Editor’s note: Thank you to our friends at the CDA Institute for hosting The Icebreaker aboard the HMCS Margaret Brooke, where VAdm Angus Topshee gave remarks following the National Marine Workforce Development Conference last week in Toronto.
🎯 Three-Shot Burst
More than 230 defence tech start-ups have been founded in Europe since Russia’s invasion in February 2022, including 52 this year, according to Dealroom. Venture capital investment in European defence tech has similarly jumped, reaching $1.5bn in the most active year yet.
While investors welcome the influx of what they say is much-needed capital to help Europe re-arm, there is concern that hype is outrunning reality.
So what?: Investors said a shake-out was inevitable, especially in the crowded area of drones where some estimates put the number of start-ups at more than 500. Valuations, too, have been driven up as investors have piled into financing rounds, despite many companies still being years away from delivering battle-ready capabilities.
PitchBook data shows that the median VC defence tech valuation in 2025 is $146 million. This is compared to $42.8 million last year and $22.8 million across all sectors.
Nearly 60% of all defence tech funding has gone to drone startups this year, and over a third of deals have involved drones. Of the nine defence tech unicorns currently existing, five are developing drones.
Lorenz Meier, chief executive of software start-up Auterion, said scale had “ramped up hugely”. When Auterion started, an order of 100 drones was a big order. It now has a contract with the US Department of War to deliver 33,000 drone “strike kits” to Ukraine, Meier said.
However, he added that “investors have moved from admiring the increase in funding for defence, to focusing on margins and multiples, so we do expect some consolidation in the industry”.
Bottom line: Government contracts are critical if the industry is going to grow and become sustainable. “We’ve seen lots of capital that is going into start-ups,” said Dame Fiona Murray, chair of the Nato Innovation Fund, but now the “real question is, are you going to get capital accumulating into some of the winners?”
Closer to home, the Globe & Mail argues that a boost in defence spending may be the best offence against economic stagnation.
Related:
Canadian SMEs want to help National Defence, but the system holds them back
Canadian startups aren’t feeling the Buy Canadian love
Source Canada has a plan to change this!
Iron Bubble? Defence tech funding and valuations are soaring, but structural demand suggests substance beneath the hype
Bessemer Venture Partners says defence technology represents the single largest growth opportunity in Europe today, and there is ‘no limit’ to what they will invest
Uwe Horstmann Takes the Reins as Stark CEO:
Europe’s defence tech M&A deals in 2025
Ukrainian Front: Existential pressure, Keynesian spending, and a stripped-down bureaucracy have turned Ukraine into a military-tech wunderkind… Why Smart Capital Is Backing Ukraine’s Defence Tech to Win the War… Aerial drones once changed the fighting in Ukraine. Now it’s explosive-laden, unmanned robot vehicles… Ukraine’s most prestigious military units are run like businesses…
Ukraine has become Europe’s unexpected R&D lab for 21st-century warfare, producing innovations at a pace traditional defence contractors can only watch with envy:
Europe must decide whether to persist with systems built for decades-long platforms or adopt Ukraine’s model of rapid iteration and commercial integration. Venture capital could bridge the gap between prototype and deployment, providing patient investment and expertise. A new generation of European defence funds could draw on existing strengths while learning from Ukraine’s battlefield economy.
Case in point: The new Ukrainian FP-5 “Flamingo” cruise missile is rewriting the rules of modern warfare:
👊Range: 2,000 miles (twice the Tomahawk)
👊Payload: 2,300 pounds (twice the Tomahawk)
👊Cost: One-fifth of the Tomahawk
But here’s what really matters, it’s built from scraps:
👊A carbon-fibre shell spun in one piece
👊A recycled Czech jet engine bolted to the back
👊A repurposed Soviet FAB-1000 bomb as its warhead
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Dominion Dynamics is building Canada’s next generation of sovereign defence technology, with a focus on Arctic sovereignty.
🤝 Sovereign Capability
Ottawa-based Dominion Dynamics launches to build Canadian Arctic sensor network
The Ottawa-based company closed a $4-million pre-seed funding round in August, and last week wrapped up a demonstration of its technology with the Canadian Rangers, a part of the armed forces reserves who work in rural or isolated regions such as the Arctic.
Dominion Dynamics was founded in June by Canadian Eliot Pence, a general partner at Tofino Capital. Previously, Mr. Pence was head of international growth for U.S.-based Anduril Industries Inc., which is well known for its prowess in rapidly developing and deploying defence technology.
Dominion’s first product is a sensor network, which essentially operates as a command-and-control system for remote areas lacking communications infrastructure.
The sensors connect to phones or cameras to collect data, such as images and voice notes, and push them across a network to a communications tower. The data can then be received by armed forces members stationed at nearby bases to produce a 3D map that shows what their colleagues in the field are seeing and hearing in real time.
Related:
Canadian Rangers test their mettle in Arctic lands where help is far off, and the prospect of a ‘Golden Dome’ even more so… It’s time to build a wartime economy in the North… Denmark renews security commitments with new defence spending for land, sea and air in the Arctic and North Atlantic… Canadian Arctic Is NATO’s Soft Underbelly
Postsecondary defence pivot: Canada must retrain auto workers for the shipbuilding and space sectors, teaching artificial-intelligence skills across all academic disciplines and developing a skills strategy for the energy sector
In the middle of a tense trade war, Canadian tech companies and policy-makers carve a path for data sovereignty
How Halifax’s COVE has served as a key Canadian commercialization hub for dual-use maritime technology
DIBS: Design, Iterate, Build, Source — a new In-Q-Tel framework for rethinking how the Defence Industrial Base can move faster, scale smarter, and source more securely in a rapidly evolving world
Europe Is Losing the Chips Race: The Continent Needs More Cooperation With America—Not Less… Why Europe Lost Semiconductors?
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⚔️ Combat Readiness
Space has become the world’s biggest wiretap
Half the world’s satellites are leaking unencrypted data from military secrets to phone calls into space.
Low Earth Orbit constellations like Starlink and Telesat are now selling “security by design,” touting agile beams, zero-trust frameworks, and NSA-certified encryption. But the legacy satellites still circling at 36,000 kilometres can’t be patched.
For decades, the night sky has been romanticised as humanity’s quiet frontier, the final escape from noise, politics, and whatever’s trending on Earth. Turns out it’s anything but quiet. According to a three-year investigation, half of all geostationary satellites are effectively broadcasting their private communications to anyone with a spare weekend, a £500 dish, and a laptop. Yes, the same orbit that beams down weather reports, live TV, and in-flight Wi-Fi is also casually leaking military data, ATM commands, and your gran’s holiday WhatsApps.
Related:
Civilian Tech Is Powering China’s Military… China is a major beneficiary of the war in Ukraine… China’s Military in 10 Charts
Ukraine says Russia’s new Geran-3 jet-powered drone is packed with foreign parts, flies 230 mph with a 600+ mile range, and appears resistant to electronic warfare. Production is scaling into the thousands each month.
Much of the world will be rushing to get their hands on Israeli defence tech innovation after the war
Connecting tech reform to the warfighter mission:
Why Signal’s post-quantum makeover is an amazing engineering achievement… China producing ‘world-first’ quantum radars to track US stealth jets like F-22
Last week, a United Airlines flight from Denver to Los Angeles was forced to divert to Salt Lake City after its windshield cracked mid-flight. Early speculation suggested a possible impact with space debris
Last week, In-Sec-M, the Canadian Cybersecurity Cluster concluded a mission to Estonia and Lithuania, an initiative that brought together leaders from Canada’s cybersecurity in an important milestone in Canada’s cybersecurity cooperation with the Baltics
Katherine Boyle, an influential VC who is a friend of the US vice president, thinks the country’s path forward involves more weapons production… Anduril founder on modern warfare:
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With new investments in national defence on the horizon, Canada’s innovators have a role to play. The new Canada Defence Procurement Readiness Program from CCI helps firms understand the system — and navigate it with confidence. Deadline to register is November 2. Learn more at DefenceProcurement.ca
🐸 Meme Warfare
Editor’s note: We prefer Wuxly
🔫 Hot Shots
Grey war: The next conflict won’t start with bullets or missiles at a distant overseas location, but instead could be a cyber strike on the homeland… Hackers Say They Have Personal Data of Thousands of NSA and Other Government Officials… Electronic warfare and information advantage added to US Army principle cyber advisor portfolio… The Things that Bedevil U.S. Cyber Power… Chinese hackers accessed classified UK computer systems for over a decade… UK: NCSC Reports 130% Spike in “Nationally Significant” Cyber Incidents — up to four per week… Chinese Hackers Blamed for Severe Breach at US Cyber Firm F5… A Chinese state-backed cybergang known as Flax Typhoon spent more than a year burrowing inside an ArcGIS server, quietly turning the trusted mapping software into a covert backdoor… China’s burgeoning undersea sensor net aims to turn the ocean transparent: The PLA is building a self-healing “kill web” to surpass today’s brittle kill chains… Flights delayed after Kelowna airport public information system hacked
Rare earths primer: How China Took Over the World’s Rare-Earths Industry… Canada can be the supplier of choice to our allies and partners around the world when it comes to critical minerals and rare earths… Rare earth start-up to build recycling plant in Canada… A Rare Earths Alternative to China? Australia Eyes Timely Pitch to Trump… Trump signs rare earths deal with Australian prime minister as a way to counter China
Commodity futures: As venture capital moves deeper into Hard Tech and reindustrialization, investors who understand how commodity risk flows through a business will underwrite smarter and help founders scale faster… U.S. Army Plans to Power Bases With Tiny Nuclear Reactors
Acquisition debt: This burden, rooted in legacy processes and obsolete systems, undermines the defence departments’ ability to deliver cutting-edge capabilities at the speed of modern threats
Brain drain: In just one research group at University of Toronto, 10 of 26 PhD graduates left Canada immediately after graduation for positions at NASA, Amazon, and GE Aerospace. Most were born here. Some are now leading research programs outside our borders. UTIAS Professor David Zingg traces Canada’s innovation crisis back decades to the Avro Arrow era, when we had world-leading aerospace ambitions and delivered them
Defence research: A new paper demonstrates that the open approach doesn’t just work by attracting different firms; the open incentive structure itself drives greater innovation. It provides an avenue for firms to identify technological opportunities the government isn’t yet aware of, creating an entry point to much larger public sector contracts and private investment
Inflection point: The Canadian Army has launched Inflection Point 2025 in August, an ambitious plan to restructure, equip, train, sustain, and integrate the force for the challenges of modern warfare
Swarm: ‘Killer Robots’ — Why AI is Terrifying the American Military… Anthropic partnered with the US government to create a filter meant to block Claude from helping someone build a nuke
Defence bank: US’ Erebor aims to be one of the most conservative banks in the country when it comes to lending-to-deposit ratio
Banking changes by the Nordic Investment Bank, Allianz Global Investors, UBS Asset Management and Danske Bank now enable financing for dual-use and conventional weapons projects. Some funds have dropped exclusions on conventional weapons manufacturers from their ESG portfolios; others have called for European Defence Bonds to support the EU’s new ReArm program, which Canada hopes to join
Here and there: Prime Minister Mark Carney’s visit to Malaysia, Singapore, and South Korea underscores a new focus on defence and security partnerships alongside economic ties… South Korean defence company seeks dozens of Canadian partners in bid to win submarine deal… Industry minister pushing F-35 maker for economic benefits in Canada… German, Norwegian Ministers Court Canadian Submarine Order Worth Billions… Canada’s plan to donate refurbished armour to Ukraine appears to be on the scrap heap… CSIS lacked proper policies, procedures to manage new secret technology: spy watchdog… ‘Captain, We Have Been Destroyed’: Canadian Diesel Submarine ‘Sank’ $5.5 Billion Navy Aircraft Carrier
Innovation to weaponization: The story of the largest transfer of intellectual property in human history: a shadow campaign that has reshaped industries, governments, and the very balance of power… China is undertaking one of the most significant military build-ups of our generation and U.S. universities are contributing to it… Indulging in absurd anti-U.S. rhetoric? You’re doing a solid for Moscow and Beijing
Save the date: Canada’s CDS told an Ottawa breakfast crowd last week that the existing procurement model is built for peacetime: we must move faster, adopt agile paths, and collapse red tape… The PSPC Marine Commodity Management team, in collaboration with our Procurement Assistance Canada colleagues, is hosting the Small and Medium Enterprise (SME) Procurement Fair on November 5 in Ottawa
Deal corner: Lila Sciences Raises $350M Series A: The Future of Autonomous AI Labs in 2025… Govini, a defence tech startup taking on Palantir, hits $100 million in annual recurring revenue… Oureon Technologies is emerging from stealth following a $3.5M pre-seed round led by GTMfund
Haters gonna hate: Carney’s military spending will leave Canadians worse off and divided… What would have happened to the armed forces in Quebec after the Yes vote?
If you’ve read all the way to the end today, congratulations — you’re eligible to claim a free space in CCI’s Canada Defence Procurement Readiness Program. Reply to this email telling us why your dual use company would benefit, and The Icebreaker could provide you a free registration code generously provided by our pals at CCI!
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