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.