The Hon. Lisa Raitt talks to Melanie Nadeau, CEO of COVE, the globally recognized innovation platform helping transform defence-focused ideas into commercial solutions. Together, they explore why innovation in defence matters, how Canadian entrepreneurs can scale breakthrough ideas, and why this is a pivotal moment for Canada’s defence and resiliency sector.
Lisa Raitt: Thank you for tuning in to The Raitt Stuff. I'm your host Lisa Raitt and in this podcast I'm going to share insights on current hot topics in the areas of public policy, politics and business, with some guests along the way. Welcome back to The Raitt Stuff. I am so delighted to have with me today somebody from the East Coast of Canada. Some of you may know that I actually grew up in Cape Breton Island. And as a result, I always have an affection for tracking what's happening in the Atlantic economy. And I'm delighted, as I said, to have somebody who's out there building the Canadian economy, but doing it from a little bit of a different location than normally here in the Greater Toronto area. Melanie Nadeau is the chief executive officer of COVE, and she leads the strategic direction and manages the overall operations. But, she's got 20 years of experience in business development initiatives that drive high-tech innovation, entrepreneurship, and investment. As of her own, she has been a noted expert for the International Energy Agency, United Nations Environment Program, Intergovernmental Panel on Climate Change, and the International Electrotechnical Commission. Earning multiple awards, she has been named as one of Canada's Clean 16 for her outstanding contribution to clean capitalism and has been named one of Atlantic Canada's twenty-five most powerful women, invited to speak at TED Global, and is a strong supporter of Canada's tech ecosystem and a mentor for the Creative Destruction Lab. Melanie, welcome to my little podcast today.
Melanie Nadeau: Thanks so much for having me on, Lisa. It's great to take part in your podcast.
Lisa Raitt: I'm really happy to have you here. As you can see right now, we're in an inflection point here in Canada. And it's no longer thinking necessarily about how do we trade with other countries. That's super important. But we've got this kind of vibe, I think, in the country right now where people are looking inwardly, internally, and wondering okay, if there's going to be a gap in what we're going to be bringing in from the United States. Where can we fill and how do we build the next new economy? Are you feeling that kind of an energy right now?
Melanie Nadeau: Absolutely. So the momentum I would say since the Prime Minister's speech in Davos have just been a ripple effect, not only in Canada, but just internationally. So we work as well with markets in Europe and elsewhere, and there's just a speed that we didn't feel say three years ago. So there definitely is a different sense of urgency that we're seeing for sure.
Lisa Raitt: Yeah. So what is COVE? What does it stand for? What do you do? How are you how are you playing a role in the innovation ecosystem?
Melanie Nadeau: The short of it is COVE is a commercialization platform. So what we do is we help technology moves from innovation into markets. And I can talk about a little bit of our history. So you talked about us being on the East Coast. Well, naturally, many years ago, we really started off as an ocean tech hub, and then since ten years ago our mandates shifted pretty significantly. So today we work with technologies and companies in areas like autonomous systems, secure digital capabilities, advanced sensing, communications, specialized manufacturing. And so our remit now is over 700 companies or 700 clients that we work with across Canada and then also internationally in US market as well as European markets. But what I'd say is kind of throughout that ten years, the common denominator that we've seen is developing like high impact tech that markets need, and oftentimes, what we've seen even before it became a thing in Canada, it was that they were dual use, which really means that these this type of equipment or product was being sold or driven towards defense markets, but also had super strong applications in commercial markets. So dual use for us has been around for a lot longer than I think what may be now perceived as a bit of a buzzword in Canada. We've been involved in it for many, many years. At the end of the day, what our focus has been has really been about how do we help these companies move a lot quicker to get into these markets. So, we help them on understanding how to test that equipment, in a real environment, not in a lab, in like the actual environment where it's going to be used. How do we get the customer to validate it? How do we bring the customer to the table? Can it meet procurement and security requirements? And, that is obviously becoming more and more important given the speed and urgency in Canada but also globally around security. Can it raise the capital it needs? And that's a big one. And can it really be a business that can scale? So all to say that's been really our focus. And so, one day we thought we were ocean tech experts, but what we really are is commercialization experts.
Lisa Raitt: So are you a government agency?
Melanie Nadeau: No, we're not. We're completely independent. We have partners that are governments in Canada and internationally. We have clients that you know are industry, we have partners that are industry, so where we sit is sort of at the nexus of being trusted, because part of our values is really looking at a whole supply chain. It's not necessarily to support the profit of one company, it’s to look at that whole supply chain and more of that ecosystem level of how we can ensure what we do really benefits like the broader scale and not just one entity.
Lisa Raitt: Are you focused only on Atlantic Canada or do you have clients from across the country?
Melanie Nadeau: Yeah, I mean a lot of people think just because we're in Atlantic Canada we're we're centered in Atlantic Canada, but in fact we're headquartered in Halifax. But we work across Canada and about thirty percent, roughly thirty percent of our client base is international. So, we've got companies that we work with in British Columbia, Ontario, Quebec, Alberta and increasingly more across all provinces.
Lisa Raitt: In Halifax I know that I feel a NATO presence. Either the security conference that's coming there, there seems to be a lot of NATO attention, especially with the promise that the government has made and our country has made regarding NATO defense spending. You mentioned a little bit about dual use. Are you seeing the companies though getting the kind of support that they need in order to be part of that larger defense conversation.
Melanie Nadeau: Yeah, I would say that, things are changing so rapidly, and as you can imagine, like this is a very for one, like in defense, it's a very complex industry. You already talked about NATO and that's you 32 countries, and then you got The Five Eyes, and then you have other bilateral partnerships, and then you have Canada and Canada's sovereignty and security. So it's a very, very complex environment, and I feel like in the work that we've done at COVE, we've been at the Nexus. So we've done a couple of things. We've been involved with NATO's arm called Diana, which is about accelerating innovation within the Alliance. And I've been working with companies since for a couple of years now. And that I will tell you has been a transformative enabler to help companies across the Alliance move a lot quicker and closer into the defense ecosystem and actually get to procurement. So I've seen that have tremendous success already, and it's still early days. There's obviously a lot of attention in Canada and investment and recognition that we can't keep going to the same large companies that we've been going through over decades. There’s a huge economic opportunity with the investment that Canada's making, but also all the other NATO countries. And so how do we start thinking about going less to the couple of companies we've been going through over the years in our defense supply chain to building a real economic advantage, which is about building more, stronger Canadian companies that are servicing opportunity in Canada, but also opportunity in some of these other markets. And so that I would say we're very early days, but there's a lot of good signals like Canada releasing the Defense Industrial Strategy, which is a very, very strong signal. We’re starting to work on something called the Defense Innovation Secure Hub, DISHs, to help accelerate innovation and operational capabilities. So, there's a lot of pieces that are starting to be put into place, but there's also a lot of urgency in this field of security and the pressure obviously from NATO and others to move quickly. And so I think imperative in Canada is to figure out how to meet that urgency, how to ensure that we are confident as part of the alliance and making our commitments and our investments, but also ensuring that we're driving economic value into and building an industry in Canada that supports Canadians but also exports to all these other markets. So, there there's a lot going on, I guess is the short to your question. And there's a lot of activity and it's hard to navigate, but there's some very interesting pathways now that are developing that I think are definitely helping.
Lisa Raitt: You're not surprised because you work in this space? I will tell you, I was surprised when I was reminded that most of the companies in the defense space, in terms of numbers of companies, they're small and medium-sized enterprises. They're not the large kind of behemoths that you would think of. The Bombardiers and the Lockheeds get the news, but the ecosystem and the supply chain is really made up of small and medium sized businesses. Is that a challenge, do you think, for our defense sector that it is the small folks that normally don't have that capital behind them?
Melanie Nadeau: Yeah, and I think that's kind of the crux that we're in. So, there are large companies, prime contractors that have been around have loads of expertise, and those still need to be there. But what's happened to some of those medium sized businesses who may have good product, good technology, they've typically what's happened sold overseas to other markets because Canada has not procured from that Canadian company. So that is over and over again the narrative that is happening. And I know, there's a lot of pressure to change that. And then what also has happened is that the investment community in Canada has not really invested in defense historically in these small, medium sized businesses for lack of not understanding the sector. And the other piece to it is kind of tied to my first point is that
a lot of investors will say, well, have you sold to your main customer? Which you would naturally think is Canada, and most will say no, because it's not been accessible to them, but maybe they've sold into Australia or somewhere else. And so, it sort of starts to reduce the confidence that an investor may need in order to make these kind of investment decisions. So I think, that's a good reason why, and the complexity of this market, a good reason why we haven't seen a lot of small businesses be as successful as they should be. But, a lot of our work is really focused too on ensuring the ones that are good, we need to scale them fast and we need to scale them at a scale that makes them really competitive in Canada and internationally. And so we talk a lot about, our North Star, which is ten billion dollar Canadian companies, which at that level, you're real in a very competitive market. And so that's part of our North Star, is how do we create that or how do we help enable some of those conditions to create that where we have those kind of Canadian companies?
Lisa Raitt: It's really timely that we're speaking today because we're well, we're sitting here and we haven't seen yet the investment summit that the Prime Minister is bringing together. But what we have seen are a number of the financial institutions, including my financial institution, CIBC, make significant commitments to defense initiatives. So in the case of CIBC, for example, we have said that we've committed $2 billion over five years for those small and medium sized defense related and dual use businesses. Normally you don't see a banking sector being involved in it. Are you seeing that more and more? The areas that were not necessarily coming into those riskier investments are showing up.
Melanie Nadeau: Well, things have definitely changed in that area in Canada. So internationally, and primarily if you think about the US market, they've been investing in defense for decades. Whether it's banking or risk capital or so on, it's a much more sophisticated market. In Canada we haven't seen that. But I will tell you in the last several months there's been the pretty significant announcements. So one started with the Business Development Bank of Canada, who announced their portfolio for defense and I think that was a catalyst. Now we're seeing banks, like yourself at CIBC, making some pretty serious commitments. And I think that's what's really required was I talk about like we need this to be an economic strategy. We need those type of players engaged, involved and I'm quite bullish on this. I see there's a true industry and an economic opportunity here. So it's exciting to see that level of commitment coming not only from the government in Canada, but also coming from the banking community and financial institutions. I think what's going to be interesting is as I talk about some of these businesses that have long been maybe not scaling at the pace that they could have because of all the reasons we previously talked about, they're going to need to be investment ready. and so that's going to be another step up that we're going to have to experience as banks are leveling up, as other players are leveling up, companies will also have to level up to meet the requirements of these investors. And I think it's really good news, but it is something that we can't lose sight of.
Lisa Raitt: And it's super interesting to me because the role that you're playing is really by, as you said, you're at that nexus helping these companies that are focused on their business, quite frankly, trying to help them commercialize and grow. And now we see banks like ours at CIBC actually putting experts in a national network, trying to make sure that we have the ability to cover off those kinds of business and we have an understanding of it. And I think working with COVE makes a whole bunch of sense because you can see both sides of the coin in this matter. It's really hard to match up, from one industry into another one. So the role that you're playing, I commend you for it. I think it's really well placed. So well done you.
Melanie Nadeau: Oh, thank you so much, Lisa. For my team and myself, it's a very exciting time. Right time, right moment. But it’s not just a Canadian moment, it's a very global moment. And what's exciting about it is Canadian players are stepping up in a way like I haven't seen before. So I think that I'm very optimistic.
Lisa Raitt: In case anyone's out there listening who has a company that they're interested in, how do they get in contact with you? Not you personally, Melanie. I wouldn't put your telephone number on the air, but how can they reach out to COVE just to see whether or not you can help them answer some questions?
Melanie Nadeau: Yeah, absolutely. So I mean the easiest way is obviously through social media or our website, covesolutions.com. We're on different social media channels. So if you just seek us out, I guarantee somebody will get back to you and try to figure out how we can help.
Lisa Raitt: Amazing. Well, thank you so much for spending some time with me here today. I'm sure that everybody is really interested in knowing how we're fitting the pieces together to build this great defense industry, which is out there for us to grab onto because Canadian ingenuity, innovation, the willingness to get things done is definitely alive and well and it's an exciting moment, like you said.
Melanie Nadeau: Absolutely. It's ours to seize.
Lisa Raitt: Amazing. Thanks so much, Melanie.
Melanie Nadeau: Thank you.
Lisa Raitt: Thanks so much for tuning in. Now, if you have any questions or comments or even requests on topics to discuss, drop me a line at lisa.raitt@cibc.com. Your interactions actually will make this better. I'm your host, Lisa Raitt, and this has been The Raitt Stuff.
Disclaimer: The materials disclosed on this podcast are for informational purposes only and subject to our Code of Conduct as well as CIRO rules. The information and data contained herein has been obtained or derived from sources believed to be reliable, without independent verification by CIBC Capital Markets and, to the extent that such information and data is based on sources outside CIBC Capital Markets, we do not represent or warrant that any such information or data is accurate, adequate or complete. Notwithstanding anything to the contrary herein, CIBC World Markets Inc. (and/or any affiliate thereof) shall not assume any responsibility or liability of any nature in connection with any of the contents of this communication. This communication is tailored for a particular audience and accordingly, this message is intended for such specific audience only. Any dissemination, re-distribution or other use of this message or the market commentary contained herein by any recipient is unauthorized. This communication should not be construed as a research report. The services, securities and investments discussed in this report may not be available to, nor suitable for, all investors. Nothing in this communication constitutes a recommendation, offer or solicitation to buy or sell any specific investments discussed herein. Speakers on this podcast do not have any actual, implied or apparent authority to act on behalf of any issuer mentioned in this podcast. The commentary and opinions expressed herein are solely those of the individual speaker(s), except where the author expressly states them to be the opinions of CIBC World Markets Inc. The speaker(s) may provide short-term trading views or ideas on issuers, securities, commodities, currencies or other financial instruments but investors should not expect continuing analysis, views or discussion relating to those instruments discussed herein. Any information provided herein is not intended to represent an adequate basis for investors to make an informed investment decision and is subject to change without notice. CIBC Capital Markets is a trademark brand name under which Canadian Imperial Bank of Commerce (“CIBC”), its subsidiaries and affiliates provide products and services to our customers around the world. For more information about these legal entities, as well as the products and services offered by CIBC Capital Markets, please visit www.cibccm.com.