The Business Development Bank of Canada (BDC), through its VC arm BDC Capital, has the capital and the leverage to set the tone for Canada’s business and tech sector—whether that’s through a newfound focus on defence or heavy promotion of AI adoption.
Isabelle Hudon was appointed president and CEO of BDC in August 2021. Five years later, she has been renewed for a second term, until at least 2030. BetaKit sat down with Hudon in Montréal this month to discuss the Crown corporation’s approach to AI, indirect versus direct investing, and why it’s time to put the ‘C’ in BDC.
The following interview has been edited for clarity and length.
What is your priority for the next four or five years at BDC?
First, to stay on the growth path that we have been on for the last five years.
Isabelle Hudon,
“I feel that the influence we have with our direct investment is quite powerful.”
BDC
I’m quite proud of how the team embarked on this vision five years ago: not only to keep on doing our work very well, but doing more for a greater number of entrepreneurs. We have a dual mandate: a commercial mandate and a development mandate. At the time, my colleagues felt that we were massively delivering on the commercial mandate and probably not enough on the development. That’s what we have done over the last five years. We gave a capital D to BDC, and we will keep that capital D.
With what’s going on in the economy, it’s now time to honour the C in BDC and contribute to the economic sovereignty of our country. That’s why I feel that I’m in the same organization for a second mandate, but with a different twist.
Can you tell me more about what honouring the capital C will look like?
Contributing to the reshaping of our economy and making sure that we’re increasing our economic sovereignty. We cannot do it all at BDC, but certainly we can contribute to this goal.
It means also having high ambitions for the defence and security sector. We had almost no exposure a year ago; on a portfolio of $55 billion, we had no more than $400 million of exposure.
Is there a specific level of exposure you want to reach with defence?
Going from $400 million to $6 billion. After less than one year with this platform, we’ve almost doubled the exposure.
Speaking of defence, Canada’s been selected to host the new international defence bank. You don’t know which city it will end up in, right?
*laughs*
I’m impressed by the level of awareness of this new bank. It says a lot about where we’ve moved along in Canada in the interest of defence and security.
When the announcement became public that I was renewed here, there were a lot of questions because I was highly involved in the negotiation of the charter of that new bank. But it will be a standalone; BDC won’t have anything to do with it.
Let’s talk about BDC Capital. We’ve reported on the tension between investing directly in startups, versus investing indirectly via funds. Now that BDC has a new direct life sciences fund, do you have plans to change the weighting of how much money is allocated directly versus indirectly?
It’s a healthy debate. The short answer is yes.
Having been overly invested directly allowed us to have great influence on crowding in money from the private sector. We’re often one of the first investors to join, and often one of the last, if not the last, to leave the table. So it’s a vote of confidence.
When we deploy capital through the indirect channel, we don’t have that level of direct influence. That being said, the influence we have through the indirect channel is that we’re getting the ecosystem bigger and richer, not with dollars but with expertise.
RELATED: Is BDC too big to change?
Eighteen months ago, we were probably between 80-20 and 70-30 on direct and indirect. We set the goal over the next few years to get to 60 direct and 40 indirect. Fiscal 2026 was a difficult year for most investors. We had more opportunity to deploy towards the indirect channel than the direct ones, so we’ve increased quite rapidly our indirect investment.
Even if a lot of funds would come to us, or to you, to say BDC should be only indirect, I don’t agree. I feel that the influence we have with our direct investment is quite powerful.
There has been criticism and chatter about staff turnover. Do you feel as though it’s a problem at BDC Capital?
No. It’s kind of healthy to have people turn around. I’m a big fan of seeing people within BDC Capital moving into financing, and vice versa. Many people that have exited BDC Capital found better opportunities. We cannot be everything to everyone, and I’m not worried at all.
BDC launched the $500-million LIFT initiative to help small businesses adopt AI. How is BDC using AI internally?
If we want to be credible when speaking to entrepreneurs, trying to convince entrepreneurs to deploy more and use more AI, we need to drink the Kool-Aid first and foremost.
“We cannot be everything to everyone.”
Isabelle Hudon,
BDC
Eighteen months ago, I said to the team, ‘I’ll challenge you to have at least between 15 and 20 pilot projects where AI would be deployed.’ We deployed 22 pilot projects. Not all very successful, but all successful because we tried it, and we were able to conclude what worked and what did not work.
For my second mandate, you’ll hear me often with two words: agility and speed. We need to be way more agile and we need to gain speed in what we do, with the same level of discipline. The ones that are being challenged, it’s not us. It’s the entrepreneurs on the ground facing the real headwinds.
Feature image courtesy BDC.