Shadowing Chinese icebreakers
Ottawa's Arctic satellite bet, CellCore's flax-to-firepower supply chain, and why Palmer Luckey's new bank just raised more in a week than Canadian dual-use VC sees in a year
Editor’s Note: To a couple pals reading this from somewhere on the Bering Sea right now: good to know you’re keeping eyes on Xue Long and Xue Long 2. Stay safe, stay sharp, come home soon.
Special congrats this week to Mark Robbins, a member of DND’s BOREALIS team, who just graduated Canadian Forces Leadership and Recruit School, better known as Basic Training. Well done, soldier.
🎯 Three-Shot Burst
Canadian banks are re-entering defence financing, but most defence SMEs still cannot get a loan without a signed government contract in hand, since procurement cycles run roughly seven years from pitch to decision, and no bank wants to carry that risk alone. The Defence Minister isn’t thrilled about the situation:
“I’ll be really blunt. We don’t have any choice. We need to move forward now. We need to look out for ourselves. We need to step it up domestically.” — Defence Minister McGuinty
Contrast that with Silicon Valley: Palmer Luckey’s challenger bank Erebor is nearing a $1.5 billion raise at an $8 billion pre-money valuation explicitly positioned to replace Silicon Valley Bank for defence founders.
Northside Ventures counts just 84 Canadian dual-use startups founded in the last five years against a federal plan to nearly double core defence spending to roughly $159 billion by 2035, and its own portfolio data shows only 12 of 34 investments are dual-use despite screening 5,000 companies a year. “We will need force multipliers,” says Clearpath Robotics co-founder Ryan Gariepy.
DLA Piper counts more than EUR 18 billion invested into European aerospace and defence startups so far this year alone, dwarfing anything moving through Canadian venture channels. And the new Defence, Security and Resilience Bank that Canada helped stand up with eight allies carries about $190 billion in capital but still leaves the hardest problem unsolved.
Canada bets the Arctic on satellites, reactors and shadowing Chinese icebreakers. True North Map ties together Ottawa’s Arctic buying spree: a $2.3 billion, 15-year contract for secure Ka-band connectivity, a Polar Class icebreaker joining the Canadian Coast Guard this season, and nine Prairie manufacturers entering the AeroTrace supply chain pipeline. The Telesat satellite build-out headlines the push, with the Lightspeed constellation expanding from 156 to 225 satellites, and Telesat and MDA shares soared on the announcement. MDA Space picked up a $474 million contract increase to build the extra 27 satellites in Montreal.
CTV put the total federal Arctic military technology investment at $2 billion. That sovereignty concern is not abstract: Canada and the US are actively shadowing Chinese icebreakers Xue Long and Xue Long 2 after they sailed through the Bering Sea, with an RCAF CP-140 flying out of Alaska since July under Operation Latitude.
Energy security is the other Arctic leg: Ontario’s Darlington site will host the first small modular reactor in the G7, but Canada will still enrich its uranium fuel in the United States, reversing “the original rationale for the CANDU program.” Both The Record and CBC report that a Waterloo startup wants a cleaner fix: Canadian Strategic Missions Corporation is building a desk-sized microreactor meant to replace diesel generators across the North, backed by $4.5 million from Ottawa and $1 million from the Canadian Space Agency, with founder Daniel Sax targeting fleet deployment by 2030.
Canada’s defence-tech founders are getting louder, and some of them fly F-18s. Start with the numbers: AI-powered defence tech has drawn a record $32 billion in VC funding since 2022, with H1 2026 alone pulling in $12.8 billion, more than five times all of 2022, according to Forbes’ survey of veteran founders now running the sector’s marquee names. Shield AI’s Brandon Tseng put the founder pitch plainly: “Veterans are really good at enduring pain and suffering. A 22-year-old marine has probably endured much more than a 22-year-old fresh out of college going to work at XYZ company in Silicon Valley.”
Canada has its own version of that story:
Horizon Aircraft’s Cavorite X7, a hybrid-electric VTOL built around a patented “HOVR Wing,” comes from a Lindsay, Ontario company co-founded by ex-RCAF F-18 pilot Brandon Robinson, who explains the tilt-wing design simply: “There’s a reason why you don’t see large birds with these tiny little propellers on top.” Muskoka has its own veteran-founder story too, with Skadi Cyber Defense’s Rachel Clark, a former US Marine and Navy submarine-systems engineer, building an autonomous cybersecurity platform called Frostbow for DND, NATO and mining clients.
Meanwhile a new hiring data set shows who is actually building this industry: Anduril alone made 258 external engineering hires in 2026 so far, more than a quarter of all hires tracked across nine defence “neo-primes,” and 79 percent of those hires came from commercial tech rather than the military, prompting the blunt verdict that “this is a commercial-tech recruiting operation wearing a defense badge.” Anduril’s own CEO Brian Schimpf spent the week on a media circuit explaining that philosophy on CNBC’s Tech Download, insisting autonomous weapons already exist quietly in torpedoes and anti-radiation missiles.
Japan is chasing the same wave from a different angle: Terra Drone’s pivot from commercial drones to defence contracting has sent its Tokyo-listed shares up 499 percent year to date.
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🤝 Deal Corner
🍁 CellCore builds Canada’s first sovereign nitrocellulose supply chain, from flax straw and an Indigenous-owned facility. CellCore Technologies plans to make nitrocellulose, the explosive propellant base Canada currently produces none of, from Canadian flax straw and dissolvable wood pulp, targeting 6,000 tonnes annually by 2028. The facility will be Canada’s first Indigenous-owned sovereign nitrocellulose plant, anchored by Des Nedhe Group Defence and English River First Nation, with pre-sold supply agreements already exceeding initial capacity. CEO David Brough frames the urgency plainly: “God forbid a larger conflict kicks off. All those chains of supply, most likely, the countries that actually hold on to those will start to draw them back.”
Take a look at this Global Energetics Tracker
🍁 North Vector Dynamics lands European capital and pushes its valuation past USD 90 million. Calgary’s North Vector Dynamics landed a strategic investment from Dutch-listed defence manufacturer CSG N.V., which posted EUR 6.7 billion in 2025 revenue across 14,000 employees, pushing NVD’s valuation past USD 90 million on the strength of its ITAR-free, NDAA-compliant CM-70 drone interceptor. “NVD gets a manufacturing and export network it would otherwise need years to build. Ottawa gets a sovereign missile capability with a European accelerant attached.”
🍁 ThinkOn and AVSS give Canadian public safety and defence a sovereign alternative to hyperscaler-hosted TAK. Toronto’s ThinkOn and New Brunswick drone maker AVSS partnered to let Canadian agencies run Team Awareness Kit entirely on Canadian cloud infrastructure, streaming MAVLink-compatible drone telemetry straight into TAK’s common operating picture without a foreign hyperscaler in the loop. DroneXL adds that AVSS has now manufactured more than 2,000 systems this fiscal year and that ThinkOn has held sovereign certification for eight years across Canada, the US, UK, Australia and the Caribbean.
Finland’s Kelluu is bringing autonomous, cold-weather airships into Area X.O in Ottawa to push Canadian Arctic ISR forward, and The Walrus lays out why Canada’s military is preparing for the drone wars in the first place.
Vimy Forge publishes a look book on its very first cohort.
🍁 Canada Rocket Company races to fill the void SpaceX is leaving behind. BetaKit reports SpaceX has started turning away rideshare customers on Falcon 9 past 2028, favouring its own Starlink satellites, leaving Canada, the only G7 country without independent orbital launch capacity, scrambling. Financial Post reports Canada Rocket Company has raised $22.5 million, mostly from Canadian investors including BDC, plus an $8.3 million federal grant under DND’s “Launch the North” program, with CEO Hugh Kolias noting “everyone thought it was oversupplied” when explaining why so few companies had targeted the medium-lift launch gap his company now occupies.
🍁 Calogy’s thermal-management IP turns a near-shutdown into a $1.2 million dual-use drone contract. Sherbrooke’s Calogy Solutions will design the battery system for Jaunt Air Mobility Canada’s next hybrid-electric, autonomous VTOL drone, a $1.2 million CAD win built on air-cooling tech the company claims performs like liquid cooling in Arctic cold or extreme heat.
🍁 Alberta’s defence-tech ecosystem has grown 5.5x since 2018, and the province is still second nationally. Start Alberta’s H1 2026 review counts 289 tracked Alberta defence and dual-use companies with CAD 1.48 billion in disclosed funding, enterprise value up from CAD 5.8 billion in 2018 to roughly CAD 32 billion today. Standouts include Canadian UAVs, the only Canadian firm certified for beyond-visual-line-of-sight drone flight, and Grengine, selected for NATO’s DIANA 2026 Challenge from more than 3,600 applicants across 32 nations. Nationally, Ontario leads with 625 defence companies and Alberta, BC and Quebec together account for 93 percent of the country’s defence startups.
Cambridge Aerospace becomes Europe’s fastest-growing air-defence startup. The Financial Times reports UK startup Cambridge Aerospace closed a $300 million Series C at a $3.4 billion valuation, a 2.6x jump from its $1.3 billion Series B just four months earlier, led by DFJ Growth, an early Anduril backer. Bloomberg confirms the round and notes Lux Capital and Elad Gil, both Anduril investors, also participated. Founder and Cambridge professor Steven Barrett says the 250-person company, whose board includes former UK defence secretary Grant Shapps, is “growing rapidly,” building low-cost Skyhammer and Starhammer interceptors and planning a rocket-motor plant in Norfolk.
Valar Atomics raises $1 billion to put a microreactor behind an Nvidia chip. El Segundo’s Valar Atomics closed a $1 billion Series B led by Sequoia Capital plus a separate $200 million credit facility, just months after its reactor reached criticality in the US Department of Energy’s Reactor Pilot Program and then powered an Nvidia Blackwell chip in a live demo. Twenty-seven-year-old founder Isaiah Taylor’s backers now include Palmer Luckey and Palantir CTO Shyam Sankar.
Hadrian raises $1.37 billion to build the factories the Pentagon needs. Factory-builder Hadrian closed a $1.37 billion Series D at nearly $8 billion post-money, a little over a year after a $260 million Series C, with JPMorganChase’s Strategic Investment Group anchoring alongside Baillie Gifford and Valor Equity Partners. Hadrian already builds submarine components for Lockheed Martin, RTX and Anduril, and CEO Chris Power’s framing is blunt: “Being able to produce, and have advanced factories, is deterrence.”
Related: RBC’s business-banking arm frames Canada’s push toward 5 percent of GDP on defence spending by 2035 as a growth opportunity that most suppliers still do not know how to access, and The Hill Times reports Canadian contractors are still asking Ottawa for a “clear plan” on how small industry can actually participate in reaching NATO’s spending target.
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Canada’s first program aimed at accelerating the adoption of quantum computing technology by providing technical expertise and access to state-of-the-art quantum computing platforms for academics & SMEs.
⚔️ Combat Readiness
Kit for Canada 🍁: Defence Minister David McGuinty toured CFB Suffield and announced a new $20.3 million Quantum Defence Innovation Secure Hub in Calgary, chosen from 25 national bids, alongside a $750 million DRDC Suffield lab breaking ground next year. BetaKit confirms the quantum hub’s 13-member consortium includes Lockheed Martin Canada, CAE, Calian and four Prairie universities, with McGuinty telling reporters “quantum will shape the next generation of defence capabilities, and Canada must be prepared to lead, not follow.” Meanwhile demand for Canadian-made Canadair water bombers is outpacing De Havilland Canada’s production, with Europe’s 22 ordered aircraft not arriving until 2028 even as France endured its worst wildfire season since the Second World War with just 7 of 12 Canadairs flying.
From ‘Top Gun’ to Ghost Bats: the future of aerial combat
Chad Rogers publishes a homemade version of ‘in case of crisis or war’, for Canadian households
Home front 🍁: CSIS issued an urgent June warning, backed by a Five Eyes assessment, that Chinese operatives are posing as recruiters and consultants on LinkedIn to target Canadians, even as Prime Minister Mark Carney pushes to grow Canadian exports to China by 50 percent over four years. The Walrus’s blunt framing: “The Carney administration is treating China as a market while the Chinese state treats Canada as a target.”
Software sovereignty: Policy Options argues Canada is trying to build a mandatory defence-cyber-certification regime in three years that took the US over a decade, while the Pentagon itself has just paused its equivalent program for a 60-day review. A TechTO essay adds that Canada spends just 1.06 percent of GDP on business R&D, second-lowest in the G7, warning that “a weaker Canadian copy of a foreign product is not sovereignty. It’s a dependency with a maple leaf on it”, a theme echoed in a Canadian Shield Institute newsletter cataloguing homegrown alternatives to American Big Tech, from social platforms to cloud providers, all still tiny next to US incumbents. South of the border, Breaking Defense reports agentic AI is forcing the Pentagon and intelligence community to rebuild Zero Trust cybersecurity around a “digital birth certificate” for people, devices and AI agents, with SOCOM commander Admiral Frank Bradley wanting networks that detect compromise “in minutes, not months.”
Silicon front: Reuters reports the Trump administration is drafting a ban on Chinese-made optical transceivers that move data inside AI data centres, a supply chain where China’s Zhongji Innolight holds 27 percent global market share, while The Wall Street Journal covers US startups finally shipping sodium-ion “salt” batteries at commercial scale, a bid to break dependence on China for batteries and critical minerals, both bets on choking off Beijing’s leverage over hardware Western militaries now depend on.
Stockpile paradox: The New York Times reports the US war against Iran has drained weapons stockpiles pulled from Asia and Europe to dangerously low levels, emboldening Russia and China. CNN puts numbers on it: nearly 80 percent of the THAAD inventory and roughly half of Patriot interceptors gone since the war began, while Reuters’ exclusive finds the Army has used “virtually all” of its global ATACMS and Precision Strike Missile stockpile, missiles that cost more than $1 million each and take years to replace.
Cheap at scale: Defence Connect Australia’s first-person account from a June missile barrage on Kyiv, during which Russia launched 70 missiles and 611 drones in one night, describes a “front-to-factory innovation loop” behind Ukraine’s capacity to produce more than 8 million drones a year across 160-plus companies, a scale PitchBook notes is being achieved on venture funding equal to roughly one hundredth of one percent of the global total, proof that production discipline beats capital abundance.
Deep strike:
Defense Brief’s “gold rush” survey finds one-way strike drones like Fire Point’s $55,000, 1,600-kilometre-range FP-1 have made the missile “ammunition now, and the scarce thing is the factory,” with Britain and Germany alone committing over $50 billion across a dozen countries to deep-precision-strike weapons.
Ground robots: Bloomberg reports a Ukrainian flamethrower-armed ground robot repelled a Russian assault near Dobropillia, part of a push to build at least 50,000 combat UGVs in 2026 to close the manpower gap with Russia, while Forbes documents Ukraine’s first known drone-delivered robot assault, an ARK-1 UGV carrying a TM-62 anti-tank mine dropped behind enemy lines by a heavy-lift drone, a tactic both armies are racing to copy.
Counter-drone: The US Marine Corps awarded an $11 million contract to Epirus for its HAVOC high-power microwave system, built to disable entire drone swarms including Russian fiber-optic-guided drones that have defeated traditional jamming with cable spools up to 50 kilometres long. The Army is meanwhile poised to sign its first laser “program of record” with AeroVironment for up to 20 systems, after Patriot missiles costing $4 million apiece were fired at $35,000 Iranian drones. Procurement is speeding up too: JIATF-401’s new Amazon-style counter-drone marketplace, built by startup Kaizen in under nine weeks under a $15 million contract, already lists Anduril, SmartShooter, DroneShield and AeroVironment, and Business Insider’s coverage of the same launch notes allied buyers from the UK, Romania, Australia, Poland and South Korea are already onboarded through the Foreign Military Sales Fast Lane. The Army also wants a Next Generation Counter-sUAS Missile priced under $150,000 that can leave the launch rail in under five seconds and integrate with the existing Coyote launcher, a direct response to the Patriot-versus-cheap-drone math playing out in the Gulf.
Big think: A Center for Security Studies essay from ETH Zurich asks whether Clausewitz’s idea of war as a political, human phenomenon survives an age of AI-enabled “precision mass”, while Small Wars Journal debates whether drones and sensors denying sanctuary 40 kilometres behind the front line mean the US Army’s Armor Branch will be “dead by 2035”, a debate with direct implications for how Canada spends its own armoured-vehicle budget.
Pentagon reform watch: A First Breakfast essay from Hudson Institute’s Nadia Schadlow argues Congress should fund industrial “capacity” the way SaaS funds standby compute, paying contract manufacturers retainers for surge capability ahead of a Taiwan contingency, a model already being tested through USSOCOM’s new SOF RACER consortium with GovSignals, promising non-traditional vendors a path to deliver technology in “weeks, not fiscal years”, the same standing-capacity logic Schadlow wants written into law. The White House and Pentagon are calling for the U.S. military to become an AI-first fighting force.
Europe rearms: The Washington Post’s op-ed from a Ukrainian drone-company founder explains why ten European countries launched Freyja, a missile-interception coalition explicitly designed not to replace the American Patriot but to end Europe’s dependence on any single manufacturer or country. Days later, US intelligence linked an explosive drone found at a NATO logistics hub in Leipzig to Russia, prompting Germany’s interior minister to call it a sign of “daily hybrid warfare.”
Maritime autonomy: The Pentagon’s DIU solicited up to $100 million for unmanned surface vessels after three Saronic Corsair USVs struck Iran’s Bandar Abbas naval base and evacuated two downed Apache pilots from the Strait of Hormuz, a demand signal Anduril is answering with talks to build a drone-boat production site at Baltimore’s historic Sparrows Point shipyard, a potential investment in the hundreds of millions, a bet that drone boats now matter as much as hulls.
Autonomous air: The New York Times details Taiwan’s plan to deter a Chinese invasion with a drone “Hellscape,” targeting 100,000 drones a month by 2030 and more than 210,000 aerial and maritime drones in total, while The War Zone reports unidentified drones were sighted over the joint US-UK base at Diego Garcia, previously targeted by Iranian ballistic missiles.
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🔫 Hot Shots
Stranger Pings: The Threat of CCP-Controlled Infrastructure in the U.S. Communications Backbone
Anduril CEO Brian Schimpf’s media tour keeps landing. George Hoyem, a former In-Q-Tel investor who helped Anduril land its first customer, writes that Schimpf may be “the clearest voice in defense tech right now,” arguing AI-enabled precision should be “more precise, more discriminating, and less prone to unnecessary collateral damage than older and ‘dumber’ alternatives.”
A16z’s American Dynamism film series turns industrial policy into cinema. The venture firm’s short-film series profiles founders rebuilding US industry, including an underwater-drone startup mapping the ocean floor and a portable nuclear-power venture, on the theory that “we know more about space than the bottom of the ocean.”
The UK puts £100 million behind first-time venture fund managers outside London. Britain’s Investor Pathways Capital Initiative aims to launch up to 10 new VC funds in every postcode, part of a broader £400 million push to diversify who controls early-stage capital.
A $30 kids’ smartwatch turned into a stalking tool. Wired researchers hijacked a child’s GPS smartwatch and remotely tracked, photographed and recorded a reporter, tracing the flaw to three Shenzhen-based platforms running tens of millions of devices worldwide: “millions of kids are being exposed and vulnerable to exploitation.”
FelixClark launches a scorecard to separate real dual-use companies from defence-adjacent marketing. The DURI Dual-Use Readiness Index scores startups on technical maturity, market pathway and capital readiness, built on the premise that “many companies can claim defence relevance. Far fewer can demonstrate it.”
A military GPS jamming exercise may have contributed to a fatal medevac crash. Futurism reports an experimental jammer at White Sands Missile Range disabled a medevac aircraft’s navigation before it crashed near Ruidoso, New Mexico in May, killing all four aboard, the first known case of military GPS jamming contributing to a civilian crash in US airspace.
Odds & Ends: Wuxly selected to supply the Royal Canadian Mounted Police with Canadian-made Duty Overalls. SAAS North announces DEPLOY for defence tech founders (Nov 5), and Invest Ottawa announces GCXpo (Sep 29)
Chinese-made camera parts in Royal Navy drones were phoning home. Britain’s £12 million K3 Scout uncrewed vessel fleet had cameras transmitting “heartbeat communications” to a Chinese IP address, forcing the Ministry of Defence to strip their connectivity before Gulf deployment: “If we cannot say with confidence what is inside our own military equipment, we cannot say it is ours, or that we are sovereign.”
The Army wants its AI battlefield network to police itself. Axios reports the Army’s Next Generation Command and Control platform, built around Anduril’s Lattice software, automatically quarantined a misbehaving application during testing at Fort Irwin, part of a $4 billion FY2027 push to fuse 40-plus applications into one operational picture.
China’s Palantir-style AI firms are surging. The South China Morning Post’s look at Beijing’s military-civil fusion strategy tracks a Chinese firm claiming its AI flagged an unusual concentration of US surveillance assets across the Middle East more than 50 days before the US strikes on Iran, marketing itself as a Chinese answer to Palantir and Anduril.
The Jaguars are the NFL’s first team to fight back against drones. Ondas subsidiary Sentrycs will deploy cyber-takeover counter-drone tech at Jacksonville’s stadium this season, after the FBI seized more than 700 illegal drones around World Cup stadiums this summer.
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.