{"id":30941,"date":"2026-05-04T10:14:05","date_gmt":"2026-05-04T10:14:05","guid":{"rendered":"https:\/\/www.europesays.com\/canada\/30941\/"},"modified":"2026-05-04T10:14:05","modified_gmt":"2026-05-04T10:14:05","slug":"the-defence-tech-gold-rush-is-testing-the-limits-of-venture-capital","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/canada\/30941\/","title":{"rendered":"The defence-tech gold rush is testing the limits of venture capital"},"content":{"rendered":"

TORONTO \u2014 A gold rush mentality is forming around defence tech in Canada as the federal government\u2019s promise to spend billions of dollars to grow the sector lures capital that once shied away from military-related investments.<\/p>\n

Amid the excitement, however, investors and entrepreneurs warn that defence tech\u2014with its long timelines and massive capital needs\u2014isn\u2019t a natural fit for the traditional venture capital playbook.<\/p>\n

Some investors say venture capitalists will have to get comfortable taking on more risk if they want to get in on defence tech. Others are waiting for government initiatives, such as funding and contracts, to make the sector less risky for them. \u201cOur asset class lives on hype cycles,\u201d said John Rikhtegar, vice-president at venture firm Northleaf Capital Partners, at a recent Canadian Club Toronto talk. \u201cDefence is a permanent national security issue,\u201d he added. \u201cIt\u2019s not a trend or a fad.\u201d <\/p>\n

Talking Points<\/p>\n

New government spending and procurement promises are drawing venture capital to defence tech, but long timelines and high costs mean traditional VC investing doesn\u2019t always fit
\nWhile investors are keen to enter the sector, some are holding back until Ottawa\u2019s promises of action turn into predictable contracts for Canadian defence startups<\/p>\n

Venture capital funds in Canada are software startups. Entrepreneurs can spin up these companies relatively fast and cheaply, and their revenue\u2014often based on monthly or annual subscriptions\u2014is fairly stable, making growth more predictable and the potential returns to investors huge.\u00a0<\/p>\n

Deep-tech companies, meanwhile, which include many of those in the defence sector, have historically had a tougher time raising venture capital in Canada. They require more money up front to research, test and build their products, take longer to reach the market and often depend on a small number of government contracts for revenue, making growth slower and returns less certain. \u201cThose long procurement cycles don\u2019t really lend themselves to any kind of rational investment time for a venture capitalist,\u201d said Chris Pogue, president of space and defence at Calian, a publicly traded defence contractor based in Ottawa. Defence tech companies, rather, need \u201cpatriotic, patient capital,\u201d he said.\u00a0<\/p>\n

Pogue said that\u2019s where firms like Calian could help, by educating investors on the intricacies of the market. In September 2025, the company launched Calian Ventures, an investment arm focused on moving defence and dual-use technologies\u2014those that have both civilian and military customers\u2014from development to adoption. Unlike many venture funds which just focus on investing, Calian also offers engineering and testing support. That includes helping defence startups adapt their products to meet specific military requirements. It also helps make sure their technology can operate within the systems of larger defence companies, since those are the firms that typically land big government contracts. <\/p>\n

\t\t\t\t\tRelated Articles<\/p>\n

\t
\n\t\"Mark\t<\/a><\/p>\n

\t
\n\t\"\"\t<\/a><\/p>\n

By doing that work, Pogue said, Calian is limiting the risk that scares many VCs away from defence startups, and ideally draws more capital to the sector.\u00a0<\/p>\n

The Business Development Bank of Canada (BDC) is also grappling with how best to approach venture capital investing in a sector it, and most other VCs, had long-avoided.\u00a0<\/p>\n

The federal government has tasked the Crown corporation with deploying $6 billion in government funding to defence and dual-use startups. The bank will issue most of that money through loans and new programs designed to support small and medium enterprises in the space. It will also make venture capital investments through its new $300-million StrongNorth Fund.\u00a0<\/p>\n

BDC is the biggest venture investor in Canada, with a smattering of funds backing companies in different sectors and at different stages of their growth. But executives leading the bank\u2019s defence strategy say they need to approach military and dual-use tech companies differently.\u00a0<\/p>\n

\u201cIt\u2019s higher risk,\u201d said Peter Dawe, a military veteran whom BDC seconded from the Department of National Defence to lead its defence division. \u201cIn many cases, it calls for greater patience and more creative financial solutions.\u201d Dawe said the bank is still trying to figure out what those solutions look like, \u201cto ensure that we are investing in opportunities that present themselves as strategically significant to Canada, but that don\u2019t fit the classic venture profile.\u201d\u00a0<\/p>\n

Dawe said BDC is paying close attention to what the military needs, taking its financing cues from the government\u2019s new Defence Industrial Strategy. That approach, coupled with Dawe\u2019s own expertise in the sector, may give other investors confidence in BDC-led deals and ultimately attract more money to them.\u00a0<\/p>\n

Venture capital investor Margaret Wu said the government\u2019s commitments to grow the domestic defence industry has made her more comfortable investing in the sector. Her firm, Georgian\u2014which typically invests between $30 million and $50 million in growth-stage AI companies\u2014recently wrote its first cheque in a defence-tech company, Dominion Dynamics, an Ottawa startup building software to help the military detect threats in the Arctic.\u00a0<\/p>\n

The deal was part of what Georgian calls its pathfinder strategy, where it invests smaller sums in \u201cfrontier\u201d technologies outside its comfort zone to learn about a new sector. Toronto-based quantum computing company Xanadu, which recently went public, was one of the firm\u2019s first such investments. The approach gives Georgian a \u201cfront-row seat\u201d to how a particular market develops, said Wu, who led the Dominion Dynamics deal. She said the deals help Georgian better understand a new sector and potentially invest more in it.<\/p>\n

Wu said she hadn\u2019t changed her risk assessment to invest in defence tech, and she expects the same kind of returns under similar timelines as she would for any other portfolio company at a similar stage. Rather, she said, the defence market itself has become less risky.\u00a0<\/p>\n

That\u2019s mostly down to the government, said Wu, which has made major spending and procurement commitments, including a pledge to direct 70 per cent of its defence contract spending to Canadian firms. Such moves, Wu added, have reduced some of the uncertainty that once discouraged venture investors. Promises alone, however, aren\u2019t enough to make defence tech venture-backable for the long haul. \u201cThe investor community is going to have to see more contracts,\u201d Wu said. \u201cNot just memorandums of understanding, not just letters of intent, not just loans and not just matching financing.\u201d It\u2019s a \u201cchicken-and-the-egg\u201d scenario, she added: startups need funding to prove their technologies, but investors want the government to show it\u2019s serious about buying.\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"TORONTO \u2014 A gold rush mentality is forming around defence tech in Canada as the federal government\u2019s promise…\n","protected":false},"author":2,"featured_media":30942,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[9018,17,6885,7875,2134,7876],"class_list":{"0":"post-30941","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-canada","8":"tag-bdc","9":"tag-canada","10":"tag-defence","11":"tag-startups","12":"tag-tech","13":"tag-venture-capital"},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/posts\/30941","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/comments?post=30941"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/posts\/30941\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/media\/30942"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/media?parent=30941"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/categories?post=30941"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/tags?post=30941"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}