Submarine decision: Why Germany won
US creates a drone czar, and Dominion Dynamics raises $139M to build Canada's autonomous future
Editor’s Note: Thanks to our pals at Platform Calgary and Torys LLP for hosting The Icebreaker at a private defence tech dinner at the Calgary Stampede; and to the VCAA for hosting a defence capital roundtable later this morning. Special shout out to Matt Berry and Evan McCann for wrangling this first-time Stampeder through the chaos.
In the back half of this week, The Icebreaker heads to Montreal to help DMZ Ventures and BDC judge a $100K Dual-Use and Sovereign Tech Investment Prize at Startupfest.
🎯 Three-Shot Burst
Germany’s TKMS will build Canada’s fleet of 12 submarines — the largest single defence procurement in Canadian history. The contract value: $20–30B for the hulls, up to $40–50B including operations, maintenance, and upgrades over the life of the fleet.
The framing matters. This wasn’t a purely military decision. Ottawa explicitly said the winner would depend on economic benefits — not just submarine design. TKMS countered with a jaw-dropping pitch: $86B added to Canadian GDP and 650,000 job-years over the term of the deal. Hanwha came in hard too — $70B in trade and investment pledges, 25,000 annual jobs from 2026 to 2044, a steel mill commitment, and it literally shipped a submarine to Canada to show off. Ottawa chose Germany anyway.
The strategic logic is NATO alignment. TKMS proposed a three-country model — Canada, Germany, Norway — building, training, and maintaining together. Two Arctic nations, all NATO. The Walrus flagged the harder question before the decision landed: does Canada really need twelve submarines designed for last-generation warfare, or should it buy eight and field dozens of autonomous underwater vehicles — including from Kraken Robotics in St. John’s? Canada’s answer is twelve. History will judge whether that’s the right call.
Reality check: Canada currently operates four submarines. Typically one is operational at a time. Twelve gives Canada three deployable at any given moment. That’s a genuine Arctic deterrence posture — the first in decades. But delivery runs mid-2030s to early 2040s, and Canada hasn’t ordered new submarines since the 1960s. The procurement clock is already running.
Bottom Line: Canada’s submarine decision is the most consequential defence procurement since the F-35. It signals NATO alignment over economic hedging, bets on a three-ally construction model, and commits Canada to a conventional underwater deterrent for the next half-century. The industrial fight now moves to who actually builds what, and on Canadian soil.
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Barrack Hill: Navigating Canada’s defence and procurement landscape with precision.
🤝 Deal Corner
🍁 Dominion Dynamics raises $139M Series A — Ottawa-based Arctic sensing and ACP developer. Lead: Georgian Partners. Backers include Bessemer, OMERS, BCI, BDC, RBC, Valor Equity. Total raised: $169M since June 2025 launch. CEO Eliot Pence (ex-Anduril) calls it the largest Series A ever by a Canadian defence startup. Still no federal contract — 50% chance first contract lands in the US.
🍁 Canada to join NATO Innovation Fund — Pending approval from 24 member nations. Canada set aside $107M over 20 years in 2024 but never followed through. Was one of only 8 NATO allies not backing the fund. Initial investment up to €15M per company. Contributions count toward Canada’s 5% GDP target.
🍁 Canada announces founding partners for global Defence Bank — The Defence, Security and Resilience Bank (DSRB) aims to raise up to £100B (US$133B) in cheap finance for allied nations. ~10 founding nations to be announced at NATO Turkey summit. Canada likely sole non-European founder. Canada’s potential contribution: up to €1.5B. Supporting banks: JPMorgan, Deutsche Bank, RBC, BMO, CIBC, Scotiabank, TD.
🍁 CADSI hits record 1,788 members — Up ~750 year-over-year; nearly 1,400 above 2021 low. Big Six banks (minus TD and BMO) now members. CIBC, BDC joined in 2026. 47 academic members (+62% YoY). Controlled Goods Program applications surged 78% above prior year in February.
🍁 Orqa + Remote Robotic Systems: $150M Canadian drone partnership — Croatian drone leader Orqa partnering with Ottawa-based RRS to build Canadian sovereign capability. Target: 10,000 systems/month by 2029. Up to 100 jobs in Ottawa and Toronto by Q4 2027. Canada becomes first non-EU nation in EU’s SAFE initiative. Signed with both Carney and Croatian PM present.
Defence tech funding hits $35.6B in H1 2026 — 40% YoY increase. Q1 alone was $19.8B — largest single quarter ever recorded. Autonomy is the dominant theme: $16B TTM across 212 deals. UAV subsector up 254% TTM, UGV up 284%. Capital is concentrating — top 5 rounds = 48% of H1 total, Anduril’s $5B Series H alone = 14%. Median round size doubled YoY from $11M to $20M.
Ondas acquires DZYNE Technologies for $876M — Drone and C-UAS rollup Ondas ($ONDS) expanding with DZYNE’s ULTRA (70+ hr endurance, 450 lb payload), LEAP, IonStrike interceptor, and new Blitz Group 1 drone. New business unit: Ondas Sentinel. On pace for $525M revenue this year. Portfolio spans US, Europe, Israel.
Harpoon Ventures closes $155M Fund IV — San Diego early-stage VC now at $450M+ AUM across four funds (Fund I: $55M → Fund IV: $155M). Strategy pivoting to infrastructure/”picks and shovels” — 3D-printed batteries, automated shipbuilding. “Are we in a bubble? Yes. The tourists are the ones who get screwed.”
Netherlands bets €30M on drone software over hardware — Dutch Ministry of Defence signs 3-year strategic partnership with Amsterdam-based Intelic, whose NEXUS C2 software lets drones from different manufacturers operate together. First country to formally fund a software-first approach to drone procurement. Exploring golden share. NEXUS in combat use in Ukraine since 2025.
Six Robotics raises €12M seed — Oslo-based swarm coordination company. Valkyrie software lets a single operator command multiple heterogeneous drones as one team. Built to 90 people before taking outside money. DTCP Defence led. Already integrated with Norwegian Armed Forces, Stark’s kamikaze drones, FACNAV. “Europe cannot afford to depend on others for the software that defines what its forces can do.”
Jamie Dimon wants JPMorgan in the weapons business — Dimon considering shift to invest JPMorgan’s own capital directly in defence companies — not just provide loans. Framed around US weapons shortage exposed by the Iran conflict. L3Harris flagged inconsistent federal procurement as barrier to rocket motor scaling.
Marc Andreessen and Blake Masters appointed to DoD policy board — a16z founder and former Thiel Capital COO now providing “independent strategic advice” to Hegseth.
Related: a16z: DoD contracting for startups 101 | MITS Capital: Wall Street to Warzone podcast
⚔️ Combat Readiness
Drone czar: Hegseth signed a memo creating DRPM-UxS — a Pentagon-wide drone czar reporting to Deputy SecDef Feinberg, with authority over all UAS Groups 1–3, all autonomous ground vehicles, nearly all unmanned surface vessels, and all autonomy/AI/swarming software. ~$54.6B in FY2027 budget scope. “Adversaries collectively produce millions of unmanned systems each year. The United States has been slow to field these capabilities at scale.” DIU becomes primary industry interface.
Loyal wingman goes mainstream: US Air Force confirmed General Atomics FQ-42 and Anduril FQ-44 Fury for production — the world’s first large-scale CCA fleet (~1,000 aircraft). Germany, Australia, Poland also accelerating. Canada has 88 F-35s coming and no autonomous ecosystem to pair them with. Dominion Dynamics’ Scout ACP is the domestic answer — but Anduril, GA, and Boeing/RAAF MQ-28 are ahead on capital and flight hours.
Ground robots: Eurosatory 2026 outside Paris — UGVs dominated, not tanks. 50+ manufacturers. Ukraine contracted 25,000 UGVs in H1 2026 alone, ran 50,000+ missions. Rheinmetall Canada’s Mission Master and General Dynamics Land Systems-Canada’s TRX give Canada world-class UGV capacity. Problem: no political will to field it. “The challenge is not innovation, but fielding capability at scale.” CDR
UFORCE’s Oleg Rogynskyy joined CNN International’s The Brief to discuss how Ukraine is rewriting the playbook of modern defence and why the future of deterrence lies in affordable, autonomous mass.
Russia’s shadow fleet ran an 18-month nuclear surveillance campaign — IISS analysis of 144 incidents across 12+ NATO countries. Targets included RAF Lakenheath (US nukes deployed July 2025), France’s Île Longue submarine base, and NATO air bases at Kleine-Brogel and Volkel storing US air-launched nukes. Drones launched from “dark sailing” vessels with transponders off. None captured or shot down. GRU assessed as orchestrator. “A series of tactical successes for the Kremlin and a strategic failure of allied defences.”
NATO Maven reaches full operational capability — Project Maven AI targeting system now at full capability within NATO SHAPE. NATO SHAPE
🍁 Canada Arctic: spending ≠ readiness — Macleans longform: 1/3 of Inuit live in homes in poor repair; TB rate 37x the national average; $17.69 box of Cheerios; food bank use up 80%. CSIS: “the infrastructure gap in Nunavut is creating national security risks.” CDS Carignan: “geography alone no longer guarantees the security of our northern flank.”
🍁 From spending to readiness — Canada’s talent problem — “Scaling investment is not the same as scaling capability.” The bottleneck won’t be capital; it’ll be coordinated talent, training, and procurement. Building blocks exist — CAE simulators, Irving Shipbuilding, Magellan Aerospace — but the system doesn’t connect them. BHER
🍁 Canadians are becoming defence hawks — Politico poll: 52% say Canada poorly prepared to defend itself; 61% say too few troops; 53–27% margin prefer buying from Europe over US; 52% support domestic production even at higher cost. Military recruitment hit a 30-year high — 8,000+ sworn in last fiscal year.
🍁 Skilled Canadians want to come home — Brain drain reversing. High-skilled workers citing US political climate, cost of living, and Canadian opportunity as pull factors. Financial Post
Pentagon manufacturing bottleneck: Manufacturing — not funding — is now the primary constraint on US defence capability. Companies need right mix of facilities, skilled labour, and reliable suppliers to deliver in months not years. Rep. Wittman: “Shipyards are turning more into assembly sites rather than primary production facilities.” Could take 2–4 years to materially improve.
DoD can prototype. Production is another story. — No data on how many OTA contracts or SBIR grants actually convert into programs. “The challenge is what does it lead to?”
Pentagon hiring hundreds of software engineers — “War Force” program: hundreds of engineers for 2-year DoD stints, embedded down to unit level. Builds on Tech Force (1,000+ hires at $150–200K/year). AI talent priority for CDAO’s AI Acceleration Plan.
Navy Innovation Unit gets 200+ applications — Tech-focused Reserve unit drew senior execs from hyperscalers, defence primes, and defence-tech startups. Mirroring Army’s Detachment 201 (which commissioned Palantir CTO and Meta CTO as Lt. Cols). Commissioning begins fall 2026.
Logistics are the next war’s biggest vulnerability — “All logistics operations will be contested” in peer conflict. Unlike Iraq/Afghanistan where rear-area sanctuary was guaranteed, a war with China or Russia won’t offer the same protection.
AI warfare: point of no return — WSJ on Ukraine’s AI arms race. Eric Schmidt: “Future warfare will be predominantly robotic and automated.” Ukrainian drone CEO: “Either robots will eliminate us in fifty years, or the Russians will take us out in a year.” Anthropic and OpenAI now have dedicated national security offerings.
Europe’s rearmament paradox — $559B spent by NATO Europe last year. Germany alone: $114B (+24%). Yet the FCAS program just collapsed, the Franco-German tank program is stalled, and the Stoxx Europe Targeted Defence index is down 15% since January. NUPI: “Europe’s Achilles heel is no longer financial, it is institutional.”
UK Defence Investment Plan praised by startups — Long-awaited DIP published. European drone startups broadly positive but flagging execution risk.
🔫 Hot Shots
🍁 UVic MARMOTSat launching on SpaceX Falcon 9 in July — University of Victoria’s second CubeSat will probe the ionosphere for climate change signals and fly an open-source radio system. PacifiCan funding: $5.4M. Next mission: PolarLink (2027) focused on Arctic communications with space-to-space optical links.
Vermeer launches “Recovery” for GPS-denied drones — New feature for its Visual Positioning System corrects drift mid-flight without satellite data. 95% success rate at 1km drift; ~80% at 3km. Tested in Ukraine under real operating conditions. Customers: Lockheed, Northrop, Anduril, AV, Firestorm. VPS trained on 25,000+ hours of aerial video.
Deviro, Leleka, Bulava — Ukraine’s triple drone debut — New Ukrainian FPV and strike drone models entering service. Combat-proven ecosystem expanding. The Defender
Hypersonics VC funding hits 12-quarter high — $413.1M in Q2 2026 across just four deals. Castelion ($350M Series B + $105M Navy contract), Hermeus ($350M Series C at $1B valuation), Rocket Lab ($190M hypersonic test contract). The real VC play: propulsion, thermal protection, test infrastructure — not full missile programs. Visible US opportunity: mid-teens billions through end of decade.
BVP defence tech roadmap — five frontiers for 2026 — Defence tech advanced more in 24 months than the previous 3 decades. Five frontiers: autonomy from concept to combat, AI in DoW workflows, advanced manufacturing, edge/network resilience, energy/materials independence. China controls ~70% of rare earth production and 90% of processing. European defence spending projected to grow 3.4x in six years. Palantir at ~65x NTM revenue. Check out monthly comps from BCI.
Wall Street to Warzone: Perry Boyle (MITS Capital) on investing directly in Ukraine’s defence ecosystem. Innovations in drone tech, building the defence industry from scratch under wartime conditions. “It’s not a storm — it’s the climate.”
MITS Capital / Ukraine: Also see the deep-dive on Deviro, Leleka, and Bulava drone systems — Ukraine’s drone output ecosystem expanding beyond FPV into new strike categories.
Related:
This Mine Predicts Major Wars. It’s Opening Again
America seeks its McDonald’s model for missile making
TACTIQL joins the Oracle Defence Ecosystem
Ukraine opens door to arms exports
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