With billions of dollars in fresh defence financing now available, Canadian tech companies may need to solve a more pressing problem – finding a military customer willing to buy what they build.

That’s the main challenge facing Canadian tech founders as Canada’s renewed focus on building up its military infrastructure has opened a market for commercial software and artificial intelligence, according to David Tyldesley, co-founder of the SAAS NORTH AI conference.

“In defence and dual use especially, they need a Canadian customer, the Department of National Defence or the Armed Forces, to buy from them,” Tyldesley said in an interview with TechNX. “They need to rapidly prototype, iterate and improve their product.”

Last month, the Business Development Bank of Canada outlined plans to deploy $1 billion in investment within its existing $6 billion Defence Platform with a focus on defence and dual-use technologies.

Meanwhile, some of Canada’s biggest banks like TD Bank, the Bank of Nova Scotia and CIBC have committed billions of dollars in new financing support for small and medium-sized defence-related and dual-use businesses and other sectors critical to Canada's economic future.

Those commitments could help companies expand, but Tyldesley said founders need to understand how defence procurement differs from typical commercial sales like selling software to a corporate customer.

Finding the first customer

While adding features can help win an enterprise account for a commercial software business, defence customers are looking for a capability that addresses an operational need, Tyldesley said.

“Defence buys capabilities, not features,” he noted.

Some of the founders Tyldesley speaks with regularly are already winning contracts. Others are trying to determine whether their products, such as supply chain software or cybersecurity tools, have military applications, and then attempting to navigate unfamiliar buyers and purchasing cycles.

That interest prompted Tyldesley to introduce DEPLOY, a defence and dual-use summit taking place during the SAAS NORTH AI conference Nov. 5 in Ottawa. The event will bring founders together with military decision-makers, investors and companies already selling into defence.

"If you asked me if we were going to have a component related to defence at a (Software-as-a-Service) conference, even three or four years ago, I would have said you were crazy. And look where we are now,” he said.

With interest in the defence sector growing, the event will bring tech founders in direct contact with Canadian Armed Forces decision-makers and other established defence contractors, as well as peers who have already found success navigating complex defence procurement arrangements. Those connections could help tech executives determine whether pursuing military business makes sense for their company.

Tyldesley added that he sees an opportunity for businesses to adapt existing products without making their survival depend on a single government customer.

“Instead of betting your whole company on one customer like the CAF (Canadian Armed Forces) or DND (Department of National Defence), why not build for the commercial market first and make defence your second customer,” he said.

Keeping the economic benefits in Canada

Tyldesley said U.S. tariffs have accelerated discussions about Canada’s reliance on foreign suppliers and its ability for Canada-based companies to manage supply chains and operations that are essential to national security.

“If you’re depending on one supplier for your security, you’re not controlling anything,” he said.

Ottawa’s Defence Industrial Strategy aims to increase the share of defence acquisitions awarded to Canadian firms to 70 per cent. It also looks to create 125,000 defence sector jobs over the next decade to “position the Canadian defence sector as a powerful engine of growth, innovation, and long-term national resilience”.

The defence industry already generates significant economic activity in Canada. A federal report released earlier this year found that defence activity contributed $11.1 billion to Canada’s economy and supported 81,800 jobs in 2024, including suppliers and the effects of spending by associated employees. Direct defence industry employment totalled 37,700.

But substantial investment in the domestic sector needs to be made to hit Ottawa’s lofty target. A Canadian Chamber of Commerce Business Data Lab report released last month found Canadian-controlled companies accounted for just 18 per cent of defence industry sales. The report said complex procurement and uncertainty about future government demand were among the obstacles to growing Canada’s defence sector.

For Tyldesley, Canadian ownership of intellectual property is central to building an industry whose growth benefits the domestic economy. That doesn’t mean companies should abandon the United States, which he still sees as a major market, while exploring opportunities in Europe and overseas.

“We should be looking to the Americans, absolutely, but also to the Europeans,” he said.

Human accountability in military AI

The rapid advancement of AI models presents another opportunity for tech companies, particularly in the less visible work involved in operating a military. Tyldesley pointed to logistics, imagery analysis, cybersecurity, maintenance and inventory management as areas where AI could play a significant role.

“It’s the back-end stuff that lets the Department of National Defence or the CAF analyze images, analyze data, detect threats and move more quickly operationally,” he said.

But governments and ethicists should guide the debate over AI safeguards, while arguing that human accountability must remain central when AI is involved in decisions about lethal force, he said.

“Humans have to stay accountable for anything that relates to lethal decisions,” Tyldesley said.

Ultimately, Tyldesley believes the new attention and financial interest in developing Canadian-made defence tech should help companies retain control of their technology in Canada.

“Building companies and exporting product is all good, but for me, IP in Canada is at the core of what we’d like to see become a focus for defence in Canada, so we can control our own destiny.”