Canadian Startup Founder Defends Y Combinator's Decision to Exclude Canadian Startups

Hassan Ismail, co-founder of Yellowcake, says tight Canadian regulations made it nearly impossible for his first startup to succeed.

Published on Feb. 8, 2026

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Hassan Ismail, a 24-year-old Canadian startup founder, recounts the challenges he faced trying to launch a defense technology company in Canada, including navigating complex regulations and lack of investor appetite. He says Y Combinator's initial decision to exclude Canadian startups was justified, as most Canadian founders end up moving their companies to the U.S. anyway due to the more favorable business environment.

Why it matters

This story highlights the difficulties Canadian entrepreneurs face in launching and scaling startups, especially in regulated industries like defense technology. It provides insight into why many Canadian founders choose to relocate their companies to the U.S., where the funding landscape and regulatory environment are more favorable for startups.

The details

Ismail co-founded West Tek Defense Corporation in 2022 to develop smart rifles for the Canadian military, but faced numerous regulatory hurdles. Getting the required business firearms license (BFL) was nearly impossible without first securing a contract, and the company struggled to find Canadian manufacturers and investors willing to take a chance on them. Ultimately, they were forced to shutter the defense startup and instead launch a new SaaS company as a Delaware C-Corp, raising funding from American investors.

  • Ismail and his co-founder officially founded West Tek Defense Corporation in August 2022.
  • They spent about three years going through the entire process of bidding on a Canadian military contract.
  • After being told by Canadian officials that their startup wouldn't be considered, they finally obtained a BFL but continued to face challenges finding manufacturers and investors.

The players

Hassan Ismail

The 24-year-old co-founder of Yellowcake, a Canadian startup that relocated to the U.S. after Ismail's previous defense technology company failed to gain traction in Canada due to regulatory hurdles.

West Tek Defense Corporation

The defense technology startup founded by Ismail and his co-founder in 2022 to develop smart rifles for the Canadian military.

Yellowcake

The SaaS startup founded by Ismail and his co-founder after shuttering West Tek Defense, which is now incorporated as a Delaware C-Corp and raising funding from American investors.

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What’s next

Ismail and his co-founder plan to continue growing their SaaS startup Yellowcake, which is now based in the U.S. and funded by American investors. They are also considering moving the company's headquarters to New York City, which they see as the next major tech hub.

The takeaway

This story underscores the challenges Canadian entrepreneurs face in launching and scaling startups, especially in regulated industries, and highlights why many choose to relocate their companies to the U.S. where the business environment is more favorable. It also provides context for Y Combinator's initial decision to exclude Canadian startups, which Ismail says was justified given the difficulties of building a successful company in Canada.