Foreword
Canada discovered defence tech about eighteen months ago. The $82 billion commitment, the Series A's, the word "neoprime." The money arrived, and with it a lot of people who have never sold anything to a soldier.
Eugene Yumshtyk has.
He is the COO of Paradigm Shift Technologies, a Toronto company that spent over twenty five years convincing the world's biggest primes to stop coating gun barrels with hexavalent chrome. OEMs in the United States, France, Spain, Italy, Poland, the UK and Ukraine listened. Ottawa, for most of that time, did not.
What that means in practice: every time a gun fires, the inside of the barrel erodes a little. Coat the bore and the barrel lasts longer and shoots straighter. The standard coating since the 1930s has been hexavalent chrome, which is carcinogenic and is being regulated out of Europe. Paradigm Shift's process, called EPVD, deposits an alloy inside the tube instead. No chrome, and a barrel that survives a lot more rounds.
Then Russia invaded Ukraine, every howitzer at the front started burning through barrels ten to fifteen times over, and the thing Eugene had been saying for a decade stopped being a pitch and became a supply problem. M777 barrels now carry lead times north of 36 months.
I have a lot of respect for Eugene, and it has nothing to do with the coating. He is one of the least BS people I know in this industry. He tells it how it is, and he is one of the most truthful people I have met anywhere. In a space that runs on press releases and five year roadmaps, that is rare enough to be worth saying out loud.
Full disclosure: Eugene is a friend, and Paradigm Shift is a Fello client. That is the reason I can ask him the questions below instead of reading his press releases. I would rather you know that than guess.
Before you believe the forecast for Canadian defence, it is worth talking to someone who lived the weather.
The interview
Q: Take me back to the early days, before anyone in Canada was talking about defence. What did a typical sales trip look like, who were you trying to convince, and what was the no you heard most?
A: Everything started in the US with the DoD and then transitioned to Canada, Europe, Asia and the Middle East. We would go to defence expos around the world and speak to gun manufacturers and militaries, but they often thought it was too good to be true. Until we let them hold actual fired barrels and showed them military reports proving that what we said we do has been done.
Q: What's the longest a single deal took from first conversation to purchase order, and what happened in the middle?
A: We are still working on some of the deals we started negotiating over 10 years ago. When you work with government, large primes and militaries, people change over every few years, which means they may or may not pick up where their predecessors left off. That leaves us to restart the entire education process over and over again.
The other side of the coin is reluctance to change, and egos. The idea of if we didn't come up with it, it's no good. We know there are people out there who tried copying the technology. They have all failed.
Q: You built a defence company in Canada when the only customers were in Europe. What does Canada make hard that nobody admits out loud, and what does it make possible that nobody notices?
A: Canada has a Munitions Supply Program that designates only a handful of primes who can supply the Department of National Defence directly. According to the most recent Defence Industrial Strategy released by our government this year, SMEs like us must find ways to collaborate with the selected primes.
If the prime has a sole source contract, similar to a monopoly, and DND does not specify that they want improved weapon performance, then the primes have no incentive to work with SMEs like ours. Especially on components that are consumables. By improved performance I mean extended barrel life, improved accuracy, sovereign coating applications, eliminating the use of hazardous materials.
Our Prime Minister has announced that Canada will Build, Partner, Buy, and specified it must be done in that order to help establish a sovereign defence industrial base. But it always comes down to the details and the execution. If 70 percent of a weapon is made in Canada by a foreign owned organization, is it sovereign? Is it Canadian? If a Canadian owned company can provide the same or better product or service, should the government incentivize the primes to work with local organizations rather than international alternatives?
Q: "Availability is the new caliber." When did you realize that was true, and who was the first person to get it?
A: At the onset of the war in Ukraine. After about 12 months of war the Ukrainians started to run out of barrels and spares for weapon systems like the M777 howitzer. A US Army general announced during an artillery conference that for every howitzer they supplied to Ukraine, approximately 30 of them, they have had to replace the barrels 10 to 15 times.
We were also told that some artillery manufacturers sent memos to the Ukrainians stating they should not exceed a certain number of rounds within a day. That would mean firing the artillery until 11am and then waiting until the next day. Not an option they can afford. So the Ukrainians kept firing. Some of their rifled barrels became smooth bore and they had to figure out how to proceed with a weapon system that all of a sudden had an accuracy of plus or minus 100 metres. The Ukrainians drove to Romania to meet with us and described their dire need for extended barrel life.
Q: You beat chrome, a hundred-year incumbent, as a small company. What was the actual argument that worked on an engineer at Rheinmetall or Leonardo? Not the pitch, the sentence.
A: Our successful USAF Commercialization Phase III SBIR result on the GAU-12/U: 100 percent higher fatigue life and 167 percent less erosion than chrome plating, while being 100 percent ECHA and REACH compliant.
Q: What's the thing about selling to a prime that nobody writes down and you only learn by losing?
A: The bigger the boat, the slower it turns. The US Army is a great example. The government allocated billions of dollars towards developing ERCA, extended range cannon artillery. The goal was a howitzer that can hit a target 70km away with a longer barrel. The program was cancelled after a large portion of the funds was spent demonstrating they could build two prototypes. As the service acquisition chief put it, the prototypes were showing excessive wear on the gun tube after firing a relatively low number of rounds.
They could have called Paradigm Shift.
Q: Dominion raised C$169 million in a year. What do you see when you read that headline? What's right about it and what's missing?
A: It's about time. I am happy to see this kind of capital being raised by fellow Canadian defence companies. I hope the momentum continues and these companies continue to deliver on their promises to their investors and fellow partners.
Q: What's the most common thing you hear at CANSEC now that you know is wrong? Say it the way you'd say it to me at dinner.
A: "The requirements don't ask for it." That usually means the requirements are either outdated, lack detail, or are framed towards a specific sole-source prime. Innovation requires change, change requires courage, courage requires action.
Q: What would you tell the 2008 version of you? One thing.
A: Don't stress the small stuff, and don't listen to people who tell you that your idea will never work. You'll learn from the lows, grow through the challenges, and realize that the setbacks you once worried about are often what prepare you for your biggest opportunities.
Fello's take
Money showing up is not the same as a market opening. Eugene has spent twenty five years with a product that beats the incumbent by a documented margin, validated by the US Air Force, and he is still rebuilding the same case every time somebody rotates out of a desk. That is not a technology problem. It is a procurement structure problem, and $82 billion does not fix it on its own.
The Munitions Supply Program is the part nobody says out loud. If a handful of primes are the only direct suppliers to DND, and DND does not write performance improvements into the requirement, the prime has no reason to call the Canadian SME with the better coating. The incentive points the other way. Sovereignty ends up measured in percentages of a bill of materials instead of in who owns the capability.
Build, Partner, Buy is the right order. The question Eugene is really asking is whether anyone enforces it once a sole-source contract is already on the table.
For founders, the lesson here isn't about defence. In any long-cycle sale, your real competition is institutional memory loss. Eugene won by making proof portable: fired barrels people could hold, and reports with numbers in them. Build the artifact that survives the person who leaves.
Eugene Yumshtyk is the COO of Paradigm Shift Technologies in Toronto. You can connect with him on LinkedIn.
Interview may be lightly edited for length and clarity.
