OTTAWA — As federal money starts pouring into defence purchases, startups are racing to invent products the Canadian Armed Forces don’t yet know they want.

Their backers hope these small firms with a nimble entrepreneurial ethos will eventually shove aside titanic prime military contractors like Boeing, founding a new generation of “neo-primes” modelled after U.S. companies like Anduril and Palantir.

Two startups with that explicit ambition have made news already in 2026: Dominion Dynamics with a $21-million capital raise and Juno Industries by launching with $3 million and former defence minister Harjit Sajjan chairing its board.

Anduril’s founder Palmer Luckey calls his US$30.5-billion, nine-year-old enterprise a “defence product company” and Juno Industries has the same philosophy, chief executive Hunter Scharfe said.

“What that means, in a practical sense, is that the company and its shareholders take on the R&D risk,” Scharfe said. “We are investing our money, as shareholders, to build products that ultimately win contracts.”

This might sound like a pretty ordinary approach to starting a business, but it’s not the norm in military contracting.

Work in that sector is more typically based on answering government requests for proposals, which can be slow and painful. Even programs specifically meant to nurture new tech for the Canadian Forces don’t work very well.

“The joke is, whether you’re buying a Toyota Corolla or a tank, it’s the same model of acquisition,” said Jeffrey Collins, a political scientist at the University of Prince Edward Island and author of a book of case studies of complex Canadian military purchases called Canada’s Defence Procurement Woes.

Few companies can slog all the way through traditional procurement processes to make sales—and even fewer of those are startups that survive by counting their nickels.

Dominion’s Arctic-oriented sensors are an answer not to a specific procurement call, but to the military’s public thinking on “pan-domain command and control,” or PDC2. That means systems that gather key data before and during an operation, turn it into useful information for commanders and then send those commanders’ orders back out to be executed—whether by people or autonomous devices.

A 2024 Canadian Forces concept paper on PDC2 is essentially a wish list of technologies and tools. Rather than wait for the Forces to transform those ideas into bidding documents for specific equipment—while technology races ahead—Dominion wants to knock on Ottawa’s door with irresistible goodies.

“We think that that’s the right wedge into the broader need that Canada has, and then a global role,” Dominion’s chief executive Eliot Pence said.

Other Arctic countries, and indeed any nation with sparsely populated territory to protect, could be customers.

Juno Industries is also looking at the Arctic, but from a different angle. Though Scharfe is cagier than Pence is about initial plans, Juno’s centre on devices that can function autonomously in the Far North.

“This is going to be a massive economic zone, in my view, over the coming years. Securing that, from a sovereignty perspective, [is] extremely important,” he said.

Stephen Fuhr, the federal secretary of state for defence procurement, declined an interview on the subject. But as part of its promise to meet NATO targets for defence spending, the Liberal government has pledged to spend $1 billion this fiscal year alone on existing and new military capabilities, especially in the Arctic; $560 million on the Forces’ digital technologies; and $2.1 billion boosting the capacities of defence suppliers.

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In North America, defence production has long been dominated by a very few giant prime contractors, since the American defence industry consolidated in the 1990s. After the collapse of the Soviet Union ended the Cold War and the U.S. government cut military spending, Bill Clinton’s defence secretary, Les Aspin, called chief executives to a dinner at the Pentagon and warned them they should merge for their own survival.

They moved fast. A 1998 analysis reckoned that 51 large U.S. aerospace contractors had consolidated into five: Lockheed Martin, Boeing, Northrop Grumman, Raytheon and Litton. 

Litton sold out to Northrop Grumman in 2001; Raytheon renamed itself RTX in 2023 after another major merger in 2020. Similar combinations happened in numerous categories, from missiles to satellites to helicopters, with those same companies dominating many of them.

Much defence production in Canada is done at branch plants of U.S. primes, such as General Dynamics Land Systems’ armoured-car factory in London, Ont.

In 2017, amid worries that there wasn’t enough competition any more for the Pentagon’s dollars, the U.S. Defense Department got authority to buy more easily from non-traditional vendors through streamlined processes. The products had to be somehow novel and they would be pretty much off-the-shelf, not custom-made to military requests.

That’s the year Anduril was born, and began growing into a first-rank “neo-prime” by making equipment, especially autonomous devices, the U.S. military hadn’t asked for.

Canada does have homegrown global players in military-related technologies, Pence said—Bombardier supplies airplanes that Saab, for instance, outfits for military customers—but in his view they don’t fit the bill of a full defence prime.

“We’ve got companies that play in defence, but they’re either heavily civilian and not really focused on defence, as is the case with Bombardier and CAE, or single-domain, which is the case for MDA,” he said.

MDA is primarily a space company but at ground level, it does military work, too. Contrary to Pence’s view, it thinks of itself as “one of the few truly Canadian defence primes,” according to vice-president Amy MacLeod.

CAE and Bombardier didn’t respond by The Logic‘s deadline to questions about how they see themselves in the defence ecosystem.

However, CAE, which is known for its flight and training simulators, named U.S. navy veteran and former Northrop Grumman and RTX executive Matthew Bromberg as its new CEO last summer. 

Then just last week, Bombardier named a new senior vice-president of strategy, mergers and acquisitions: Sandra Hodgkinson, a former American defence policy official who more recently worked in the U.S. for Italian prime contractor Leonardo.

Canada’s domestic defence innovation peaked with the Avro Arrow, Collins said, the cutting-edge fighter that prime minister John Diefenbaker’s government abruptly cancelled in 1959. Whatever the wisdom of that decision, Collins said, the conditions that drove it still apply: it’s just hard to make money supplying the Canadian military.

Foreign governments will generally give preference to their own companies, he said, and short of a major and lasting war, Canada’s armed forces aren’t likely to grow to the point of sustaining many vendors all by themselves.

Much like the auto sector, Canadian military production integrated tightly with U.S. industry after the Arrow decision, Collins said. He thinks maintaining that basic structure but swapping out the U.S. prime contractors that Canadian suppliers are used to dealing with for ones from friendlier nations—like Sweden’s Saab, Germany’s TKMS and South Korea’s Hanwha—is likely a better overall bet than building Canadian defence companies from scratch.

But Collins acknowledged he doesn’t know what the future of the Canada-U.S. defence alliance is, or how Canada’s military acquisitions will change with new priorities and spending.

“Folks starting up in the space, they’re trying to position themselves before the dust settles and new structures take shape,” Collins said.

Scharfe said Juno Industries is founded on the expectation that Canadian military procurement will get both more agile and focused on domestic production, though he’s ready to be patient through long sales cycles.

Investors see the opportunity and will back good companies that are ready to meet the Canadian Forces’ needs, he said: “The amount of capital that is now prepared to deploy is much bigger.”