Op-Ed: Washington's Defense Tech Bet Pays Off, Canada Waits

TL;DR: Canada spends about 1.4% of GDP on defense, according to Reuters, and has pledged 5% by 2035. An IR Insider op-ed argues Washington's early bet on defense startups is paying off while Ottawa is still placing chips. Canadian startups are waiting for that spending to become larger contracts.

Key Takeaways

• Canada now spends about 1.4% of GDP on defense and has agreed to NATO's 5% target by 2035, per Reuters.
• The $6.6 billion Defence Industrial Strategy aims to lift the Canadian-owned share of military spending from about 43% to 70%, according to the Ottawa Business Journal.
• Federal defence-related requests for information or proposals rose 60% in a year, but a request is not a contract.

The op-ed, published by IR Insider, sets the two governments side by side. In its telling, the United States has spent years buying from venture-backed defense startups, and established contractors have started joining those startups' funding rounds. Canada has announced a strategy and a pile of money. It has long sent most of its defense dollars to the United States, and the op-ed calls diversifying "a reasonable instinct."

What has Canada actually committed?

Canada has made two firm commitments: a spending target and an industrial strategy. Prime Minister Mark Carney has vowed to hit NATO's initial 2% of GDP target this fiscal year, and Canada now spends about 1.4%, Reuters reported. Ottawa has also agreed to NATO's pledge of 5% of GDP by 2035, split between 3.5% for core military capabilities and 1.5% for defense-related infrastructure.

The second commitment is the Defence Industrial Strategy. The Ottawa Business Journal reports it is worth $6.6 billion and is designed to lift the share of military spending going to Canadian-owned, Canadian-headquartered companies from about 43% to 70% over the next few years. The IR Insider op-ed cites the same 70% goal.

Item	What is reported	Source
Current defense spend	About 1.4% of GDP	Reuters
NATO pledge	5% of GDP by 2035 (3.5% core, 1.5% infrastructure)	Reuters
Defence Industrial Strategy	$6.6 billion; Canadian-firm share from about 43% to 70%	Ottawa Business Journal

Is the money reaching startups yet?

It is starting to, in small amounts. The Ottawa Business Journal says the federal government posted nearly 600 defence-related requests for information or proposals in the most recent quarter, a 60% increase from a year earlier.

The founders it quotes are still waiting for scale. One says the work needs to "come into larger-scale programs." That is the gap the op-ed points at. A request for proposals signals intent. A signed multi-year contract is a revenue line that a lender, an investor or an employee can plan around.

How are public markets reading it?

Public markets moved first. Reuters reports that some Canadian defense, construction and mining shares have outperformed the broader Toronto index this year, including Bombardier, which has more than doubled. That rally says little about private startups, which can't be sold on a quiet Tuesday and may wait years for a contract. Greg Taylor of PenderFund Capital Management told Reuters that Canada being "fully on board" with NATO spending should be good for companies tied to it.

Private investors face a different question. Listed stocks already reflect the spending pledge. A private round has to last, often for years and on thin revenue, until the contracts arrive. For a sense of what US-scale funding looks like, read our take on Shield AI's Series G and on Mach Industries' production-first Series C. Our piece on the defense tech bubble warning as private equity pours in covers the other side of the trade, and Stark Defence's raise from Sequoia and Founders Fund shows how European defense startups are funded.

What does this mean for an accredited investor?

The Canadian defense tech story is a policy commitment, not yet a revenue record. Washington's startups have contracts to point to. Canada's have a budget direction and a rising number of requests for proposals. Those are different stages of risk, and a startup priced as if the second were the first deserves a harder look at the sponsor, the structure and the fees.

The op-ed is also one writer's argument. Treat its framing as a thesis to test against the contract announcements, not a conclusion.

Common mistakes

One easy mistake is reading a spending pledge as a purchase order. A 2035 target says nothing about which company wins in 2027. Another is assuming the 70% Canadian-share goal helps every Canadian startup equally, when it favors the firms that can deliver at scale. A third is treating a rally in listed names as evidence about private valuations, which are priced differently and trade rarely.

FAQ

What is Canada's defense spending target?

Canada has agreed to NATO's pledge of 5% of GDP by 2035, with 3.5% for core military capabilities and 1.5% for defense-related infrastructure, according to Reuters. It currently spends about 1.4% of GDP.

What is the Defence Industrial Strategy?

It is a $6.6 billion program meant to raise the share of military spending going to Canadian-owned companies from about 43% to 70%, according to the Ottawa Business Journal.

Are Canadian defense startups winning big contracts yet?

The signals are early. The federal government posted nearly 600 defence-related requests in the latest quarter, per the Ottawa Business Journal, but founders there say larger-scale programs still need to follow.

Can individual investors buy into these startups?

Only some rounds admit individuals, and most private rounds are limited to accredited investors. Canadian private placements run under Canadian exemptions, which differ from US rules, so confirm eligibility, fees and liquidity in the offering documents before assuming access.

Your next step

Pick one Canadian defense startup you have seen pitched and look up whether it has a signed contract with a named buyer. If it has only a request for proposals or a pledge behind it, treat the valuation as a bet on timing. To get the next defense-tech deal read with its facts and claims kept apart, sign up for the free AIN briefing.

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