0600 SITREP: "Alpha, Kilo, Hurricane-of-Cash"
Listening for the call sign of new defence tech funding
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🎯 Exclusive Breaking News: Today’s Three-Shot Burst
Federal Government Readies to Destigmatize Defence Tech Funding - with a Big Cheque
Senior leaders at BDC (Business Development Bank of Canada) and EDC (Export Development Canada) are preparing to take custody of over $1 billion+ in new federal funding, earmarked to catalyze the Canadian defence tech sector. Unlike traditional BDC Capital venture funds - where capital is recycled as bank reinvestments - this allocation is expected to function more like the bank’s cleantech program: direct program spend, administered as a government initiative rather than a standard venture capital play.
Why this matters: The precise shape is still a work in progress, but rather than through a VCCI-like program, it signals that the government wants faster deployment. Most important, this move should help destigmatizate defence tech funding amongst Canadian institutional investors, a cohort notoriously hesitant to fund anything considered a ‘sin’ industry. Defence innovation is now seen as a national asset, not a liability.
Friendly fire: As BDC CEO Isabelle Hudon once said, “a development bank is there to play where others are not - until they follow.”
What we are hoping for: Many in the defence community are looking for Ottawa to adopt the US DOD’s Office fo Strategic Capital method. The program employs loans and loan guarantees as an enticement for private capital to invest in potentially overlooked segments of the market that support the development of critical technologies.
Bottom line: For the first time, if you’re building or backing defence tech in Canada, you now have government tailwinds, not headwinds. This should produce, downstream, more (or first-time) potential for new public-private partnerships, greater opportunities for co-investment, procurement pilots, and international collaboration.
The provenance of this intel is classified.
💣 Arsenal Update
Xanadu What Our Enemies Don’t - Worldwide First with Error-Resistant Quantum Chip
Xanadu Quantum Technologies Inc. is reporting a new milestone in the effort to develop a form of light-based quantum computing that can operate at commercial scale. The company has achieved the world’s first demonstration of error-resistant photonic qubits on an integrated chip - a milestone published in Nature and already being called a “worldwide first”.
Error correction is the holy grail, as most quantum computers are still error-prone science experiments. Xanadu’s Aurora system already networks server racks together, and the company is targeting a million-qubit quantum data centre in Canada by 2029.
Bottom line: Xanadu’s error-resistant qubits could accelerate Canada’s ability to develop quantum-resistant encryption, critical as adversaries stockpile data for future decryption by quantum computers. This aligns with DND/CAF’s Quantum 2030 plan to counter quantum-enabled cyberattacks. In additon, photonic quantum computers operating at scale could theoretically break classical encryption methods, giving Canada and its allies leverage in intelligence operations.
⚔️ Combat Readiness
Ukraine showed that drones are the new bullets. Why doesn’t Canada get this?
Writing in the Globe and Mail, Canadian expat and former head of itnernational growth for Anduril Industries, Eliot Pence, writes that in Ukraine, first-person view (FPV) drones have shifted from novelty to necessity, shaping tactics, logistics and even battlefield outcomes in real time. Reports indicate that the country is producing approximately 100,000 drones monthly, with ambitions to scale up to 4.5 million annually this year. Drones now account for as much as 80 per cent of battlefield casualties in the war with Russia – they are the new artillery of modern conflict.
Other countries have taken note, and begun to treat drones like they treat munitions. With more than one million registered drones, China has established a formidable drone industry. Its selective restrictions on drone component exports have impacted Ukraine’s drone production capabilities, while continuing to supply Russia.
For Canada, drones shouldn’t be treated like traditional aircraft. They’re closer to bullets than bombers: cheap, fast, disposable and essential for modern operations.
Canada’s defence procurement model is poorly suited to this new reality. But there is hope - Canada’s Munitions Supply Program (MSP) offers a model. Under the program, the Department of National Defence ensures domestic production capacity for key munitions through long-term contracts and industry partnerships. This approach guarantees both readiness and sovereignty.
An MSP for drones would fund Canadian manufacturers to produce inexpensive drones at scale, on a recurring basis. Canada’s tech ecosystem – startups, researchers and defence primes – can deliver if the government provides clear demand and stable funding.
Related:
The UK is investing £350 million this year to increase the supply of drones
to Ukraine, aiming for a tenfold boost. Meanwhile, the U.S. Army is field-testing 3D-printed drones and renewable tech in the Pacific.
🤖 Innovation Spotlight
Canada’s Defence Tech Funding Baseline Has a Cold Start Problem
Our friends at the Canadian Venture Capital & Private Equity Association (CVCA) have generously combed their Aerospace & Defence records for the last half decade, to find that only 11 venture deals actually qualify in that time period across Canada. This is barely enough data to produce meaningful analysis - though this of course explcitly excludes deals in spaces such as quantum, like Xanadu (above).
The top three disclosed deals by size:
Héroux-Devtek Inc. privatization (Feb 2025) - a company specializing in the design, development, manufacture and repair and overhaul of landing gear and actuation systems and components for the aerospace market.
CAE Inc. private placement (Mar 2021) - a manufacturer of simulation technologies and training provider.
The company has just appointed Matthew Bromberg as President and CEO, effective August 13, signaling a potential strategic shift for one of Canada’s defence tech heavyweights. With CAE’s global simulation and training business under pressure from both commercial and military clients, all eyes are on Bromberg to drive innovation and growth in a crowded, rapidly evolving market.
Maritime Launch Services growth funding (May 2021) - founded in 2016 as Canada’s first commercial satellite launch company.
[Eds. note: thanks to our pals at the CVCA for the data pull]
📋 Procurement Updates
German, Norwegian officials urge Canada to join 'familiar family' in buying new submarines
The CBC’s Murray Brewster, the éminence grise of defence, reports that German and Norwegian defence officials are confident Canada will sign on to the ReArm Europe plan in the coming weeks. Such a move will make it easier for the Liberal government to buy new submarines from allies.
Competition for the multibillion-dollar defence program is heating up and their remarks come weeks after two South Korean shipyards, in a joint venture, submitted a detailed, unsolicited proposal worth up to $24 billion, to build 12 submarines for the Royal Canadian Navy.
🌏 International Developments
How the Houthis Rattled the U.S. Navy—and Transformed Maritime War
The U.S. Navy deployed the USS Truman carrier group to the Red Sea in December 2024 to counter persistent Houthi attacks on commercial shipping - attacks that began in late 2023 and escalated due to the Gaza conflict.
The Houthis, backed by Iran, unleashed a relentless barrage of missiles and drones in the confined waters of the Red Sea, pushing U.S. sailors to their limits and causing repeated close calls and losses - including three fighter jets lost from the Truman in under five months, one due to a malfunction during a high-stress landing.
The extended Red Sea campaign against Yemen's Houthi rebels exposed gaps in the U.S. Navy's supply chain for precision weapons, the service's top officer told a House committee on Wednesday. U.S. Navy warships launched hundreds of high-end air defence missiles at inbound Houthi threats over the past year, and the service has deployed an unpublicized number of Tomahawk cruise missiles and other land-attack munitions during counterattacks. During the Trump administration's intensified strike campaign - March 15 through May 6 - the U.S. expended at least $1 billion worth of weaponry in 1,100 airstrikes.
Those strikes have created a dent in the U.S. Navy's weapons inventory that the defence industrial base will struggle to ramp up to refill. The burn rate on Navy weapons stocks - and the vulnerability that this created in the event of a Pacific conflict - was one of the many factors behind the White House's decision to cease hostilities with the Houthis.
🔫 Hot Shots
11th Province Update: President Trump says tariffs on steel and aluminum will double, even as PM Carney negotiates with him in secret. Note to the President - when we make you Governor, defence will be spelled with a ‘c’ not an ‘s’… Kidding aside, there is at least one area where Canada can thank Trump: trade between our provinces.
Lock, Stock, and No Barrel: Stocks on new Canadian Ranger rifles are cracking and need to be replaced, because they cannot withstand moisture.
Arctic Infrastructure: Seafood magnate John Risley has launched Arctic Economic Development Corp. (AECD), aiming to spur large-scale growth north of the 60th parallel by marshalling a wave of new capital, private-sector expertise, and partnerships. The CDA’s Benjamin J. Sacks advocates for investing in people to ensure Arctic sovereignty.
Sidewinder, sidelined?: Raytheon has secured a $1.1B Sidewinder Missile contract. Canada, a Sidewinder user, should take note: U.S. production surges often mean longer waits and higher prices for foreign buyers.
Ready, aim, lobby: thyssenkrupp Marine Systems has opened a new representative office in Ottawa, aiming to “focus its work on the needs of the Canadian Navy”. This is less about jobs and more about positioning for the Canadian Patrol Submarine Project, where the real action (and dollars) are still years away. Meanwhile, Hanwha Ocean has signed MOUs with BlackBerry and L3Harris for “long-term cooperation” on the Canadian Patrol Submarine Project. Remember: MOUs are not contracts - no money, no metal, no momentum.
Great Canadian Export: Maritime-based Global Spatial Technology Solutions (GSTS) has expanded into the UK and Mediterranean, rolling out the world’s first AI-powered collaborative optimization platform for maritime operations. This is a Canadian AI export story with real teeth!
Bottom’s Up: At the NATO leaders' summit later this month, members are expected to agree to a massive hike in their defence spending targets. Canada is reviewing defence spending “top to bottom” ahead of that. In the meantime, MP Sherry Romanado has been tapped as Parliamentary Secretary to the Minister of National Defence, and MP Jenna Sudds becomes Parliamentary Secretary to the Secretary of State (Defence Procurement).
Elsehwere in NATO news, the NATO Defence Innovation Accelerator for the North Atlantic (DIANA) 2026 challenge is now open. This year, DIANA’s challenges address ten focus areas that encourage dual-use tech solutions. Apply by July 11.
🤝 Meet the Defence Tech Community
Join us for a Defence Tech Patio Drop In on June 27
Sign up here to join VCs, founders, operators, defence primes, and the defence-curious, over a few cold beers on a sunny patio.
This meetup is officially part of Toronto Tech Week 2025, a weeklong citywide collection of events to connect and celebrate the builders.
🐸 Meme Warfare
Trump and Elon are at war. Trump has likely not realized he’s 1v1 battling the 4th best Diablo player on the planet.
Between the cuts to NASA and the likely subsidy cuts to SpaceX, our survivial chances as a species have likely dropped a couple percent. Enjoy the memes, though!
📣 Quote of the Day
“Heightened tariffs on steel and aluminum are a direct threat to Canadian jobs and security... The federal government must act without delay to defend the industry.”
- Unifor, Canada’s largest private sector union, voicing concerns about new US tariffs that speak to Canada’s defence readiness and industrial base, which are only as strong as our supply chains.
If you’ve got battlefield intel, classified tips, or just want to call in an airstrike on our typos, hit “reply” and sound off. Whether it’s a new tech sighting, a rumour from the mess hall, or feedback on our comms, we want your SITREP.
Refreshingly mix of positive defense news, that's a first for Canadian indie media.
Really enjoying this newsletter - great roundup, and nice mix of humour. Keep 'em coming!