For Eliot Pence, founder and CEO of Dominion Dynamics, this year’s changing geopolitical circumstances and a flood of federal defence money aligned perfectly with his plans to found Canada’s “defence neoprime”—an explicitly Canadian competitor to big-name defence contractors like Lockheed Martin or Raytheon.
“Political access, funding, and management of ecosystems win.”
Eliot Pence
Pence’s Ottawa-based company has secured $21 million CAD in seed funding, led by Canadian firm Georgian Partners, with participation from the British Columbia Investment Management Corporation (BCI) and San Francisco-based Bessemer Venture Partners. Founded in June, the startup has already raised a total of $26 million; Pence did not share its valuation.
The sizable early-stage deal, which Pence claimed was massively oversubscribed, comes amid a chilly fundraising environment for young tech startups in Canada. For Georgian, which has traditionally focused on growth-stage investments across software sectors, it’s an opportunity to get in on the burgeoning defence tech industry.
Lead investor Margaret Wu told BetaKit in an interview that the firm considers it a “pathfinder deal,” writing an early-stage cheque into emerging sectors. Past examples include Toronto’s Xanadu, which builds quantum tech, and Canadian-founded Tenstorrent, which makes AI chips.
“We want a courtside seat to learn more and assist,” Wu said.
Pence formerly led the international go-to-market strategy at one of the world’s hottest and most controversial startups: California-based Anduril Industries, which contracts with the US military and develops autonomous weapons and surveillance software.
In an interview with BetaKit in early January, Pence outlined the lessons he learned from his time at Anduril. Playing to the end user’s needs—meaning the government and its allies—was chief among them.
“Product and tech don’t necessarily win,” he said. “Political access, funding, and management of ecosystems win.”
Right now, the argument for Canadian defence spending appears to have already been won. In November’s federal budget, the government pledged $82 billion toward defence, writ large, with envelopes like the Defence Industrial Strategy and a defence platform for the Business Development Bank of Canada (BDC) seeking to fund domestic companies.
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“The government is saying all the right things and allocated the sufficient amount of capital,” Pence said. He cautioned, however, that Crown corporations such as the BDC have limited investing into “hard-nosed” defence such as weapons and ammunition.
Indeed, some venture capital (VC) funds were barred from investing in defence companies due to stipulations in agreements with limited partners (LPs). In December, BDC, a significant LP in the Canadian market, signalled it was open to lifting some of these restrictions.
Beyond securing capital, landing the Canadian government as a customer remains a challenge, considering its traditional reliance on US suppliers. Pence previously said on The BetaKit Podcast that he wants to reverse the trend of the Canadian government sourcing most of its defence material from US companies.
Becoming a prime, or a main defence contractor with the government, will eventually mean many divisions of hardware and software developed for various uses—from weapons to data management software. Dominion’s current focus, Auranet, is a software layer that connects hardware sensors into a data fabric for monitoring remote regions in the Arctic.
Canada doesn’t have “a system for generating data, capturing that data in a repository, and drawing insights from that data” in the North, Pence explained. Dominion’s Auranet has been deployed twice so far and will be used for Northern military exercise Operation NANOOK in February.
“In the event of some sort of conflict, we can look at what happened in the past and build predictive models that help us anticipate future problems,” Pence said.
Pence said Dominion has nearly 20 employees and plans to focus on research and development this year, rather than revenue.
Feature image courtesy SAAS NORTH.