BEYOND SOVEREIGNTY SLOGANS: A DEFENCE-TECH PROCUREMENT CRISIS & THE REAL "BUY CANADIAN" PLAN

Supporting defence tech, fixing procurement, and leveraging AI can turn “Buy Canadian” from a talking point to real sovereignty.

TLDR: Canada is moving to turn sovereignty from rhetoric into reality by strengthening defence tech, reforming the slow procurement process, and investing in sovereign AI and quantum capabilities. Despite strong domestic talent, reliance on foreign capital and delayed government adoption have pushed innovation abroad. Faster procurement, better support for Canadian firms, and a shift toward risk-tolerant, co-developed solutions will be key to building and retaining strategic technologies at home.

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The Joke that Launched a Thousand Ships

What does ‘sovereignty’ mean to a fairly small nation like Canada? Perhaps strong borders, secure citizens, robust defence capabilities, autonomy, and money in the bank?

Like most things, it’s debatable. What isn’t debatable is that the country is rekindling its desire to shore up sovereignty, particularly in defence and global partnerships.

Speaking at Toronto Tech Week, Douglas Soltys, Editor in Chief of Betakit, suggested that Trump’s infamous “51st state” wisecrack may have been a turning point for Canada. In early 2025, Trump’s running gag quickly fanned the embers of anti-U.S. sentiment, contributing to a shift in Canada’s national trajectory: from the heated rivalry of the 2025 Four Nations and a campaign about sharp elbows, to evolving defence procurement.

How much truth is in a joke? Trump’s jab still weighs heavily on Canadians’ collective psyche, possibly influencing economic choices and even defence-tech spending. Of course, Canada’s defence and aerospace industries were already extensive and innovative, with crown jewels like MDA and Bombardier, as well as fiery upstarts like Nordspace. 

Meanwhile, “the West is seriously, seriously outgunned en masse in the era of modern warfare,” said Kath Intson, CEO and Co-founder of Sentinel R&D, to a Toronto Tech Week audience. "Iran is producing about 60,000 [military drones] per year. Russia has a goal of making around a million,” she says, “When we look at NATO and Israel combined, we make about 20,000 a year.”

Sentinel Announces Joint Venture with Ukraine's Airlogix

That's a glaring gap. And there appear to be others as well, including long procurement timelines and barriers for Canadian companies.

The Canadian government appears eager to address these issues with procurement updates and increased defence spending. The country’s recently announced Defence Industrial Strategy outlined $180 billion in procurement and $290 billion in capital investment in Canadian firms over the next decade. Their goal is to increase the proportion of contracts awarded to Canadian firms to 70% and boost investment in federal defence-related R&D by 85%.

AI & Quantum Join the ‘Defence Tech’ Ranks

If defence is a core requirement of sovereignty, then defence tech can be a superpower. From communications and intelligence to hardware manufacturing and, now, even AI. 

“We just released our most recent [AI] model open source,” Cohere co-founder Nick Frosst explained at Toronto Tech Week, “because I think that that pushes it into the direction of sovereignty enabling for people, for companies, for countries.” 

This comment comes a couple of months after Canada announced plans to support ‘sovereign AI’ data centres. The concept of Sovereign AI is often applied to corporations that need to protect their data moats, operations, and customers. It allows systems to be deployed without locking into one vendor, maintaining autonomy over system operations and adaptation. In the case of defence, the ability to control and adapt systems quickly and securely can be critical, reducing external dependence.

Advanced AI is also being applied across defence tech offerings, from drone-based AI and intelligence analysis to cyberwarfare. Quantum capabilities are also poised to enter the fray.

Christian Weedbrook, founder and CEO of the recently public Xanadu, sees quantum computing as the next big technological leap and inherently dual-use, thereby benefiting from state-driven support. "... the U.S. government and other governments around the world have really injected a lot of money into the development of a large-scale quantum computer."

A Shocking Reality: Canada’s ~16-Year Procurement Cycle

If defence tech is a core component of sovereignty, but the average procurement cycle takes over 16 years, is true sovereignty possible? 

“We note that the average procurement cycle is 16 and a half years,” said Mina Mitry of Kepler Communications. “That’s beyond the lifespan of any company starting to ever care about government as a user....” By the time the public sector is ready to buy, the startup ecosystem that built the solution has often moved on to another problem. 

Eliot Pence of Dominion Dynamics also argues for the rapid prioritization of Canadian companies. "We are now at an inflection point,” he says. “What good looks to me is privileging explicitly Canadian companies…and doing it very quickly. I'm talking week cycles, day cycles, hour cycles."

In an effort to improve defence procurement, the federal government has established the Defence Investment Agency and the Defence Industrial Strategy to reduce red tape and prioritize domestic manufacturing. The aim is to position the government as a 'first customer.' This way, sovereignty-enabling technologies are not pushed toward faster markets and foreign buyers.

The procurement system may require a philosophical shift, not only a procedural one.

As Co-founder and CEO of Build Canada, Lucy Hargreaves noted, the previous model was to “spec out exactly what they wanted in a great amount of detail, and companies would bid for that...” It’s an approach that assumes the state knows the solution before the market does. That rigid process often can’t keep up with the pace of innovation.

Pence suggests that co-development could be essential. He describes a 90-day trial during which a product went through ~200 dot updates and four fundamental refactors: “I would not have known what they wanted unless I had co-developed [with] them...” 

Although collaborating more closely with emerging companies could be beneficial, that practice increases the risk that a government becomes responsible for picking tech winners and losers.

Funding Woes Force Canadian Companies Out

The early funding gap is notorious in Canada.

As is our reliance on U.S. capital. Roughly 65% of VC capital invested in Canadian startups comes from foreign sources, and mostly from the U.S.

That often compels companies to move stateside, leading to another phenomenon: Canadian companies must prove themselves elsewhere first, then come home. 

As Mitry describes: “We started the business, we raised capital from the U.S., we sell to the U.S. as our first customer. We go sell to Europe as our second customer. And we come back to Canada and say, okay, now we're a qualified entity.” 

Pence outlines a procurement and policy environment that historically favoured non‑Canadian firms, forcing Canadian companies to rely on foreign primes/markets: “We took a long time to buy things. And we, generally speaking, privileged, frankly, not Canadian companies.”

It’s now common knowledge that Canadian companies often have to move stateside to take off. Xanadu’s Weedbrook echoes this problem, explaining why the company decided to work with DARPA in the U.S. "As a startup and entrepreneur," he says, it's imperative that they try to "get some of that money...." If money is limited at home, why not work with a close ally? He adds that the Canadian government has established the Canadian Quantum Champions program to help keep Canadian IP and support quantum companies here at home. Related plans could include quantum datacenters, anchored by Canadian talent.

Canada's international corporate outflow could be viewed as an extreme form of brain drain. Talent, capital, IP, and strategic leverage are all more likely to accumulate elsewhere first. In terms of sovereignty, that outflow presents a vulnerability.

AI Minister Evan Solomon acknowledged that he wants companies investing in Canadian talent, “but we don't just want to be Branch Plant Nation.” Speaking to the Tech Week audience, he says he wants innovators to stay on home soil, admitting, “We've got to do better.”

This challenge largely comes down to investment. According to Elliot Pence, pension plans could play a decisive role in scaling sovereign technologies. “...we should tell the pension funds to invest in Canadian companies. That's what successful countries do.”

Indeed, countries like Norway are often much more intentional about directing domestic capital toward strategic sectors. 

Could Canadian risk aversion be holding it back? 

The “failing fast” mantra is common in the tech industry, but not so much in the policy world. As Mitry put it, “Oftentimes, there's just a risk aversion. If I [spend] a million dollars with you, and it doesn't work out well… that's compromised my next promotion.”

“That mentality really has to shift,” he adds. Currently, decision-makers need “air cover or policy air cover.”

That is the crux of the issue. A paradigm shift may require institutional permission to take measured risks and then scale what works.

Building Canadian Sovereignty In Sync

Canadian sovereignty may look a bit different from that of the bigger players, due to its smaller size and constrained economy. That process could involve more collaboration and international integration than one might typically expect. As a nation located next to the biggest market and military on the planet (while maintaining relationships with other world powers), the opportunities to engage and build are there for the willing.

Despite obvious struggles, it appears that exploration into Canada becoming a robust first customer has begun — a giant leap toward moving beyond sovereignty as a slogan.