Industry and Technology Committee on Nov. 26th, 2025

[Arad Gharagozli]

The SR and ED program and R and D rebate programs as a whole are good, but a lot of companies at this stage just need direct funding in the form of projects to build rapidly instead of trying to spend money up front and then going through the process to reclaim it. The most efficient way for any of these companies to go from the scale of a start-up to the point where they can be export-ready SMEs is to have multiple programs that can propose projects that build capabilities across all defence domains.

If we say there is going to be a five-year program, even at $15 million, that creates predictability. That allows companies like ours to hire talent, train them and build infrastructure, which is actually much more important. However, we doubt that. There is a lot of uncertainty. Private sector investors are not that excited about it either.

[Dominique O'Rourke, Liberal, Guelph, ON]

You're looking for a project that calls for proponents, not for you to develop something and then seek a contract. Is that right?

[Arad Gharagozli]

Yes, ideally.

[Dominique O'Rourke, Liberal, Guelph, ON]

Okay.

To the other witnesses, budget 2025 introduces a $1-billion small and medium business credit program for defence contracts. There are two things I'm wondering about there. One, is that a welcome addition? Two, the United States has what's called APEX Accelerators to help small and medium-sized business bid on government contracts. Is that something you would recommend for Canada?

[Goran Pesic]

I can take this one.

As I mentioned earlier, I think when we look at the Canadian jurisdiction, our own framework, our own realities, we should try to create programs that will work for us. Even though there are models working under different jurisdictions, like in the United States with the DOD and others, they're in a different category. There's also a lot of heritage there in how they've been working and how they've been reforming recently.

My suggestion is that we look for a made-in-Canada, Canadian-made solution. I think we have enough intelligent people to come up with a unique Canadian-made program to fit the needs of Canadian start-ups, scale-ups, large and small businesses, and entrepreneurs trying to access these funds.

That's my suggestion. We have an opportunity to do something by ourselves, for ourselves. Let's take that on with serious challenge and output.

[Dominique O'Rourke, Liberal, Guelph, ON]

I have another question for you, Mr. Pesic.

You talked about a whole-of-nation approach, mobilizing the whole citizenry, and defence literacy. In our first or second meeting, an assistant deputy minister said to us that we don't have time for silos. She said explicitly that this is not peacetime. I suspect that most Canadians going about their business are not thinking that.

What do you think of the concept of having more citizens engaged? While we should have our made-in-Canada model, it's been the case that other countries have mobilized citizens when there's emergency preparedness. Do you think Canada should be looking at a model where there's more preparedness on the part of regular people?

[Goran Pesic]

That's a very fair question.

I think the old public safety ads that ran perhaps 10 or 15 years ago about being ready for 72 hours apply just as much today as they applied when they were first rolled out, in any stripe of government. I think that's an important public safety message: Be ready for 72 hours. Given the climate, given where we live, that's an ongoing message.

I'd like to propose again this notion of a national day of recruitment. We don't have such a thing. Perhaps others do; we don't. Again, it's a Canadian solution for Canadian times. What I like to think about when we're talking about ITB programs is, why not include Canadian Tire, Tim Hortons, McDonald's—anyone who is wearing a uniform—or even veterans' organizations?

A national day of recruitment should be seen as something we celebrate as a way of perhaps bringing new Canadians into the Canadian military system, and also Canadians looking for alternative employment who maybe didn't consider a military career, even a reservist opportunity. This could be done, I would say, fairly inexpensively. However, the commercial market out there—perhaps retailers, just as an example—I think would welcome such an opportunity to get involved in a new defence industrial strategy.

This is what I'm proposing, and it is something of a mind shift, but we need to think differently in the times that you're describing as the end of peacetime. Perhaps it's the time of preparation, which a lot of nations are signalling, like the United States.

[The Chair, Liberal, Ben Carr]

Thank you very much, Ms. O’Rourke.

Mr. Ste‑Marie, you have the floor once again. We don’t have more opening remarks, so feel free to ask a question.

You have the floor for two and a half minutes.

[Gabriel Ste-Marie, Bloc, Joliette—Manawan, QC]

Thank you, Mr. Chair.

I’ll address Mr. Pesic first and if I have more time, I’ll ask the other witnesses to chime in.

Mr. Pesic, how can the government evaluate the success of its defence strategy?

What performance indicators could it use and how?

[Goran Pesic]

That’s a great question, Mr. Ste‑Marie.

Success has to be seen in non-material terms. We talk about sovereignty. What does that mean? That can't be quantified in material terms. That is a much higher order thing.

Success has to be seen as preparing Canada for the 21st century under current geopolitical constraints, partnerships and shifting interests. Success has to be seen as, for example, building a railway from coast to coast. It was a vision that someone had that others bought into. This was a nation that got behind an idea, and to this day, 150 years later, we are still using those rail networks. That was a success that nobody thought it would be back then, but they saw the potential of not only large-scale infrastructure projects—as we're talking about infrastructure—but also nation-building projects.

We need to think in the context that a successful country is a country with a perpetual nation-building status. We need to be seen not as armchair participants, with the arena in front of us and others somehow dictating what the game looks like. We need to be seen, every day in this House, and in businesses and universities, as being in the craft of nation building. That is a very important process, because if we stop, other adversaries don't. They have ambitions that may overtake ours.

I'm just saying that success has to be defined in national and strategic terms. At a military level, if Canada can provide a significant defence deterrent—in other words, deterrence against adversaries—with our allies, including the United States, NATO and partners, then that is a major success for all of Canada for the future.

I hope that answers your question. It is a hard one, but it is more existential and philosophical than it is, perhaps, material.

[Gabriel Ste-Marie, Bloc, Joliette—Manawan, QC]

Thank you very much.

Thank you, Mr. Chair.

[The Chair, Liberal, Ben Carr]

Thank you very much, Mr. Ste‑Marie.

Mr. Guglielmin, I'll give five minutes to you.

[Michael Guglielmin, Conservative, Vaughan—Woodbridge, ON]

Thank you, Chair.

Mr. Gharagozli, Galaxia has gone further than most start-ups. You launched MÖBIUS-1. You secured CSA and DND support, yet you also told the national defence committee that current bureaucratic procurement processes still block new space firms from fully engaging.

Based on your experience, what specific parts of the procurement process need to be improved so that our tech start-ups can actually scale?

[Arad Gharagozli]

It requires a significant overhaul.

We just secured a new contract with the Department of National Defence for our CTOS project. It's a Canadian tactical operations satellite. Just to give you an example, from the time it was awarded to when we had the contract signed, it took us more than, I would say, 14 or 15 months. That is a forever time in a start-up life cycle. A company can easily go under before that contract even materializes.

A big part is that these programs are not designed for the new generations of companies coming up. They're trying to build rapidly. They want to iterate as fast as possible.

When you're looking at, for example, the U.S., almost every regiment, like the special ops, the Air Force or even the CIA, almost has their own investment funds. From an idea up until investment, it's a one- to three-month process. You do a pitch and put your product in front of them, and they say, “I like it. Here's the first round of contracting.”

If you're looking at start-ups and not at larger primes, we need a better approach, more like a venture capital approach. I feel like even organizations like BDC are still moving at a government scale and at a government pace. There is a lot to learn from the venture world on how to keep up with the pace of start-ups and support their innovation.

[Michael Guglielmin, Conservative, Vaughan—Woodbridge, ON]

In the past, you've described Galaxia's satellite as software defined with AI on board for real-time insights that could be critical for Arctic surveillance for NORAD-related missions, yet we continue to hear, as you've just been saying, it takes years sometimes to move from demonstrations to deployed capability.

If we're serious as a country about faster time to field under the new defence industrial strategy, what specific decisions do you think need to be taken so we can avoid this becoming just another pilot project for most companies?

[Arad Gharagozli]

We need to target, number one, CAF's needs when it comes to defence: What do we actually need in maritime, under water, space or whatever it is? Then, when those companies approach CAF, we can rapidly give them a project and say, “Here's phase one; build it.” It takes about $1 million, but we can ensure that's going to turn into a commercial contract.

For example, in our case, right now we're building a satellite—it's going to launch in 2027, I believe—but there is absolutely no path after that. We're not going to scale that up. It's just a demonstration mission. It's absolutely crucial to have a path forward after that to, let's say, a $50-million contract that is going to bring you, in the next five years, to commercializing and even exporting that.

[Michael Guglielmin, Conservative, Vaughan—Woodbridge, ON]

You've also said that Canada needs launch capabilities for satellites to be shot into space. What kind of minimum launch capacity do you think Canada needs on its own soil to credibly claim space independence?

[Arad Gharagozli]

Right now, a lot of military operations happen within low-earth orbit, which is about 500 kilometres above earth. We have companies like Maritime Launch Services, based in Canso, and Reaction Dynamics, which is building the hybrid launch vehicle, that can take 200 kilograms, 300 kilograms or 400 kilograms of payload into space in launch-responsive format. You can launch within months.

That is perfectly fine for responding to what we need right now and for catching up with the rest of the world, so we are on the right track, but again, even within those limits—we work with those guys a lot—and even in that domain, you can see that the investment is moving slowly. There was a recent commitment of, I believe, $185 million for launch capability, so that's a really good sign, but to be perfectly honest, $180 million Canadian is a drop in the bucket when compared to other nations building launch capability and space capability. It needs to be significantly boosted so we can keep up.

[Michael Guglielmin, Conservative, Vaughan—Woodbridge, ON]

Thank you.

[The Chair, Liberal, Ben Carr]

Thanks very much, Mr. Guglielmin.

Mr. Bains, you'll close out this round with five minutes.

[Parm Bains, Liberal, Richmond East—Steveston, BC]

Thank you, Mr. Chair.

Thank you to our witnesses for joining us here today.

I'll begin with Mr. Pesic.

There are around 600 different defence manufacturing service providers and suppliers in Canada, and many of them in that ecosystem are concentrated in different regions and hubs around the country. In British Columbia, my home city has Boeing and MDA Space. We have a strong aerospace and geospatial intelligence sector.

I'm curious to know your thoughts on how the government can leverage these regional strengths to build a more integrated defence industrial ecosystem.

[Goran Pesic]

That's a very good question. I would offer some insights and suggestions.

When we're looking at the notion of a defence industrial strategy that will eventually lead to a policy, we need to think of it as being set within a national industrial strategy. When we talk about dual-use companies, a lot of companies are producing.... Actually, I would even go on to say that it's tri-use. What I mean by tri-use is consumer and commercial, defence, and national security. It's dual use, but in my opinion, there are actually three things, because consumer and commercial are grouped together and then you have defence and national security on that side.

I think the government just needs to make a conscious decision to create what was created many decades ago—that is, Ontario does autos, for example, and specializes in the Ontario area for that for the purposes of concentration, scale and the ecosystem. That was many decades ago. Aerospace in Montreal, for example, was an architecture that was envisioned many decades ago as well.

I think what we are talking about today is more about ecosystems. How do we create ecosystems that create a portfolio of capabilities and then have regional distribution? Instead of making a widget that somehow gets sent to the other side of the country, we may want to think about a portfolio of capabilities that can be applied to a national security and defence export orientation.

I think we're ultimately creating a community of companies and entrepreneurs and a new culture of co-operation with the government and maybe lenders or others, in a new way, but we have to think about a portfolio of capabilities. It's okay if there's a portfolio of capabilities within British Columbia and a completely similar-looking portfolio in Halifax, Nova Scotia, for example, but some of those portfolios might be different.

You might have some space capabilities in there. Some could be cyber and some maritime, and some could be other types of advanced manufacturing. When the government is looking at this and saying that it needs a capability for a future concept of operation and asking where it can go, if I have a portfolio of capabilities, it's easy to send out a group email and then get some feedback. That's just a straightforward suggestion.

[Parm Bains, Liberal, Richmond East—Steveston, BC]

Thank you.

Mr. Gharagozli, you mentioned something about venture capital and finances. We've heard other witnesses prior to your panel talk about the stigma in defence around financial backing. We've heard about debanking, a term being thrown out there for people in the defence area, and that it's difficult for them to get financial support.

Can you talk about the financial ecosystem and what we may need to do to ensure there's financial backing for a lot of the start-ups?

[Arad Gharagozli]

It's very hard to secure financing for what I'm going to say are real technologies. I'm talking about hardware. Whoever did this, it was a very intelligent play, because it really made.... As Mr. Chaulk alluded to, hardware is not interesting and a lot of companies are focusing on just SaaS.

Nobody is investing in the infrastructure, but the reality of it is that if you do not have infrastructure, the entire SaaS thing falls apart. It doesn't matter if you're building airplanes or data centres, building hardware and infrastructure is very expensive, very risky and very difficult and complex. There is a reason that not a lot of people are going after it, and that's it.

Once you achieve that, you're in a position where you can attract investments into your country. You can have people come to you and say they want to be part of this ecosystem, as opposed to having salespeople come into our country and say, “Come buy our capabilities.”

On average, Canadian investors are educated about hardware and infrastructure. They look at them, but compared to most other countries, they do not have capital to deploy. That's where the government comes in: to de-risk a lot of this infrastructure. It can say it is going to purchase about 250 million dollars' worth of this infrastructure, and if it does that, it can be pretty sure that a lot of other private investors are going to follow on.

If we don't do that, we're not going to sell domestically. If we don't sell domestically, obviously we're not going to sell efficiently globally either.

[The Chair, Liberal, Ben Carr]

Thanks very much, Mr. Bains.

Colleagues, that's the time we have for the first hour.

Witnesses, thank you very much for availing yourselves of the time to be here today, and for providing some further guidance and insight to us.

Colleagues, we're running a bit over time, and I have to suspend to allow us to turn the panel over. We might have to clip a bit off the very tail end of the final round in our second hour.

I'm going to suspend, and we'll come back to things right away.