After decades of underinvestment in defence compared to its peers, Canada has made defence spending a priority amid military and economic threats from the United States, and Canada’s technology sector spent much of 2025 embracing the call to arms. As a result, billions of dollars are set to flow into shoring up Canada’s domestic defence capabilities over the coming years, and a chunk of this money will be deployed by the Business Development Bank of Canada (BDC).
Last year, BDC signalled its readiness to serve the country’s defence tech sector in “a less shy” and “more aggressive way,” unveiling a new $4-billion CAD defence tech platform and informing venture capital firms of its willingness to lift historic restrictions on defence investing.
This week, the federally-funded Crown corporation’s shared its first two investments since laying out big plans to finance Canadian small- and medium-sized businesses (SMBs) developing “dual-use” tech with both civilian and military applications. BDC Capital’s Seed Venture Fund participated in Sherbrooke AI chip developer Irréversible’s pre-seed round and co-led Toronto-based Canada Rocket Company’s recent $6.2-million CAD seed financing. BDC also announced plans to partner with Creative Destruction Lab (CDL) on its new defence accelerator program, CDL Defence.
BetaKit reporter Josh Scott took the opportunity to sit down with BDC Capital executive vice president Geneviève Bouthillier to discuss these moves, why defence tech has quickly become such a high priority sector, and what role BDC hopes to play in ensuring Canada’s sovereignty.
The following interview has been edited for length and clarity.
Why is it so important that Canada invest in defence tech right now?
We all agree that Canada’s sovereignty is important. We relied on others in the past, and now Canada needs to be more sovereign in [its] technologies and defence capabilities.
Defence spending hasn’t really previously been a priority in Canada. I’m curious, how would you describe the current state of Canada’s defence sector?
You’re right, this was excluded from most investment policies of private and public investors. So this is all new. In our Deep Tech fund, we invested in 16 companies and 11 of them were dual-use. So we have a little bit of experience.
[But] we will want also to invest in funds to build this ecosystem, and [ensure] that we’re not alone at the table.RELATED: The year Canadian tech embraced defence
What role can BDC play as Canada ramps up its defence spending?
There are a lot of things BDC won’t contribute to, but one of the places we can contribute is at the innovation stage, to build those SMBs with relevant technology. So, this is what BDC Capital is going to do.
Under [BDC’s] banking and advisory sides, we’re [also] going to go deeper in the supply chains of the large defense companies. Eighty-six percent of the firms in the Canadian defence industry have 250 employees or fewer, so someone needs to help those companies grow, right?
Both [direct investing and fund of funds] are equally important [to BDC’s strategy]. I think we want to react quickly, so with direct investment we were able to have quick results. With funds, it takes a little bit more time, but we’re in discussions with many [general partners] to invest in funds.
Can you give me any insight into what restrictions BDC currently has around defence investing?
We’re going to want [portfolio company] sales to be with Canada’s allies, so NATO, G7, Five Eyes. The other thing we’ll be looking for is that IP [intellectual property] needs to be held in Canada.
What are some of the benefits of investing in “dual-use” technology, as opposed to just defence tech?
We’re not against investing in all-defence tech companies with only defence customers, but dual-use is an interesting business model because the companies have diversification in terms of applications and in terms of customers. [Their] sales cycles might be different also. It helps companies be more resilient to have commercial and defence applications.
My understanding is that part of the idea with dual-use is that the potential benefits could also be felt by average Canadians down the road?
Exactly. [Defence tech can also be] good for Canada’s population.
Tell me a bit about BDC’s first two investments in this space. Why did BDC invest in Irréversible?
[Irréversible] has a grant from the Department of Defence (DND). We [did] our due diligence and got convinced that this was key for DND. [Irréversible’s semiconductors] don’t need to connect to the cloud, it’s low energy, [and] it’s almost undetectable. So it’s really a technology that you can clearly see defence applications.And Canada Rocket Company?
This one is even more obvious. Not that the other one wasn’t obvious. But Canada [also] needs to be able to launch rockets and [Canada Rocket Company] is one company that has a lot of potential in achieving this. The strategy is very clear on defence.
RELATED: Canada Rocket Company wants Canada to stop hitching rides to space
Why has BDC partnered with CDL’s Defence program?
Especially in the defense sector, the bridge between having great technology and actually selling products [for] commercial and defence … companies will need more than money. They will need advice, they will need mentors, advisors, and of course there’s financial support that comes with that. So [this] was really a way to connect the dots.
The term “dual-use” has been thrown around a lot lately, so much so that some folks from the Canadian defence tech ecosystem have argued to me that it has been watered down and could use a more precise definition. How does BDC actually define dual-use and what might it include versus exclude?
If you go at the high level, it’s very easy to define: a company with applications [for] defence and commercial. But then, what’s the threshold? There’s a lot of complexities. We’re in the final process of having that definition ready.
When you say we, are you working with the government to develop that definition?
When I say teamwork, of course the Department of National Defence will be involved, but also members of the ecosystem. We’re talking to CDL, we’re talking to other private investors. So we’re going to propose something and then we’ll react and adapt. This is all new, but this is teamwork. The industry needs to have a common vision.
Feature image courtesy BDC.