Canadian private investment in defence and dual-use start-ups collapsed by two-thirds in a single year — from $760 million in 2023 to $260 million in 2024 — before only partially recovering to $515 million in 2025. Ottawa, meanwhile, has committed to raising defence and security spending to 5 percent of GDP by 2035.
That volatility is the mismatch Canada now has to solve: public ambition moving in a straight line, yet private capital moving in a saw-tooth. Canada should build its own version of the U.S. Office of Strategic Capital (OSC). Rather than funding companies directly, a Canadian OSC would license private fund managers and multiply what they raise with government-backed debt.
Dame Fiona Murray, Chair of the NATO Innovation Fund, argues that Canada’s capital stack is the missing piece from its defence buildup. OSC is the closest solution an Allied government has built to fixing exactly that problem. Created in 2022 under the Biden administration, and despite an otherwise total change in political weather, it expanded roughly two-hundred-fold under the Trump administration’s 2025 tax and budget package. OSC does not fund companies directly. Instead, it licenses established, vetted private investment funds to raise private capital, then levers that fundraising with government-backed debt — up to $175 million per fund — once a fund closes its first round. The insight is simple: government does not need to pick winning companies if it is willing to certify winning fund managers and multiply what they raise.
Canada is not starting from scratch. The Defence, Security and Resilience Bank (DSRB) will provide sovereign-scale financing for large programs, but it is not designed to mobilize individual Canadian fund managers the way OSC does. The Business Development Bank of Canada’s (BDC) Defence Platform was just expanded to $6 billion in March, including a $300 million StrongNorth venture fund — real, direct capital reaching Canadian SMEs. But BDC today functions as a direct lender and co-investor: it picks and funds companies itself.
Neither institution does what OSC’s licensing model does — certify a cohort of already-active private managers and lever their fundraising with government-backed debt, so government capital multiplies private capital instead of substituting for it. That is the specific rung missing from the stack.
The realistic starting cohort is broader than pure-play specialists—it is the generalist Canadian venture capital and private equity managers who have already completed dual-use transactions, a population the Canadian Venture Capital and Private Equity Association puts at roughly $7 billion deployed across 547 deals over the past decade. A licensing program gives those managers, and the entrants behind them, a commercial reason to build dedicated defence practices, growing the specialist bench rather than assuming one already exists.
A Canadian licensing program would be credible if it rested on two design choices: a narrow, clearly defined list of eligible technology categories and lending capacity sized to Canada’s own $290 billion capital investment opportunity. Pairing the program with steadier procurement signals from the Canadian Armed Forces would give lenders a reason to trust that the demand is real.
None of that is complicated to design. What is costly is delay. Every year this mechanism does not exist is a year in which Canada’s most promising dual-use companies default to whichever capital shows up first — increasingly American, decreasingly Canadian-controlled by the time they reach scale.
If Canada does not build its own version of the OSC, the pattern of the last decade will simply repeat at a larger scale: public ambition rising, private capital sitting on the sidelines because the missing rung was never put in place, and Canada’s best dual-use technology getting built somewhere else, with Canadian ideas and someone else’s money.
Jonathan P. Nauert is a founder and partner of a private investment vehicle focused on aerospace, defence and national security companies. He is a graduate of Duke University and an M.A. Candidate in Global Security Studies at Johns Hopkins University. He previously served as an executive at a multi-family office and at Coltala Aerospace Holdings, where he was also a board observer.
The views expressed in this op-ed are the author’s own and do not necessarily represent those of the Institute or its staff.
Photo: Corporal Mark Wanzel, Imagery Technician, Canadian Armed Forces. Department of National Defence / Combat Camera / 2026. Crown Copyright. The use of this image does not imply or constitute endorsement by the Department of National Defence or the Canadian Armed Forces.
