OMERS, BDC back defence startup's record-breaking $139

Dominion Dynamics Inc. has shattered records for the largest Series A fundraise in Canadian defence history after getting $139 million from major institutional investors.

The Ottawa-based startup on Tuesday said OMERS Administration Corp., Business Development Bank of Canada (BDC) and Deloitte Ventures Canada were among those buying in, and the financing was led by Toronto’s Georgian Capital Partners Corp.

The participation from Canadian investors shows they now understand the “criticality of defence” and the crucial role that technology plays, Eliot Pence, founder and chief executive of Dominion Dynamics, said.

“It’s a recognition that capital is ready and willing to participate,” he said.

But Canadian defence tech startups and small and mid-sized businesses (SMBs) are still operating in what Pence calls a “liminal state” as they await the procurement reform that the federal government has promised via the newly established Defence Investment Agency (DIA).

“We have yet to emerge on the other side of that,” he said. “We need to move at the pace of the threat and we’re not there yet. Other countries have definitely moved faster.”

Dominion’s highest priority is securing a contract with the Canadian Armed Forces (CAF), he said, but it has faced challenges in getting access to and testing its tech with the armed forces.

“Every good defence technology is co-developed by industry. What we’re looking for next is increasing the feedback and iteration cycles directly with the Canadian military,” he said. “And for a venture-backed company, you think about your life in terms of weeks, (not) months or years.”

Homegrown SMBs and startups trying to break into defence are confronting high barriers to entry, from complex procurement and regulatory requirements to security clearances and fundraising, according to a BDC report in June, putting them in a tougher spot than larger and more established defence firms known as primes.

Dominion will use its fresh funds to continue developing its flagship products designed for the Canadian Arctic: AuraNet, a software communications and monitoring platform, and Scout, an autonomous collaborative platform for drones that fly alongside crewed fighter jets.

The Canadian Rangers, a unit of the Canadian Army Reserve that supports the CAF, recently tested Dominion’s software platform in the Arctic and the company received feedback during the trial and made fixes on the go.

“The core capability that we bring to the table is velocity,” Pence said. “We are able to build, deploy, test and harden a product in the course of hours and days.”

The new fundraise will also support Dominion’s expansion. It is hiring additional technical talent and will likely increase its headcount to 100 or 200 by year-end depending on how fast it can secure government contracts, Pence said.