The Detroit skyline as seen from Windsor, Ont. San Francisco-based Y Combinator is no longer investing in Canadian-incorporated startups.Bill Pugliano/Getty Images
Alistair Vigier is the chief executive of Caseway, a legal tech company based in Vancouver.
News broke this week that Y Combinator would no longer invest in Canadian-incorporated startups, some in Canada responded with the usual hand-wringing about brain drain and sovereignty. My take? Good. Maybe this is the wake-up call we need.
The high-profile startup accelerator and venture capital firm did not reject Canadian founders. It rejected Canadian paperwork. If you want into Y Combinator now you need to reincorporate in the United States, Singapore or the Cayman Islands. That means structuring your company like you are actually planning to scale.
As someone who has built a legal-technology startup in Vancouver, I understand this firsthand. I have also experienced what happens when you build inside a system that rewards caution over speed.
Opinion: Ottawa’s shutting-out of startup founders is shutting down Canada’s future
Things happen faster in the United States. That speed is often the difference between winning and fading out. But if you want to build something big and competitive, doing it the “Canadian way” often gets in the way.
Take my experience. My company, Caseway, recently signed a major deal in the United States to integrate our legal AI software into a platform used by tens of thousands of law firms. From the first call to final signature, the whole thing took only a few months. That is what execution looks like – and should look like. We tried a similar deal in Canada. It went nowhere. We had meeting after meeting, lots of polite interest, and no decision. The contrast was glaring.
In the United States, speed is a competitive advantage. Companies move quickly because they know their rivals will not wait. In Canada, we stall. We set up committees, run small pilots and stretch timelines into quarters, and then years. Founders get stuck waiting for someone to make up their mind.
Y Combinator has the data to back this up. Startups that reincorporate in the United States end up with roughly twice the valuation of those that stay Canadian. The Canadian companies that went through YC and became unicorns nearly all converted into Delaware corporations. Forget the U.S.A.-versus-Canada battle going on right now. The United States makes it easier to raise capital, close deals and scale. Canada makes it easier to get stuck.
Canadian founders have the talent and the ideas. But too often, that potential gets smothered by a culture of hesitation. Our business landscape is dominated by large players who take forever to make decisions and rarely place bold bets. Our investors play it safe, and invest in mutual funds and real estate. Our institutions move slowly and are proud of it.
Many Canadian founders do not realize that polite interest is not the same as progress. They mistake getting likes on LinkedIn with hard actual progress. “Let’s keep talking” is one of the most dangerous phrases a startup can hear. If deals are not getting signed, it does not matter how many good conversations you had. Startups don’t have time to “keep talking.”
I am proud to be Canadian. I was born here and built my company here. But national pride should never get in the way of smart business decisions. If you are a founder and serious about growth, you need to go where the capital and opportunity live. That often means incorporating in the United States. Not because you are selling out, but because you are setting up properly.
Quebec’s Mila institute raising $100-million fund for AI startups
Some will say this fuels the brain drain. Maybe that is true. But blaming the United States for supporting startups more effectively will not change anything. Instead of complaining that YC is turning away Canadian corporations, we should be asking why Canadian investors and institutions are not stepping up. Why does our system make fast execution so difficult?
Most founders I know are not itching to leave Canada. They are forced to look elsewhere because the tools and networks they need are south of the border. The accelerators, investors and early adopters who move quickly are often not in our backyard.
I do not want Canada to lose its best technology minds forever. But I also do not want to watch those same minds get stuck in endless meetings while their runway disappears. My hope is that more Canadian startups will go where they need to go to win, and then bring those wins back. Build abroad if you must, but use that momentum to spark change at home.
In the meantime, let’s stop acting like Canadian incorporation is sacred. Choosing Delaware over British Columbia is not betrayal. If the market, funding and customers are in the United States, then go.