Industry and Technology Committee on Nov. 26th, 2025

[The Chair, Liberal, Ben Carr]

Good afternoon, everyone.

I hope you've had a good start to your week. I'm going to call the meeting to order.

We are here for what is our last meeting on the defence industrial strategy. We've had a wonderful set of conversations over the course of the past number of weeks.

We have three witnesses here in the room with us today for the first hour, and then three will be joining us virtually.

I will just remind you, for the health and well-being of our interpreters, that if your earpiece is plugged in but not on your ear, please make sure that it's placed on the sticker on the table in front of you.

As I mentioned, we have three witnesses with us here today. From Galaxia Mission Systems, we have Arad Gharagozli, chief executive officer. From Samuel Associates Inc., we have Goran Pesic, president and chief executive officer. Finally, from Solace Power Inc., we have Neil Chaulk, chief executive officer.

Witnesses, you'll each have up to five minutes for your introductory remarks. I'll give you a little wave if you're going over time. From there, we will go into the lines of questioning allocated to the political parties represented across the table from you today.

With that, Mr. Gharagozli, we will go to you first. You have the floor for five minutes.

[Arad Gharagozli, Chief Executive Officer, Galaxia Mission Systems]

Mr. Chair and honourable members of the committee, thank you for the opportunity to appear before you today.

Good afternoon. My name is Arad Gharagozli. I am the founder and CEO of Galaxia Mission Systems. We are building sovereign space capabilities for Canada, focused on next-generation earth observation systems for both defence and civil applications.

Our goal is simple: Canada should not have to rely on foreign suppliers for core space capabilities. Galaxia is the only company building a fully Canadian space mission, where every major component is designed, manufactured, integrated, launched and operated here at home with Canadian SMEs. This is a truly sovereign system, and we are on track to launching this system in early 2028, hopefully from Canadian soil.

Space is now a cornerstone of modern defence. Every domain of war-fighting is relying on space, specifically Arctic awareness, resilience in communication, intelligence gathering, targeting, navigation and so on. If we want to be a credible and capable partner to our allies, we need to pick up the pace, because we cannot afford to lag in this domain anymore.

There are several recent reports that came out specifically on Canada's defence capabilities. One is from the Canadian Space Agency. RBC just released one, and it's showing a worrying trend of Canada really falling behind. We are last in rank out of 10...from the Organisation for Economic Co-operation and Development, as well as among G7 countries, when it comes to defence spending and public spending as a whole. Annually, the U.S. is putting about $7 billion in venture funds into space capabilities. That's about seventeenfold more than what Canada is doing per capita.

What do we do about that? The answer to that is that Ottawa must become an anchor client to Canadian defence producers, and space is just a subdomain of that. Canada simply needs to buy more to enable Canadian SMEs to manufacture and innovate faster in order to become competitive globally.

We also need to rely less on foreign purchasing and on hoping that ITB will fix the gap later on. We simply need to empower our SMEs to build and innovate. This can happen through strategic procurement, scale, and financial tools focusing on technical excellence.

Right now, we create technologies and companies that are just orphans. We are developing a lot of R and D here in Canada, but that's about it. A lot of those companies do not see longer-term commercialization, so a lot of them move abroad, especially to the U.S.

Here's a very good example of how other nations are doing it. In the U.S., there is the SBIR program, which is funding these companies through small funds at the beginning, taking them through $200,000...into $1-million to $2-million feasibility studies, and later on into $50-million or $60-million procurement programs. That really puts a lot of confidence in venture funds and other funds to show that space is truly a commercial market.

Let me close with this. Canada used to lead in space; we were early. We were the third country after the U.S. and the U.S.S.R. to get into space. We were bold, but leadership does not sustain and survive on nostalgia. We don't really have a lot to talk about when it comes to our future ambitions. We're really relying on what we have done in the past, and that's risky.

We can stay comfortable and watch our most innovative companies leave and grow elsewhere, or we can choose to help them lead globally by staying here in Canada. The window is narrowing. The first-mover advantage, especially in space and commercial space, is only months or years, not decades. This cycle will not break until Ottawa makes a firm decision and commits to building Canada's space and defence capabilities through a modern, predictable and rapid procurement system that anchors and skills Canadian SMEs. The clock is ticking.

Thank you.

[The Chair, Liberal, Ben Carr]

Thank you very much.

Mr. Pesic, we'll go to you next for five minutes. The floor is yours.

[Goran Pesic, President and Chief Executive Officer, Samuel Associates Inc.]

Thank you very much, Chair.

Good afternoon, ladies and gentlemen.

Vice-chairs and honourable members of this committee, thank you for this opportunity to address you today regarding Canada's future defence industrial strategy.

Let me just set the context here. Canada's security environment has fundamentally shifted, and that's in the past tense.

We meet at a pivotal moment in history. The era of the peace dividend has ended, and the assumptions that have carried us through the post-Cold War era have now essentially evaporated and collapsed. We're living through the most significant shift in global security architecture in more than a generation.

Budget 2025 recognizes this new reality, and I compliment the government for this very strong budget. With it, the government is beginning the critical work of reorienting Canada's defence industry. It acknowledges that Canada must first rebuild the foundations of its national defence through its industrial base. It is now time to begin the process of planning how to build a defence industrial strategy that provides the Canadian Armed Forces with the tools needed to advance this country's national interests.

I will make three recommendations to represent what I consider are three critical paths to meeting the new defence industrial strategy. These are perhaps a bit unconventional, but I'd like to be entertaining today just to add some spice.

The first is a credible path to Canada's NATO commitments. What I mean by this is that the defence industrial strategy's foundation should be based on a transparent, credible defence spending road map to meet our obligation of putting 5% of our GDP to defence by 2035. A transparent, phased-in, economically grounded plan is essential for ensuring that increased defence spending becomes a catalyst for growth, innovation and resilience in a framework with three major pillars that I'd like to propose today.

First—and this is a difficult one, but please bear with me—2% of the 5% should be slated toward the co-development of the continental defence apparatus with the United States. This includes integrating air and missile systems for NORAD modernization and—perhaps a little controversial, but I'm open to it—procurement of long-range strike capabilities through strategic bombers like the B-21 Raider, which would provide Canada with significant deterrence. At the end of the game, we all want deterrence as the end state and, certainly, interconnectivity for our Five Eyes partners.

Second, 1% out of the NATO 5% should go to Arctic contributions, dedicating a significant portion to building out dual-use infrastructure ports, including submarine ports with allied interoperability; satellite communications and constellations; northern airfields; icebreakers; and community resilience in the Arctic.

Third, the last 2% of the 5% should be slated toward manufacturing and development with allied support. This final portion would be given to Canada's interests in Europe and the Indo-Pacific in supporting advanced manufacturing that enhances both collective security and the development of capabilities to mine and exploit critical minerals.

This allocation of the 5%—2%, 1% and 2%—reflects a unique geopolitical position and the comparative advantages that it has. Laying down a detailed vision of how to spend this I believe is very important. It provides a credible direction to industry and all levels of government, allows Canada to coordinate with our allies to foster interoperability and interchangeability, which is growing, and provides credible targets to allow benchmarking for performance and accountability.

This brings me to my second recommendation: taking a whole-of-nation approach to defence industrial development. This strategic capability as envisioned cannot be bought with money alone. It requires a whole-of-nation approach that mobilizes the whole of the citizenry.

This starts with significant intergovernmental coordination. Without structured federal-provincial alignment, we risk building systems that don't connect, scale or work. Defence and economic development must move together, not in parallel silos. This also requires solutions-based procurement. Right now, innovation and procurement barely speak to each other, requirements take years to develop and risk tolerances are extremely low.

To bring in a culture of solutions-based procurement, I recommend the institutionalization of the particular new office that I'd like to propose today—the office of defence innovation and commercialization—to bring customers directly to producers. This model allows the Canadian Armed Forces to raise the capabilities they demand and asks industry to compete to propose optimal solutions. The office of defence innovation and commercialization could be situated within the new Defence Investment Agency, perhaps DRDC or perhaps even at ISED. That's just a proposition.

I would also like to bring up my third point, which is citizenship, duty and national participation—

[The Chair, Liberal, Ben Carr]

Mr. Pesic, I'm sorry to interrupt. We are now over the time that's been allotted. However, members have lots of questions, and I suspect that through their generosity, they will prod you to get to that third point.

I'm sorry to interrupt you, sir, but I have to keep us on schedule.

[Goran Pesic]

Thank you very much, Chair.

[The Chair, Liberal, Ben Carr]

Mr. Chaulk, the floor is yours for up to five minutes, and then we'll go to our line of questioning.

[Neil Chaulk, Chief Executive Officer, Solace Power Inc.]

I'll try to keep it snappy.

Thank you, Mr. Chair and members of the committee, for this opportunity to contribute to Canada's defence industrial strategy.

This study comes at a pivotal moment. Canada faces intensifying global security pressure, long-deferred capital reinvestment requirements and an unprecedented scale of forthcoming defence expenditure. The essential question is how to maximize the benefits of these investments so that Canada develops the sovereign industrial capabilities that are needed to equip the Canadian Armed Forces while strengthening Canadian competitiveness and economic resilience.

We need our chosen strategy to deliver on near-term objectives while also being effective over the long term. In this context, it is essential that a modern DIS focuses on the segment of Canadian industry best positioned to deliver near-term capability, generate enduring intellectual property and become global champions of Canadian technology. That segment is the technology scale-up sector. These are firms that have progressed beyond start-up experimentation: They possess validated products and revenue, they already employ experienced teams and they are poised for accelerated growth. They are a source of technology and vital intellectual property, and they will make a massive difference to our country.

Why should scale-ups be a centrepiece of Canada's DIS?

First, they can deliver relevant capability rapidly. They're characterized by validated technology; existing production and pilot customers; experienced leadership and engineering teams; and readiness for rapid production expansion. They are also a very natural source of unique, strong intellectual property.

For defence procurement, where programs run long, integration is complex and operational reliability is non-negotiable, scale-ups offer an optimum blend of innovation and maturity. These firms are already solving commercial and government problems, and the Canadian Armed Forces' adoption becomes an acceleration, not an invention exercise.

Second, scale-ups can deliver an operational advantage to the Canadian Armed Forces. Canadian scale-ups are active in fields directly aligned with CAF needs: advanced sensors, harsh environment power electronics, wireless communication, cyber-defence and so on. Supporting these companies through procurement preference enables the CAF to adopt capabilities that reduce platform vulnerabilities, increase reliability and performance, shorten logistics and maintenance cycles and allow Canada to field differentiated and higher-performing capabilities among its allies.

Third, scale-ups are the engines of Canadian IP creation. A large amount of Canadian IP that reaches global markets comes from scale-ups. These firms have the capacity to file patents, harden technology and commercialize globally, all while retaining ownership within Canada. Strengthening them helps Canada avoid the IP leakage stage, where early-stage companies are often acquired by foreign entities before their technology matures. We see this very frequently in the media. A scale-up-focused DIS will ensure that Canada grows the acquirers, not the acquired, which is where we certainly are.

The next question I want to pose is this: How does the support of scale-ups build a sovereign Canadian defence industrial base?

Government demand is a very strong catalyst. We don't see a lot of it today, but it would be super strong if we had it. You can see it in other countries, because history shows us the most durable defence industries globally—the U.K. and the U.S. are two examples—grew their domestic procurement deliberately. They were not shy about giving preference to domestic companies, and I don't think we can say we enjoy that situation.

When the Canadian Armed Forces buys Canadian technology, three critical things happen: companies scale rapidly and sustainably, Canadian IP is entrenched in CAF platforms and architectures, and export opportunities grow through validation by a Five Eyes military, namely the CAF. This is the most powerful industrial strategy that Canada can deploy if it wants to grow an industrial base.

Additionally, scale-ups can convert that support into industrial capacity. They will increase employment in Canada and accelerate the next-generation R and D, all while anchoring IP and ownership in Canada. Each dollar invested in scale-ups produces a multiplicative return in employment, IP retention and long-term competitiveness.

These firms are where Canada will get the fastest, most reliable and most sovereign outcome. My proposed policy recommendation is to make scale-ups the centrepiece of a defence industrial strategy. Prioritize scale-up technology companies for procurement-linked support. Create mechanisms such as early CAF adoption, field trials and rapid procurement pathways. Also, maintain industrial benefits programs such as ITBs and procurement decisions that encourage scale-up participation.

[The Chair, Liberal, Ben Carr]

Mr. Chaulk, I'm sorry.

[Neil Chaulk]

Thank you. I know.

[The Chair, Liberal, Ben Carr]

I gave you the same 30 additional seconds I gave to the previous witness. It would be quite unjust of me to let you go beyond that.

[Neil Chaulk]

I understand.

[The Chair, Liberal, Ben Carr]

We are going into our lines of questioning.

Madam Dancho, the floor is yours for six minutes.

[Raquel Dancho, Conservative, Kildonan—St. Paul, MB]

Thank you, Mr. Chair.

Thank you to the witnesses for your opening testimony. I appreciate it very much.

Mr. Chaulk, I appreciated your comments.

I believe Solace Power's board chair's name is Neil Desai. He's made some interesting comments over the last number of months that I want to put to you, and I think they're quite in line with what you're putting forward.

In an article, he said, “The No. 1 issue I see for our country [is that] our economics don't work.” The article went on to say:

Structures in Canada around talent, capital, intellectual property and companies' freedom to operate looked very different only a decade ago, with entrepreneurs saying that a welcoming and supportive ecosystem put the wind in their sails [at that time]....

But those structures have changed during the last 10 years, he said. “The wind has actually been in the face of the entrepreneurs who are trying to do this at scale from Canada for the benefit of all Canadians.”

The article goes on:

Canada has this “weird” innovation ecosystem structural problem—not seen in other countries—where intermediaries such as financiers, universities, and business incubators and accelerators are put at the centre for validating businesses, he said. “Everywhere else the business gets to validate the business.”

With your comments on IP, obviously we need a very robust ecosystem to support the scale-ups that you've talked about. In light of some of his comments, can you give the committee a few more ideas for our policy discussion of what the Canadian government should be doing to facilitate this type of renewed ecosystem for entrepreneurs?

[Neil Chaulk]

That's a complex question. I'll try to do my very best to answer it.

I certainly can't speak for Neil Desai, but I would say having the incubators and all the various supports you see for small business start-ups—not so much scale-ups, but certainly start-ups in Canada—is a very healthy thing. You see a lot of companies get going.

The statistics around success rates of start-ups are pretty terrible. You do get validation through incubation and some of the nurturing that happens there, but the most true validation of a business is from the market. I think that's what we're probably missing.

Procurement in Canada is a game where we play not to lose, to quote Emad Rizkalla, one of my friends. We're not playing to win. We're very careful and very cautious, and of course, as it's taxpayers' money we should be, but I think we need to be prepared to take more risks in procurement.

With the Canadian Armed Forces, if the current expansion of investment is going to provide the opportunity for full participation across this country, then I think we can get a lot of validation that's true to the market and that builds a lot of scale-ups into bigger and medium-sized companies.

[Raquel Dancho, Conservative, Kildonan—St. Paul, MB]

Thank you very much.

Mr. Gharagozli, I saw you nodding your head quite a bit there.

Your opening comments hit on a lot of this. I think in particular you said we need to rely less on foreign purchasing and need to empower our small and medium enterprises to innovate. Do you have any thoughts on that?

[Arad Gharagozli]

I'm specifically talking about the space side. I'm pretty sure defence as a whole.... Even in the maritime domain, we are becoming a purchaser.

Specifically talking to the space side, Canada just recently signed a contract on WildFireSat. Canada does not have a very active space ecosystem when it comes to contracting active projects. We just signed a wildfire project, and phase one is $150 million, I believe. The companies that have that project are an American company and a German company.

I don't think that's anyone's fault. I don't think any Canadian companies are put out of that. The reason behind it is that we simply do not have the sorts of systems built in Canada that can respond to those needs. We basically end up going into the market and seeing what other countries are building, and we ask, “Can we use your systems? We'll pay for them.”

That's very dangerous, because a lot of the capabilities across the defence domain need to be.... We need to pick and choose which areas we're working with. We have a very strong shipbuilding program. When it comes to other domains of defence, are we going to become just a purchaser or are we going to put our foot down? Some of these emerging markets, including commercial space, are very raw. However, we have countries like the U.S.... Germany is a very good example. A lot of G7 countries put a significant amount of funds behind these markets.

We're simply falling way behind, and we're going to sit in the back and become purchasers.

[Raquel Dancho, Conservative, Kildonan—St. Paul, MB]

I believe last year you were a witness at the defence committee. You mentioned, “We must increase support to the Canadian Space Agency to ensure that research and development in essential space capabilities continue to grow.” It sounds like you would appreciate more support and want it to support our ecosystem in Canada in the space industry.

The Liberals just announced half a billion dollars for the European Space Agency. Do you feel that perhaps this money should have been for the Canadian Space Agency for better local support? How do you see this working on a grander scale?

[Arad Gharagozli]

That $580 million, I believe, is going to the European Space Agency via the Canadian Space Agency, as we are a contributing member to it. That is a very good program. However, one thing about it is that you have to find a European partner to work with to unlock the $500 million. It's not like we can just go to the European Space Agency and say that we want to work on a project and they say, “Here's a $500-million project.”

The problem in a lot of these cases is finding a European partner. We have a very good relationship with the European Space Agency. That program would be very good if it could be aligned with other similar investments that are directly invested in Canadian companies to bring them to a point where they are on the same playing field as German or U.K. companies, because we simply are not.

Right now, if you look at the space ecosystem in Canada, it's not a really diverse ecosystem. We have one or two companies generating a lot of products and they have exports. When you look at the SMEs, there's a huge imbalance there, if you will. It would be good if that money could be coordinated, with the same amount going directly back into the Canadian industry.

[The Chair, Liberal, Ben Carr]

Thank you, Madam Dancho.

Mr. Noormohamed, welcome to the industry committee. The floor is yours for six minutes.

[Taleeb Noormohamed, Liberal, Vancouver Granville, BC]

Thank you, Mr. Chair, and thank you to the witnesses for being here.

Mr. Chaulk, I want to pick up on something you were just speaking about. I'm curious. In the context of capital structures in this country, one of the big challenges or big questions when you have companies like yours that are in the earliest stages is how we make sure the capital structures in this country are able to support the assurance that companies doing leading-edge work, particularly in defence, remain sovereign. One of the observations we would make is that, particularly in early-stage companies, access to capital in a space like yours—and I would imagine in space as well—is severely constrained vis-à-vis the U.S.

What should we be looking at in this country to incentivize the private sector—Canadian capital in particular—to start making the types of investments it seems more comfortable making in similar ventures in other countries and more reluctant to make in similar Canadian companies? What is the mindset challenge we need to overcome when it comes to capital coming into these companies to do the type of innovative work that builds the defence sector in the way we need to do it?

Perhaps I'll start with you, Mr. Chaulk.

[Neil Chaulk]

With the mindset in this country, the capital is very specifically focused on what is currently the buzz, whatever that is. Today it's AI. It seems the entire market just swings with whatever the current technology is. It's partly because—and maybe we should be a little forgiving—we're not a large country economically, so we have a smaller set of opportunities.

There's a lot of data out there for this, but if you're looking for investment in Canada and you're not in a swim lane that's part of what everybody has recognized as a good bet today, whatever that is—at one point it was SaaS companies—then you'll have to go to the U.S. It doesn't matter if you start in Canada.

When we did it, we had one round. We bootstrapped ourselves for years and got one investor. It turned out to be a U.S. company. We talked to 200 different potential investors here and couldn't get anybody, but a customer bought us. We have a product going into production in automotive next year. We've done a ton of business with Boeing and a bunch of others and couldn't get an investor because we're a hardware company. Hardware today is not a cool thing. It's a bit about culture.

As for what the government can do, I don't actually know, except for fostering this ecosystem and building up a culture of worrying about scale-ups and medium-sized companies. Some of them will grow to be large. Germany is a fantastic example with a massive number of medium and large companies.

[Taleeb Noormohamed, Liberal, Vancouver Granville, BC]

Obviously, this is one of the challenges. It isn't for government to wave a magic wand and say, “We can solve this.” To your point, the ecosystem and investment community in this country need to shift their own psychology.

As an entrepreneur, if you were to speak directly to the PE and VC funds and pension funds in this country that carry the massive opportunity of investing and are willing to invest in other countries, what would you say to them about the opportunities available to them in Canada?

This is one thing we need to emphasize. There are great, innovative companies, particularly in this sector, this space, when we're talking about national sovereignty, but they aren't seeing the same action from our own investors.

[Neil Chaulk]

For me, they can take a math approach to this. We still need to support start-ups. I'll say that to begin with. Start-ups are where scale-ups come from, but scale-ups are much less risky.

Once you pass a stage and become a 50- to 70-person company, have customers already, have a proven product, have markets internationally and have revenue, your probability of failure is much lower. Clearly, someone wants it. If you can use that as a metric to make investments, there's a reasonable risk there that the taxpayer probably could support.

[Taleeb Noormohamed, Liberal, Vancouver Granville, BC]

Thank you.

With my remaining time, I'm going to Mr. Pesic. It's good to see you after close to 20 years.

I want to take you back 20 years to a trip we took to visit NATO in Brussels. One of the conversations happening 20 years ago was about sovereign wealth funds in markets making investments in aerospace, defence and industry that would support sovereignty at that time.

Through successive governments of different parties, we've never really broached the idea of a sovereign wealth fund that looks at defence and that looks at sectors and aerospace and so forth. Do you think it's time for us to start thinking about that?