canada after it noticed its "top-performing Canadian companies reincorporated in the US." Incorporating in the US gives founders easier access to investor capital, he wrote.

"We invest in dozens of Canadian startups each year and have hundreds of Canadian founders in our alumni network, including one of YC's founders, Trevor Blackwell," Tan wrote.

Blackwell founded the robotics company Anybots and has since retired from YC. Instacart, one of YC's biggest success stories, was founded by Canadian Apoorva Mehta.

Tan was also born in Winnipeg, though his family later relocated to California. He struck a celebratory tone as he announced the change on X.

"Oh Canada, don't call it a comeback!" he wrote.