Building upon previous federal commitments, the Business Development Bank of Canada (BDC) has announced a new, $4-billion Defence Platform allowing the Crown corporation to invest in and support Canadian defence technology companies.
The platform, announced Wednesday, includes $3.5 billion for financing and advisory services to help Canadian businesses scale and participate in “major defence contracts and national projects focused on sovereignty.” Another $500 million will be delivered through three streams of venture capital: a deep-tech, dual-use focused StrongNorth Fund, the Catalyst Innovation Fund, and indirect investments in VC funds “aligned with Canada’s defence and sovereignty priorities.”
In its announcement, BDC explicitly encouraged businesses, such as advanced manufacturing companies, to “apply their skills to defence needs.”
In an interview with BetaKit on Thursday, BDC Capital executive VP Geneviève Bouthillier said the StrongNorth Fund is the successor fund to its Deep Tech Venture Fund and will exclusively back companies making tech with civilian and military applications.
Bouthillier said the Catalyst Innovation Fund will provide financing to businesses just starting out selling in the defence and dual-use world, from early-stage to established companies. She added that it’s currently unclear how the $500 million envelope will be split up amongst these funds and indirect investments, but that BDC is working on getting the funds up and running “as soon as possible.”
The bank, whose sole shareholder is the Government of Canada, is the country’s largest and most active VC through its investment arm BDC Capital. In September, BDC CEO Isabelle Hudon told BetaKit that the bank was preparing to serve the country’s defence tech sector in a “more aggressive way,” as the US trade war spurred Canada to invest more in the country’s military capabilities.
“We know that entrepreneurs aligned to the sector face unique challenges in accessing capital and navigating complex supply chains, and BDC is stepping up to help them overcome these barriers, strengthen our sovereignty, and build a more secure and resilient nation,” Hudon said in a statement on Wednesday.
The funding is part of a larger push from the federal government to boost defence spending in Canada to a target of five percent of GDP by 2035. The federal commitment has made Canadian investors, including BDC, more keen on the defence sector, which ranges from cybersecurity software to quantum computing to weapons technology.
BDC’s Defence Platform builds directly on the $1-billion capital injection from the federal government in the most recent budget, which was originally called the Defence and Security Business Mobilization Program.
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In Wednesday’s announcement, BDC explicitly encouraged businesses, such as advanced manufacturing companies, to “apply their skills to defence needs.” BDC said its support will prioritize sectors “critical to national security,” such as manufacturing, robotics, critical minerals, quantum computing, aerospace, cybersecurity, AI, and technologies that can be used for civilian and military purposes.
BDC also indicated that it would look to hire industry experts and create a “dedicated team” to serve the defence sector. The Crown corporation has been undergoing a continued reset and leadership churn across its various funds. It laid off staff from its Deep Tech Venture Fund earlier this year, and Hudon told BetaKit in September its successor fund would be defence tech-focused. She also said the Crown corporation had no need to rewrite its governing rules to make direct investments in defence-related startups.
This week, however, BDC Capital executive vice-president Geneviève Bouthillier wrote in an email to investors viewed by BetaKit that BDC was willing to “alleviate” restrictions in fund documents to allow VCs to invest in companies that make or sell military-related products.
Feature image courtesy BDC