Toronto asset manager Kensington Capital Partners has acquired the venture capital (VC) business of Ottawa-based One9 to establish its own defence technology VC platform.
As part of this deal, Kensington has acquired the One9 team minus general partner (GP) Daniel Weinand, the One9 brand, and all future One9 investment activities (including new funds and direct investments). Kensington has also acquired a minority stake in One9 Capability Labs with the option to purchase it fully later. One9’s Special Mission Fund, which is now fully deployed, and its existing portfolio were not included in the acquisition. Both companies declined to disclose any of the financial terms of the transaction.
“Defence is so much more than guns, bombs, and bullets.”
Glenn Cowan, One9
One9 and Kensington have been investing in defence tech together since 2020. The two firms started with special purpose vehicles (SPVs) before Kensington decided to anchor One9’s first and only fund to date with a $10-million CAD commitment in 2022.
In a joint interview with BetaKit, One9 founder and managing partner Glenn Cowan and Kensington senior managing director Rick Nathan said that the two firms decided to join forces to capitalize on a variety of tailwinds poised to benefit the defence tech sector, including increased interest in defence investment in the wake of rising international tensions. Together, they plan to invest in more defence tech startups and VC funds both in Canada and abroad.
“There’s a real opportunity in Canada to build a platform focused on national security technology [and] defence technology, using early-stage, emerging, disruptive tech companies to be a part of a critical and much-needed new defence-industrial base,” Cowan said.
Cowan argued that his domain expertise from his time serving in the Canadian Armed Forces and supporting defence tech startups with One9, coupled with Kensington’s scale, credibility, and track record as one of the country’s largest VC investors, make for a “very logical” combination.
VC funding for defence tech has been gaining traction in recent months. At a time when much of the tech sector has been “soft,” and valuations of VC-backed companies have broadly declined, Nathan claimed Kensington has seen “real growth and real success” in its defence tech portfolio.
Kensington and One9 have collaborated on several investments, including Tomahawk Robotics, a Florida-based drone control technology firm that was sold in 2023 to Virginia’s AeroVironment for $120 million USD in cash and stock. The pair also invested in Utah’s Strider Technologies, which uses artificial intelligence (AI) to turn open-source data into strategic intelligence. Strider secured $55 million in Series C funding late last year.
RELATED: An election primer on what Canadian innovators need
With a federal election looming and a trade war with the US underway, Cowan, Medcan chair and CEO Shaun Francis, and others have been lobbying incoming leadership to increase Canada’s defence commitments and improve procurement, which they argue is needed to bring the country up to speed with its peers and modernize the Canadian military.
The Liberals and Conservatives have both committed to ramping up defence spending, which Nathan and Cowan believe bodes well for the sector and their new relationship. Meanwhile, a growing crop of defence tech startups south of the border see room to take business away from traditional contractors under President Donald Trump’s administration.
Cowan, a retired squadron commander in Canada’s Joint Task Force 2, previously spent 18 years with the Canadian Armed Forces, of which 13 were with Canadian Special Operations Forces Command. He served on multiple combat deployments in Afghanistan, information operations in the Middle East, and hostage recovery operations in Africa, where he was a strategic planner and tactical commander.
He launched One9 Venture Partners in October 2020 with Weinand, a co-founder of Shopify, as a defence, intelligence, and national security-focused investment fund aimed at bridging the gap between private capital markets and innovative military technologies with substantial civilian uses.
RELATED: Canadian Armed Forces veteran, Shopify co-founder team up for $50-million military tech fund
One9 initially hoped to raise $50 million CAD for its Special Mission Fund, but was ultimately only able to secure $10 million, including $7 million from Kensington, with the remaining $3 million from high-net-worth investors, including Weinand (also GP) and Shopify president Harley Finkelstein.
Cowan said that raising a first-time fund in a niche, specialized asset class during the COVID-19 pandemic as someone with a special forces background was “a tough lift.” He credited Nathan and Kensington for being “very early believers” in One9.
“Probably the biggest elephant in the room around that was the defence focus in Canada,” Cowan said. “Not only is a first-time fund hard, but Canada is a tough market for this sector.”
Between the Special Mission Fund, SPVs, and a separate One9 entity, the firm has deployed a total of approximately $23 million across six defence tech startups. Ottawa’s Ventus Respiratory Technologies, which is developing respiratory tech for military, law enforcement, and first responders, marks One9’s sole Canadian investment to date. Cowan attributed this to One9’s focus on the Series A level, a threshold he said not a lot of Canadian defence tech firms meet at the moment.
Capability Labs, One9’s 6,000-square-foot industrial office and workshop in downtown Ottawa, is where One9 hosts portfolio companies, conducts due diligence, finds deal flow, and connects startups with military players and other end users for demonstrations.
It is rare for a Canadian VC firm to be acquired. For Kensington, which just sold a majority stake in its own business to AGF Private Capital last year, One9 shores up its defence tech expertise and support capabilities on the VC side of its business.
Cowan and Nathan are betting that shifting political and social winds will lead many Canadian institutional and other private investors who have typically been more skittish of defence tech investing for a variety of reasons to become more comfortable with this sector.
“We expect to deploy significant capital in Canada in this sector.”
“Defence is so much more than guns, bombs, and bullets,” Cowan said, citing “top-secret level encryption and cloud compute” as one of the many examples of non-weapons-related defence tech that could also have positive implications for civilians.
Nathan believes Canada has “all the building blocks” to establish a strong defence tech sector, including strong capabilities in areas like AI, robotics, and cybersecurity that have largely not yet been leveraged for defence applications.
Kensington invests in both tech companies and other VC funds, a strategy it intends to apply to defence in a more focused manner with One9. While there are not any other VC funds in Canada dedicated exclusively to defence tech, Nathan noted that there are some strong Canadian companies. “There is stuff here, it’s just not focused, and it’s not that much,” he said.
Nathan and Cowan are confident that more defence tech companies and VC funds will emerge in Canada over the coming years, and together, hope to play a role in supporting them.
“We’re here in Canada and we expect to deploy significant capital in Canada in this sector,” Nathan said.
Feature image courtesy One9.