The Source Canada Newsletter, Tuesday September 8, 2026

In startups, “traction” is often mistaken for a measure of success. When an investor says they invest in traction, they usually mean revenue or growth. That's not what the word means.

Borrowed from the mechanical age, traction means grip, e.g. the grip of a tire on a road. A car may have a powerful engine, and it may eventually move at high speed. But first the tires must have enough grip to get started.

In 1804, two Welsh businessmen made a 500-guinea wager that a steam locomotive running iron wheels on iron rails would not have enough grip to move. They were wrong, and the demonstration is why we have railways.

Canada has a head of steam right now, and needs it as we enter a new phase of the trade war with the United States. We have bold new policies in the Defence Industrial Strategy and the Buy Canadian Policy. The Canada Investment Summit is next week. And last week it was announced that Patrick Pichette will lead the new Digital Transformation Canada.

All this potential energy is encouraging. But it is not traction. Not yet.

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Last week it was also reported that Doug Guzman is stepping down from the Defence Investment Agency after only a year on the job. The reason? The slow pace of government bureaucracy. It's discouraging news, and a reminder of how hard it is to convert energy into traction. When you push for change, the machinery of government pushes back. Guzman has described the obstacles as a “triangle of inertia” — DND, PSPC and ISED.

Economist Charles Lammam calls it "policy adventurism" and declares it isn't working:

Each new agency is a tacit admission that government's existing machinery can't deliver. Instead of doing the hard work of repair, governments superimpose new structures on top of the old ones, producing a state that is simultaneously bigger and weaker. Each workaround pulls talent and attention away from the departments left behind, so the incapacity that prompted the bypass gets worse, inviting the next one.

So how do innovators and the private sector help overcome this inertia? First, we keep advocating for the disruptive ideas that can pull Canada out of its doldrums. Second, we generate visible wins. Nothing convinces the establishment to take a risk like someone else's success story. We need successful pilots, and we need large buying commitments from government and from large enterprises. Whatever it takes.

Keeping with the industrial-age metaphor: that's what will turn a head of steam into traction, and traction into a flywheel.

Highlights

  • Doug Guzman, recruited from RBC to lead the Defence Investment Agency in July 2025, is stepping down after roughly a year. Sources cite frustration with the pace of government bureaucracy in getting procurement projects moving and approved. The Globe and Mail
  • A companion column frames the departure as a verdict on the density of Ottawa's procurement bureaucracy. The Globe and Mail
  • Mark Carney launched Digital Transformation Canada and named venture capitalist and former Google CFO Patrick Pichette as its chief executive. The new federal office takes over both running and buying technology for the Government of Canada. The Logic
  • Dominic Barton, chair of Rio Tinto and LeapFrog Investments and a former ambassador to China, was named part-time chair of Invest in Canada. Private equity investor Gurinder Grewal was named CEO, replacing Laurel Broten more than a year before her term expired. The Logic
  • Economist Charles Lammam argues Ottawa's pattern of creating new federal agencies (Build Canada Homes, the Major Projects Office, the new defence procurement body, the Canada Infrastructure Bank) is policy adventurism, each new agency a tacit admission that existing machinery cannot deliver. The Hub

Defence

  • InDro Robotics, the engineering division of Vancouver-based Indrocorp Technologies (INDROTEK), has been qualified as a supplier under Canada's Defence Drone Initiative Marketplace, True North Strategic Review
  • InDro Robotics is also building a truck-mounted mobile command centre it describes as a mainframe for Canadian autonomous warfare, spanning drones, ground robots and the software layer that coordinates them. BetaKit

Capital

  • Vancouver-founded, Y Combinator-backed Mundo AI disclosed $24 million USD, comprising a $20 million Series A led by GreatPoint Ventures and a previously unannounced $4 million seed. Mundo builds datasets, evaluations and applied research for models that interpret the physical world. BetaKit
  • Toronto startup Meissner raised $2.6 million USD in pre-seed funding for an AI system that hunts for metallic alloys that could work as superconductors. The round was backed by BDC and several investors who previously wrote cheques into Xanadu. BetaKit

Policy

  • Ottawa released a set of responsible data centre principles backed by 23 signatories, including Amazon Web Services, Anthropic, Bell, Cohere, eStruxture, Hypertec, Meta, Microsoft, OpenAI and Telus. Signatories commit to minimising water use and to not shifting electricity costs onto consumers. BetaKit
  • The CPTPP entered into force between Canada and the United Kingdom on September 1, after Canada became the last member to ratify the UK's accession. New rules make it easier for British and Canadian tech firms to do business in each other's countries, and the existing Canada-UK Trade Continuity Agreement stays in place. The Logic
  • Deloitte's Future of Canada Centre models two futures to 2036. A CUSMA withdrawal costs 1.6 percent of real GDP and roughly 163,000 jobs a year; accelerated diversification returns 0.6 percent and roughly 53,000, so diversification softens the blow rather than filling the hole left by 70 percent export dependence on the United States. Deloitte Canada

Counter Signal

  • The Defence Drone Initiative qualified supplier pool has expanded past one hundred companies. Named additions include AVSS, Zighra, InDro Robotics, Volatus, Cellula, North Vector, Arctic UAV, Laflamme Aero and ARA Robotique, alongside primes such as Lockheed, BAE Systems and Rheinmetall Canada. True North Strategic Review
  • New U.S. Section 232 tariffs on drones weighing more than 25 kilograms or carrying thermal cameras took effect just after midnight Thursday, doubling the landed cost of imports from most origins. Japan, South Korea and EU members received lower rates; Canada did not. Additional tariffs on drone components start February 9, 2027. The Logic
  • Allen-Vanguard, the Ottawa maker of radio-jamming systems used against drones and remote-detonated bombs, has been placed into receivership owing creditors more than US$80 million. A court order says the company has been shopping itself since 2023 with only one serious approach, running on credit and prepayments against a shrinking order book. The Logic

Attend Source Canada October 22, 2026. Secure your tickets now.

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