The truth is, we’re not there yet. Although the term “quantum computing” rolls easily off the lips of policymakers, business leaders, scientists and engineers, it may be five years or more before this new data-crunching technology has any meaningful impact on our lives.
And here is the problem? As things stand, companies working in the field of quantum computing are engaged in cutting-edge development work at a time when no one can fully determine what the market will look like in five or ten years’ time. It is assumed that there will be customers and use cases but, as things stand, it is impossible to predict which technology they will adopt. In the meantime, startups should continue to fund their development efforts, trying to establish some sort of traction in markets that don’t really exist.
So what does it look like in practice? How are young companies finding their feet in an industry that promises to change the world — but hasn’t yet? I spoke to two UK quantum startups about their progress from the drawing board to the marketplace.
According to data published by Markets and Markets, revenue in this sector is expected to reach around $899 billion in 2023, which will grow to $4,375 million in 2028. The government is keen to encourage the development of quantum hardware and software. For example, the UK government sees Britain becoming a “quantum-capable” country by 2033 and has committed £2.5 billion to the development over the next ten years.
So there is confidence and, as a result, VC cash is available. For example, Oxford Ionics – a hardware company with 50 people on the payroll – has raised £40 million so far. Phasecraft – a software startup – has secured £17.4 million in equity finance, plus a further £3.7 million in grants.
Co-founder and CEO of Oxford Ionics, Dr. Chris Ballance says that despite the risks associated with the technology still evolving, it’s hard to see how machines that compute significantly faster than traditional supercomputers won’t add value. “As a company, we are willing to bet on this and we are asking investors to do so,” he says.
The key, he adds, is finding the right investors — those who understand not only the potential rewards of the market, but also the risks. There is a need for specific education of investors, he adds. “We are strict with our investors. We will tell them why they should not invest.” This is not an exercise in unnecessarily scaring finance sources. It’s about making sure the investor and the company are aligned.
And as Ashley Montanaro, CEO and cofounder of Phasecraft, sees it, VC finance has been instrumental in enabling his company to develop software algorithms. “There are different ways to fund yourself,” he says. “For example, some companies offer consultancy. We see it as a distraction. VC finance allows us to focus on rigorous R&D.”
Grant funding has also played a role in Facecraft’s journey. “Financially, it’s important but not essential,” says Montanaro. “But grants are important to enable collaboration and provide validation of what you’re doing.”
Perhaps the most important aspect of attracting inquiries is the ability to demonstrate business viability. In the world of quantum computing, the fundamental unit of information is the qubit. Oxford Ionics controls its qubits – which are individual atoms – using a proprietary system designed to be scalable.
Balance says the focus is on technology that will scale to meet demand. The key is to develop reliable hardware that not only provides a sufficient number of qubits to outperform supercomputers, but also provides a low error rate to make the technology useful and efficient.
And in one way or another, all quantum hardware companies are currently working on this. Although there is a range of hardware technologies that have been proven to offer quantum efficiency, the tricky part is ensuring consistent performance that can be commercially exploited. That’s when banks, research institutes, multinationals and anyone else who will benefit from the technology will start buying.
Looking for customers
But here is the question. How do those developing technology know what their potential customers are looking for?
“We spend a fair amount of time talking to customers, for exactly that reason,” Ballance says. “Normally, we’ll talk to people with PhDs in quantum computing. We ask them what they want.”
Styling itself as a quantum algorithm company, Facecraft specializes in quantum simulation and analysis of materials including solar panels and batteries. It is also in regular contact with potential users of its services. “We have a lot of partnerships,” says Montanaro. “They include Johnson Matthey, Oxford PV and Roche.” These partnerships are helping the company develop algorithms that will solve real-world problems. Additionally, it is working with IBM, BT and Rigetti.
Business models are also being developed. Both Ballance and Montanaro believe that the main path to quantum solutions for the majority of organizations will be through a quantum-as-a-service model, using third-party hardware and software. This does not necessarily mean an arm’s-length relationship with providers. This is a complex area where users and suppliers can work together. Some organizations will purchase their own in-house systems.
Adoption of quantum computing will depend on precisely engineered hardware that can reliably outperform supercomputers, fueling the expert software industry. Ultimately, some technologies will win and others will fail to gain traction. But with quantum potentially revolutionizing tasks such as drug discovery, materials development or economic modelling, the expected rewards mean that startups able to demonstrate the viability of their technology have a fighting chance of securing VC capital.
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