Isabelle Hudon, president and CEO of the Business Development Bank of Canada outside the BDC offices in Montreal in October, 2021.Christinne Muschi/The Globe and Mail
The Business Development Bank of Canada is injecting a further $2-billion into its $4-billion defence platform, after some early success financing Canadian companies whose work is aligned with the key capabilities Ottawa recently outlined in its Defence Industrial Strategy.
First announced in December, BDC launched the $4-billion platform as a way to help small-to-medium-sized Canadian businesses participate in major defence procurements and to support startups working on technologies with military and civilian applications.
Since then, the Crown corporation says it has provided a total of $91.7-million in debt financing to 16 businesses through its new defence platform. This includes companies like Aurora, Ont.-based Wolf Advanced Technology Canada Inc., which manufactures video and AI processing tools and received $4-million in growth capital from BDC to help finance its participation in programs with large aerospace and defence contractors.
Peter Dawe, vice-president of defence strategy for BDC, said the companies coming to the bank through its new platform are naturally aligned with the sovereign capabilities Ottawa laid out in its new Defence Industrial Strategy. These capabilities include aerospace, ammunition, digital systems, in-service support, personnel protection, sensors, space, specialized manufacturing, training and simulation, and uncrewed and autonomous systems.
“That alignment is what drives a lot of the investment decision-making,” Mr. Dawe said.
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The additional $2-billion for BDC’s defence platform came out of further discussions with the Department of National Defence and Innovation, Science and Economic Development Canada, he said.
“It was determined that, given the mandate, given the rough time horizon, that we could adjust, we could build a bigger team, we could look at different mechanisms to help deploy that money, and that’s what we’ve done,” he said.
While the original $4-billion was allocated toward financing and advisory services, with $500-million of it set aside for venture capital, some of this extra $2-billion will be funnelled into more indirect investments by the bank into the Canadian defence ecosystem.
For example, academic institutions, industry associations, accelerators and incubators with their own defence programs are all options the bank is considering, Mr. Dawe said.
“There might be a real opportunity here for us to invest in these organizations to help us achieve what it is that we’re looking to do anyway, but with far greater reach and at a far greater pace,” he said.
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In January, Sherbrooke-based Irréversible Inc. and Toronto-based Canada Rocket Company became the first beneficiaries of the bank’s new commitment to funding the defence industry, through its participation in the companies’ funding rounds.
BDC has also partnered with the non-profit Creative Destruction Lab under its broader defence strategy, to provide funding and advisory services to startups in Canada and Europe. However, industry has cautioned that funnelling funds through existing programs only now pivoting to defence is a less efficient way to support industry growth than direct investment.
BDC is currently in the midst of creating a survey, which will be deployed soon, to learn more about the defence ecosystem’s needs, Mr. Dawe said.
The bank is also planning to host a strategic forum on April 2, in partnership with the Chamber of Commerce of Metropolitan Montreal, to help companies learn about opportunities available within defence. Mr. Dawe said this is part of the bank’s efforts to conduct outreach across the country on the topic of defence.