To effectively defend our country in the future, Canada's core capabilities will need to be complemented by the emerging and disruptive technologies that are advancing at an incredible pace.Arlyn McAdorey/Reuters
Glenn Cowan is the founder and managing director of ONE9, a security-focused venture capital firm. Michael M. Smith is the chief operating officer at ONE9. Philippe Lagassé is an associate professor at Carleton University.
Canada is ready to invest in its armed forces and to build a strong defence industrial base. These are important objectives in an increasingly uncertain and unstable world.
But to truly succeed in these efforts, Canada should recognize how rapidly defence innovation is evolving, thanks in large part to the technologies and capabilities being developed by non-traditional founders and entrepreneurs. Prime Minister Carney’s recent defence spending announcement acknowledges the importance of these innovations, yet more must be done to effectively develop them in Canada.
There will always be a place for large-scale, expensive military platforms, such as warships and fighter aircraft, in Canada’s arsenal. To effectively defend our country in the future, however, these core capabilities will need to be complemented by the emerging and disruptive technologies that are advancing at an incredible pace owing to private-sector innovation and investment.
Canada’s new defence industrial strategy must commit to sustaining and supporting the founders, innovators and investors who are at the forefront of these cutting-edge technologies.
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Our defence procurement system is too slow and unsuited to the times we live in. Canada needs to buy capabilities faster and more often to keep up with new technologies and threats. We need to make decisions faster and with a higher risk tolerance, so that the military gets the equipment they need and companies believe they can invest in new products and production lines with confidence.
Canada also needs to rethink how it fosters domestic military innovation and investment in a sovereign high-tech defence sector. We have some of the world’s best minds in artificial intelligence, quantum computing, cybersecurity and materials science. Yet we make it incredibly hard and frustrating for these talented Canadians to contribute to our national defence.
Canada’s defence department has a program, Innovation for Defence Excellence and Security, or IDEaS, that allows innovative companies to develop new capabilities in co-operation with the armed forces. But we don’t provide a path for the military to actually acquire those technologies after they’ve been developed.
Nor are there integrated funding mechanisms to support these early-stage companies. The Business Development Bank of Canada, or BDC, which exists to fund Canadian entrepreneurs, has historically lacked the mandate to fund defence-focused companies.
This institutional sclerosis and risk aversion affects more than just operational readiness. It also fails to take advantage of a tool of strategic impact: private capital.
In the face of glacial procurement cycles and state investment banks systematically bypassing the sector, there has been little incentive for private capital to invest in Canadian defence companies. This leaves billions of dollars sitting on the sidelines or, perhaps worse, being invested outside of Canada.
Ottawa should commit to reversing these trends and practices as part of its reinvestment in the armed forces and fostering of a sovereign defence industrial base. It should do so in two ways.
First, Canada should establish a pool of strategic, defence-focused capital, unleashing BDC and its Crown investment banks. This fund should provide capital for defence founders and innovators, but also investors, allowing them to catalyze and attract further private capital.
This would send a clear signal: Canada is committed to military innovation and fostering a thriving high-tech defence sector here at home.
Second, as part of its defence procurement reforms, the Canadian government should also establish a mechanism for the rapid and regular adoption of emerging and disruptive defence technologies. This could involve an expansion of the IDEaS program or a separate branch of the Carney government’s proposed defence procurement agency.
Either way, the goal must be clear: delivering cutting-edge technologies to the armed forces quickly and often.
Canada’s defence founders, innovators and investors are some of our best and boldest thinkers, operating in fields that will determine success in future conflicts and protecting Canadian sovereignty. They are primed and ready to contribute to the nation’s defence and are eager to reshape their relationship with the Canadian government.
Rapidly building and sustaining the ecosystem of innovation and investment necessary for their success will inevitably entail costs. However, these costs should not be seen as mere expenses; they are essential investments without which Canada’s security and prosperity cannot be safeguarded.
Mr. Carney often speaks about catalyzing investment in key sectors. Defence innovation must be one of them.