Canada is no longer treating defence as simply a procurement function: it is now a central pillar of national industrial and economic policy.
With the launch of Canada’s first Defence Industrial Strategy, the federal government has made its objective clear:
Scale up Canada’s defence and dual-use innovation — and export it to our allies.
This represents a coordinated, multi-billion-dollar shift in capital deployment, innovation programming, export promotion, and sovereign capability building.
For Canadian companies, particularly those in advanced manufacturing, AI, aerospace, quantum, robotics, cybersecurity, and life sciences, this is not a niche policy update. It is a structural change in how federal funding and economic growth strategy will be deployed over the next decade.
The Capital Commitments Behind the Strategy
The government’s plan is backed by significant financial and structural investments designed to strengthen Canada’s domestic defence ecosystem.
Major Innovation & Capital Allocations
- $4 billion Defence Platform at the Business Development Bank of Canada (BDC)
A new capital vehicle to ensure Canadian companies ( including SMEs) have access to growth financing tied to defence and dual-use innovation. - $379.2 million Regional Defence Investment Initiative
Designed to integrate Canadian SMEs into domestic and international defence supply chains. - $656.9 million to support development and commercialization of defence and dual-use technologies, including through
- Strategic Response Fund
- Innovative Solutions Canada
- Life Sciences Fund
- $105 million over three years for a Drone Innovation Hub at the National Research Council of Canada
Plus $459 million over five years to develop an aircraft research and demonstration platform supporting Canada’s defence industries. - Creation of BOREALIS (Bureau of Research, Engineering and Advanced Leadership in Innovation and Science)
A new body to coordinate and accelerate defence research and frontier technology development
Structural Shifts Beyond Funding
This strategy also introduces structural reforms that matter just as much as capital:
- Reinforcing Canada’s edge in AI, quantum, space, and high-value sectors
- A dedicated team to boost Canadian defence exports
- New trade commissioners in the UK and key EU markets
- Expanded Canadian presence at global defence and aerospace trade shows
- A new Science and Research Defence Advisory Council
- Support for sovereign control of Canadian defence-related IP
In short: this is not just about buying equipment. It is about building sovereign industrial capacity, scaling domestic companies, and positioning Canada as a long-term contributor to allied supply chains.
Key Funding Pathways Available Now
Below are some of the most relevant programs and initiatives that businesses should consider when thinking about defence-aligned growth.
1. Innovation for Defence Excellence and Security (IDEaS)
IDEaS continues to be the most direct way for innovators to engage with defence-focused challenges. Through targeted challenge streams, companies can secure funding for:
- Challenge-driven R&D
- Proof-of-concept work
- Prototype development
- Solutions to specific Department of National Defence (DND) technology requirements
For companies working in AI, autonomous systems, sensing, quantum, or advanced materials, IDEaS offers structured pathways into defence engagement.
2. Defence Innovation Secure Hubs (DISHs)
Under the IDEaS framework, the Defence Innovation Secure Hubs initiative is a new and strategic funding opportunity that goes beyond traditional R&D grants. These hubs are intended to provide secure spaces where industry, government, and research partners can collaborate on mission-critical technologies, particularly:
- Quantum technologies
- Uncrewed and autonomous systems (UxS)
Unlike traditional grants, DISHs emphasize ecosystem-building, secure facilities, coordinated testing, and collaborative frameworks between industry, academia, and government.
For organizations capable of leading or participating in consortia, this is a strategic positioning opportunity, not just funding.
3. Federal Regional Defence Investment Initiatives
As part of the Defence Industrial Strategy’s implementation, the federal government has introduced regional investment streams designed to help small and medium-sized enterprises integrate into defence supply chains. One example is the Regional Defence Investment Initiative, part of the broader strategic investment framework rolled out alongside the strategy.
Example: FedDev Ontario Regional Defence Investment Initiative
Regional development agencies, like FedDev Ontario, are now explicitly aligning their economic funding with defence priorities. These initiatives can support:
- Scale-up and manufacturing capacity
- Productivity improvements
- Supply chain development
- Commercialization of defence-relevant technologies
This reflects a broader shift: regional economic programs are now part of the defence ecosystem, providing complementary pathways alongside national programs.
4. Industrial and Technological Benefits (ITB) Policy
While not direct funding, the Industrial and Technological Benefits Policy tied to large federal defence contracts creates downstream opportunities for Canadian suppliers. By requiring major defence contractors to reinvest in Canada, ITB creates avenues for:
- Subcontracting and supply partnerships
- Joint R&D collaborations
- Market access through large defence integrators
For smaller firms that aren’t ready to bid directly on government contracts, this can be a powerful entry point into defence value chains.
5. Broad Innovation Support Programs (IRAP, SR&ED, Mitacs & More)
Not all defence-aligned funding comes through defence-branded programs. In fact, many companies build their capabilities using core federal innovation programs before ever engaging directly with DND or defence procurement.
If your technology has dual-use potential, these programs are often the foundation:
National Research Council of Canada Industrial Research Assistance Program (IRAP)
Non-repayable funding for technical R&D, feasibility, and prototype development.
SR&ED (Scientific Research & Experimental Development)
Canada’s flagship R&D tax incentive, supporting experimental development and technical problem-solving across sectors.
Research and talent partnerships connecting companies with graduate students and postdoctoral researchers for applied innovation projects.
In practice, companies often:
- Use IRAP or Mitacs to advance early-stage work
- Claim SR&ED to offset internal R&D costs
- Transition into IDEaS or defence-specific initiatives
- Scale through regional programs or larger funds
Defence funding is often layered on top of broader innovation supports, not separate from them.
The Bigger Picture: Dual-Use Is the Bridge
One of the most important shifts in this strategy is the emphasis on dual-use technologies.
Many companies do not consider themselves “defence companies.” But if your technology contributes to:
- Secure communications
- Advanced analytics
- Autonomous navigation
- Advanced materials
- AI-enabled systems
- Cyber resilience
You may already be aligned.
The federal strategy is explicitly designed to support commercialization that strengthens national security outcomes, even when defence is not your primary market.
What This Means for Your Funding Strategy
This is a structural inflection point.
For Canadian companies in advanced technology sectors:
- Defence alignment can strengthen your funding narrative
- Regional and national programs should be evaluated together
- Export positioning is increasingly part of funding logic
- Sovereign IP control may become strategically important
The window of opportunity is significant but positioning matters.
Companies that proactively frame their innovation in terms of supply chain resilience, allied interoperability, and dual-use capability will be better positioned to access capital, partnerships, and procurement opportunities as this strategy rolls out.
If you’re exploring growth, scale-up, or commercialization in advanced technology sectors, it may be worth assessing whether your work fits within Canada’s evolving defence and dual-use ecosystem.
Often the opportunity isn’t obvious at first glance but when properly positioned, it can meaningfully expand your funding options.
If you’d like to explore how this applies to your organization, let’s start the conversation.
