The Business Development Bank of Canada (BDC) is making significant strides to support Canadian enterprises capitalising on the surge in federal defence spending. The bank has announced its initial investments in two innovative startups, focusing on rocket and semiconductor technologies. These investments are part of a broader initiative to assist small- and medium-sized businesses engaged in projects with both military and civilian applications.
Strategic Investments in Innovative Startups
Sherbrooke’s Irréversible Inc. and Toronto’s Canada Rocket Company are the first recipients of financial backing from BDC’s newly established $100 million seed venture fund. BDC has participated in Irréversible’s pre-seed funding round and played a pivotal role in Canada Rocket Company’s seed financing, which successfully raised $6.2 million.
Geneviève Bouthillier, the executive vice-president of BDC, emphasised that these investments represent a transformative shift for the institution. Traditionally focused on civilian applications, BDC is now open to collaborating with businesses that operate solely within the defence sector. “I’m delighted to be at BDC during this historical moment. This initiative is not just necessary; it’s a timely response to our evolving landscape,” she remarked in a recent interview.
A Shift in Focus for Federal Support
BDC’s renewed focus on defence-related funding marks a notable departure from its previous stance, which often relegated the sector to a lower priority. This change comes as the federal government significantly increases military spending and encourages financial institutions to extend support to defence-oriented companies.
Hugh Kolias, co-founder and CEO of Canada Rocket Company, highlighted the importance of support from investors like BDC and Garage Capital. “Many talented Canadians in aerospace, currently working abroad for companies like SpaceX, are eager to return home and contribute to our industry,” he noted.
He further explained that government signals have been crucial for the company’s expansion plans, particularly in the development of its medium-lift rocket designed for satellite launches. During a keynote address in June, Prime Minister Mark Carney underscored the necessity of enhancing Canada’s space capabilities through heightened defence investments. In a recent budget announcement, Ottawa allocated $182.6 million over three years to establish national space-launch capabilities.
Pioneering Technology for Defence Applications
At Irréversible, the focus is on creating analogue artificial intelligence chips that significantly reduce power consumption and resource use compared to conventional technologies. Bouthillier noted that these chips are especially advantageous for dual-use defence products that face constraints related to power, weight, and heat emissions.
In December, BDC unveiled an ambitious $4 billion defence platform, with $3.5 billion earmarked for financing and advisory services to assist Canadian firms in securing major defence contracts. The remaining $500 million will be allocated for venture capital, primarily through BDC’s StrongNorth Fund, which targets dual-use technologies, and its Catalyst Innovation Fund, aimed at supporting defence startups.
Bouthillier clarified that while the recent investments in Irréversible and Canada Rocket Company are part of a broader defence strategy, they fall outside the $4 billion platform. Nonetheless, all defence-related investments contribute to Canada’s goal of allocating 5% of its GDP to defence spending by the year 2035.
Collaborating for a Stronger Defence Ecosystem
In addition to its venture investments, BDC is collaborating with the Creative Destruction Lab, a non-profit organisation, to provide funding and advisory services to startups in Canada and Europe involved in defence technology development. This initiative is particularly geared towards helping early-stage companies navigate the complexities of customer acquisition and procurement processes.
BDC’s proactive approach positions it among the first financial institutions in Canada to adapt its mandate in support of the federal government’s defence goals, and Bouthillier is optimistic that others will follow suit. “It is crucial that we invest time in building a robust ecosystem, rather than trying to operate in isolation,” she stated.
Why it Matters
The BDC’s strategic investments signal a pivotal moment for Canada’s defence industry, as the government seeks to bolster its military capabilities amid rising global tensions. By fostering innovation and supporting emerging technologies, BDC is not only assisting startups in tapping into federal resources but also contributing to the broader goal of enhancing national security. This shift could potentially revitalise the Canadian aerospace and defence sectors, attracting talent and investment that may have otherwise sought opportunities elsewhere.
