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Why Canadian Defence Founders Reject the Dual-Use Label
Founders at Arctic Edge say the dual-use label distorts capital allocation and may push startups out of Canada. VCs defend it as risk mitigation. The divide shapes who gets funded.
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The Risk Event: Founders Call Dual-Use a Distortion
The term dual-use has dominated Canada's defence tech conversation for years. At the Arctic Edge conference on Tuesday, held at Torys' office during Toronto Tech Week, several founders argued that the label has become a liability that misdirects capital and stifles innovation. The divide matters because Canada is gearing up to spend heavily on defence, and the way capital flows into domestic defence tech will shape which companies survive and which fail.
Paul Ziadé on the "Ahistorical" Approach
Paul Ziadé, co-founder and CEO of North Vector Dynamics (NVD), opened the criticism. “As an entrepreneur raising money, I’ve become very annoyed with the term dual use,” he said on stage. Ziadé acknowledged that dual-use is a real concept. He argued that Canada's current approach to developing such technologies has been “ahistorical.”
Ziadé pointed to GPS, originally funded for missile guidance and submarine tracking, and duct tape, built to seal ammunition cases, as examples of technologies that started as single-use military products. They found commercial applications only later. Ziadé believes Canada's defence tech industry is “really kind of cornering ourselves trying to find these multiple applications.”
Eliot Pence: "Consequences Are Hugely Regressive"
Eliot Pence, founder and CEO of Dominion Dynamics, traced the obsession with dual-use to it being “easy for VCs to sell to their [limited partners (LPs)]–not because we actually give a shit about dual-use.” Pence called the term “a story that we tell ourselves, and the consequences are hugely regressive.” He argued that the industry often assumes the best path is “to go from outside the military to inside.” The inverse is true: “the best way to get more dual-use is to double down on single use.”
Why the Dual-Use Label Creates Capital Friction
The risk event here is not a single stock move. It is a structural friction in Canada's defence tech ecosystem. If founders and VCs cannot align on what dual-use means, capital may flow inconsistently. Startups may be forced into commercial pivots that dilute their military value, or they may relocate to markets with clearer defence tech policies.
The Founder Argument: Single-Use First, Then Commercial
Ziadé and Pence represent a growing camp that believes the dual-use requirement forces startups to split focus too early. Building a product that satisfies both military and commercial customers from day one is harder than building a single-use military product and later finding civilian applications. The historical evidence supports them: GPS, the internet, and duct tape all began as purpose-built military tools.
Pence argued that the real dual-use payoff comes after a single-use military product proves itself. Forcing it upfront, he said, “corner[s] ourselves” into mediocre solutions that satisfy neither customer well.
The VC Defense: TAM and Concentration Risk
Venture capitalists on a subsequent panel pushed back. Mark Maybank, co-founder and managing partner of Maverix Private Equity, argued that “there is some merit” to the term dual-use. Startups that sell one product to one buyer, such as the Department of National Defence, face “a very limited [total addressable market (TAM)] and a significant amount of concentration risk.” Dual-use reduces that risk and boosts TAM, making startups more attractive to prospective VCs.
Maybank said he is happy Canada is even debating the topic. “Whether we’re debating defense or dual-use, we have cultural permission to have a conversation that we couldn’t have two years ago, five years ago, certainly not 10 years ago.”