Defence Isn’t Shopping — It’s Strategy
How Canada could turn a record defence budget into real industrial muscle
🗓️ For our friends on the West Coast: The Icebreaker is pleased to invite the defence tech community to a private box at the Victoria Royals game on January 9th at 7pm. Details here.
🎯 Three-Shot Burst
What does it take to build a self-sustaining modern defence economy? And what’s the smartest way to spend an annual defence budget expected to reach $150 billion by 2035? The Globe & Mail provides an in-depth look at two competing models:
Poland, which shows what panic-driven rearmament looks like — rapid procurement, heavy imports, and giant fiscal deficits. South Korea shows the smarter path: use defence dollars to build a domestic industrial engine, export globally, and innovate relentlessly.
Bottom Line: South Korea proves that if you invest in innovation, build domestic capability, and push exports, defence spending becomes an economic flywheel instead of a fiscal sinkhole. If Canada treats this as industrial strategy rather than shopping spree — choosing its strengths, backing winners, and demanding tech transfer — the $150-billion annual budget could rebuild a hollowed-out manufacturing base and finally give the country a modern defence economy instead of a procurement museum.
Related:
University leaders tout institutions’ role in addressing Canada’s defence challenges
Hostile powers sending spies to west’s universities, says former Canadian security chief
Canadian Armed Forces see a surge in recruits
Defence minister says ‘we’re good’ to meet 2% NATO spending target by March… Ottawa announces first procurements under new Defence Investment Agency… Is Canada ready for the big defence bill to come?
Building up Canada’s defence sector will depend on long-term homegrown support
The federal government announced the creation of the Regional Defence Investment Initiative (RDII), a $357.7 million commitment aimed at strengthening Canada’s defence industrial capacity and supporting the development of domestic capabilities
US National Defense Authorization Act authorizes $162B in procurement and $146B in Research, Development, Test, & Evaluation (RDT&E). RDT&E efforts are focused on new tech, including hypersonics, AI, quantum computing, autonomous aircraft, vessels, and vehicles, directed energy systems, and new space-based capabilities. It also creates a new, accelerated requirements process to expedite existing industry solutions, including requiring the DoD to look for commercial off-the-shelf (COTS) tech before seeking purpose-built, exquisite systems
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🤝 Deal Corner
Funding to VC-backed startups in defence hit $7.7 billion across close to 100 deals in 2025, per Crunchbase data:
Related:
Thanks To Drones, China And Ukraine, A Record Number Of Military Startups Became Unicorns In 2025
US Missile Defense Agency awards 1,014 companies slots on $151B Golden Dome contract vehicle… Saronic has been awarded a $392M production contract with the U.S. Navy, with nearly $200M immediately put on contract
Arctus Aerospace has raised $2.6 million in pre seed funding from Version One Ventures… Moonshot Space Raises $12M for Electromagnetic Launch… General Fusion quietly raises $51-million, months after facing cash crunch
D-Wave has formed a new business unit dedicated to driving the adoption of its quantum computing products and services with the U.S. government
India’s defence-tech startups are thriving: The recent war with Pakistan has infused new energy into the sector
European VC fundraising is down nearly 60% so far in 2025 with only one month left in the year, but not in defence
“Tough Tech by the Tough Ten” report — a first-of-its-kind map of defence, dual-use, cyber, and space innovations in the EU frontline states
Finnish satellite startup Iceye has raised €200m in new funding led by US investor General Catalyst, bringing its total valuation to $2.8B USD… Finland’s state pension is scoping out GPs for defence investment
Aerospace & defence PE rebounds in Q3 2025, with deal count up 78% and $6.5 billion in value… Global M&A activity in aerospace and defence is up over 14% in both 2024 and YTD 2025
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Volatus Aerospace is hiring an in-house corporate lawyer with a minimum of 2 to 3 years of business experience.
⚔️ Combat Readiness
New Canadian Forces command created to better co-ordinate joint capabilities
A new Canadian Forces command has been created to better co-ordinate joint military capabilities, including health care and logistics.
Previous studies have identified gaps in how Canadian military joint capabilities are developed, managed and sustained. So the new command will deal with these gaps by centralizing leadership and accountability for joint capabilities:
Meanwhile, US-Europe tensions continue to boil. A top US official recently berated Europe over cutting the American industry out of its defence buildup, and the US has set a 2027 deadline for Europe-led NATO defence. Facing an aggressive Russia and a mercurial America, Germany has recognized that it needs to rearm — the country is spending billions on weapons and repurposing civilian industries for arms production.
Earlier this week, a new US National Security Strategy called for reviving the ‘Monroe Doctrine’ while limiting NATO expansion. The Trump administration unveiled the new National Security Strategy calling for a greater emphasis in the Western Hemisphere, while also paving the way for friction points with allies and partners across the globe. The strategy curiously includes no specific mention of the Arctic. Reviews have been negative to mixed: Jim Balsillie wants an urgent Canadian response to Trump’s new doctrine, while Niall Ferguson argues the document is a nothingburger. One European security expert believes Europe has a lot to play for with the US, and will come out stronger if it takes up the opportunities.
Canada’s entry into the EU’s €150B Security Action for Europe (SAFE) program has the potential to be a significant pivot vehicle for our defence industrial base, but there’s still a lot of work ahead to turn opportunity into outcomes:
Related:
Visual Story: See how a Chinese invasion of Taiwan could unfold
Where the World Disappears: Designing the Autonomy Stack for the Arctic… Cohere announces partnership with Thales Canada amid defence tech push
Ministers McGuinty, Anand announce more than $200 million in funding for Ukraine… Roshel confirms over 2,000 Senator vehicles sent to Ukraine… NDP MP Kwan accuses Liberals of ‘fearmongering’ over defence export bill… As AI advances rapidly, Canadian tech leaders say government funding efforts aren’t keeping up
Uncle Sam: Colour Me Sceptical – The F35 vs. The Gripen… The F-35 requires 300 mechanic and US support. The Gripen just requires Sweden and an IKEA Manual... Cancel the F-35? JAS 39 Gripen Fighter Would Cripple Canada’s Air Force… American F-35s could be serviced in Quebec starting in 2028-29, says L3Harris… Canadians say selecting the best fighter jet for the job matters more than jobs… The cost of U.S.-supplied equipment for Canada’s new fleet of warships has increased by more than $1 billion
Droning on: RCMP restricts use of Chinese-made drones — the vast majority of its fleet… The Pentagon is focused on ‘drone dominance’, while the US Army rushes to catch up in a world of deadly drones… US Army issues RFIs for Common Autonomous Multi-Domain Launcher program… U.S. Deploys Shahed-136 Clones To Middle East As A Warning To Iran… CDDS AG and the Rise of Autonomous Interceptor Drones in European Defence… ‘No warehouses anymore’: Ukrainian troops get drone deliveries to the front… Drone startups are soaring as funding and government interest surge
Congressman Pete Sessions Introduces the Independence Investment Fund Act to Strengthen U.S. Leadership in Biotechnology and Emerging Technologies
US approves potential $2.68 billion sale of air strike weapons to Canada… ICE says armoured vehicles ordered from Roshel produced in US… 2025 Reagan National Defence Survey is a national public opinion poll that measures how the American people understand key defence and national security issues… Key takeaways from the Reagan Forum
Private Tech Companies, the State, and the New Character of War… Stark buys a startup to boost its manufacturing muscle… A 30-person startup just secured a $620,000,000 loan from the Pentagon
NORAD visits Waterloo Region to explore AI innovation… Canadian Naval Review has released a Coast Guard themed issue
Hypersonic: The threat of hypersonics is not hyperbole… China’s low-cost ‘cement-coated’ hypersonic missile could threaten major warships… Castelion has closed a $350M Series B funding round to mass-produce U.S. hypersonic weapons… IDEaS program is launching Canada’s first hypersonic research challenge. The goal of this challenge is to create small research clusters, or micro-nets, to address gaps in knowledge in the hypersonic field
Italy says Germany and other countries may be interested in GCAP jet programme
The Anduril Way: The case for agile systems engineering and failing forward… Yes, Blowing Shit Up Is How We Build Things… Anduril Expands to Japan, Advancing its Mission to Transform Allied Defence… Naval Sea Systems Command (NAVSEA), the US Navy’s 83,000-strong shipbuilding arm long accused of slowing shipyards, just got benched by congress. The new NDAA bars NAVSEA from interfering with the construction of autonomous ships by companies like Saronic and Anduril… Japan has just rendered an entire generation of conventional submarines obsolete
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Barrack Hill: Navigating Canada’s defence and procurement landscape with precision.
🔫 Hot Shots
Grey war: From Innovation to Weaponisation: How China Exploits the UK Open Scientific System… Indo-Pacific Command admiral set to wage AI powered warfare… C-CORE chosen by the Canadian Space Agency to help develop and specify the Next Generation Synthetic Aperture Radar system… 🛰️MDA Space awarded initial contract by Canadian Space Agency for RADARSAT+ Replenishment Satellite… 🚨 Northrop Grumman is telling contractors that they won’t award any CMMC-required contracts unless you’re compliant — or certified, if that’s needed… New offensive cyber operations squad standing up for Air Force Reserve… The Scale of Russian Sabotage Operations Against Europe’s Critical Infrastructure
Energy Brief: A Calgary Geothermal Company Wants to Use New Technology to Heat an Old German Town… Canada’s Strategic “Ring of Fire” Mineral Wealth
On the docket: At 9am EST today, Ministers Lightbound, McGuinty and Secretary of State Fuhr to announce a strategic partnership to strengthen CAF Arctic operations… The London Stock Exchange’s VC Unit is hosting a deep tech showcase in Q1
Deepwater: Proponents of deepwater port in Qikiqtarjuaq call for federal investment to speed up project. Qikiqtaaluk Corporation and Arctic Economic Development Corporation calling for $150M… Agnico, Inuit-owned Nukik enter agreement to push hydro-fibre link to Canada’s North
Sovereign capability: Canadian governments open arms, and wallets, to US chipmakers… U.S. government to invest $150 million in lithography startup… The Global Semiconductor Industry in One Giant Chart… Interested in a senior role moving the aerospace and defence industry forward in Alberta?… Anvil is hiring a marketing director
Allies: Aussie government unveils Department of Defence overhaul amid delays and cost blowouts… Government to scrap multiple defence agencies to fight massive blowouts
Ready for launch: NordSpace announce the launch of its Space Systems Lab and first dual-use self-funded satellite, Terra Nova, officially launching in 2026 with SpaceX and Exolaunch… Germany pledged €180.5M to Rocket Factory Augsburg - RFA, and €176.9M to Isar Aerospace. Germany also found room to support international competitors, by committing €4.2M to MaiaSpace, €1.8M to Orbex, and €100,000 to PLD Space. France and Spain spent all of their funds backing local companies: €179M to Maiaspace and €169M to PLD Space, respectively:
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.
Outstanding compilation of the strategic crossroads facing Canadian defense procurement. The South Korea model is compelling but I dunno if anyone has seriously modelled the timeline risk of domestic capability buildout versus immediate deterence needs. When deterence is time-sensitive and adversaries are already moving, betting on a 10-year industrial base maturation strategy might be tactically sound but strategically catastrophic if the threatwindow closes sooner than capability comes online.
Speaking of Icebreakers - Canada has one heavy icebreaker functioning now. It is 60 years old and the other is in dry dock where it will remain for a year. New Icebreakers in the 2030’s doesn’t cut the ice. Canada needs a stopgap solution now.