On October 2, Prime Minister Mark Carney’s government launched a new agency, the Defence Investment Agency (DIA). The DIA’s mandate, to overhaul Canada’s defence procurement, comes in line with the government’s commitment to increase defence spending to roughly 2% of GDP (about $63 billion) in 2025–26, and to 5% by 2035.

According to the government, procurement in Canadian defence has been fragmented across departments, slow to consult industry leaders, and imposes bureaucracy that impedes timely responses to ever-evolving defence needs. To try and resolve these problems, the DIA has been tasked with streamlining and consolidating procurement processes, engaging industry leaders earlier in the procurement life cycle, and coordinating more closely with allied partners. In addition, the new agency has a mandate to prioritize procurement with domestic industrial benefits. The government’s announcement was foreshadowed by the Prime Minister’s May 21 mandate letter to cabinet, which signalled the government’s plans to strengthen the Canadian Armed Forces and unleash the power of public-private cooperation in the defence sphere. 

Major Canadian defence and tech players have taken notice, and their actions in anticipation of higher defence spending seem likely to have significant trickle-down benefits for startup founders. Recognizing that collaborating with startups can catalyze innovation and capitalize on opportunities raised by the government’s policy agenda, established defence industry players have announced programs to connect emerging defence startups with emerging venture support. These programs indicate foundation-shifting changes for defence startups while illustrating the practical impact and relationship between the government, industry leaders, and startups.

Creative Destruction Lab, which has grown to prominence since its founding at the University of Toronto’s Rotman School of Management in 2012, recently announced the launch of a new defence-focused startup accelerator stream with locations in Toronto and Atlantic Canada. The program will identify and support 25 ventures developing dual-use technologies that address needs in defence, national security, and critical infrastructure. For founders, this represents a new funding opportunity as well as a pathway into a sector that has traditionally had high barriers to access, especially for early-stage founders and entrepreneurs. Programs like CDL’s can help early-stage companies form relationships with defence stakeholders, test their technologies in applied settings, and gain visibility in a market where credibility and networks are as important as innovation itself.

Tidal Venture Partners, a Canadian venture capital firm, has taken a different approach to building its relationship with startups. It partnered with Kognitiv Spark, a Fredricton-based software company, to launch Vimy Forge, an Atlantic Canada-based startup accelerator designed to connect founders and government agencies. For founders, Vimy Forge offers a structured environment and network to test, validate, and scale solutions that might otherwise struggle to reach government buyers.

Calian, another major Canadian defence company, has opted for a different model altogether. Rather than launching an accelerator, it has created its own venture capital fund dedicated to supporting startups in the defence and security sectors. The fund’s goal is to scale small and mid-sized enterprises that can contribute directly to Canada’s defence innovation capacity. For founders, Calian’s move signals that traditional industry players are not only discussing partnerships with Canadian startups but also actively committing capital to them. This underscores how government policy priorities can translate into private funding mechanisms that materially expand the resources available to early-stage ventures.

The launch of these defence accelerators marks a turning point. Until now, Canada was the only G7 nation without a dedicated defence innovation accelerator. That gap is now closing. The government’s policy shift, combined with the response from private sector actors, has galvanized programs designed to connect startups with funding, mentorship, and procurement pathways. For founders, this alignment between government priorities and industry investment showcases how political decisions can create real downstream opportunities for startups to receive funding and rapidly grow in their industry.

While these changes offer exciting opportunities in the defence startup landscape, the potential for volatility in this market remains. As a politically motivated investment, defence capital is tied to government priorities, which operate differently than traditional market factors. Moreover, while the DIA aims to make procurement more streamlined operationally, the nature of the defence industry means it will likely always operate in an environment of relatively high regulatory complexity, imposing ongoing legal obstacles for founders.

Early-stage founders navigating the legal complexities of establishing and growing their startups should consider signing up for our upcoming townhalls, where our student caseworkers will be presenting on some of the legal issues involved in starting a business, raising capital, hiring employees, and protecting innovations.