Who spearheads the Quantum Leap?
Over the last 2 years, there has been a growing interest in Quantum Technologies. Here at Phystech Ventures, we have been monitoring this segment for more than 5 years. We publish a biannual 1H 2021 industry report (Link to the full report), where we share our observation, present an analyst review of the whole sector of Quantum Technologies and share the Quantum Startup Map.
Key takeaways
- Investment volume in quantum technology grew more than 2x year-over-year (YoY) in 2021 for the second year in a row, reaching $2.3bn. The first half of 2022 recorded an investment of $509m, up 30% from the same period in 2021.
- Hardware remains the leading segment in terms of investment volume, where investment grew 2.6 times to $1.5b.
- The combined value of the top 10 companies increased 2.3 times in 1H2022, compared to 1H2021, to $10b. 93% of this figure is made up of companies building quantum computers.
- Unfortunately, however, the companies’ high valuations are not yet supported by any significant revenues. The startups developing hardware are just at the beginning of commercialization, with revenues of below $10m per year each.
“The main challenge for quantum computers is to fulfill and address the various promises and hopes, to demonstrate a ‘economic benefit’. Something that actually helps end-users and customers beyond something they can do on a laptop, and offers an economic incentive to use quantum technologies beyond academic interests. If the community fails at that, despite the funding, support, and investments received, there will be a loss of confidence in the entire quantum community.” — Thomas Monz, CEO & Co-founder of Alpine Quantum Technologies
- Today quantum computers are starting to perform necessary and relevant tasks. In the next 6–8 years a quantum computer will act as a co-processor, solving complex but narrow computational problems in a short time and transmitting the results to classical computers.
“At present, there are two big hurdles hampering the wide-spread use of quantum computing for industrial applications — first, the capabilities of the hardware. Second, the extremely wide application areas of a mature quantum computing, and the resulting heterogenous skill set of users (engineers, chemists, etc) is in stark contrast with the niche expertise required to run a job on a quantum computer.
Software for quantum computers can address both of these hurdles. Interfaces that are tailored to the skills and requirements of the wide array of different user types is key to ensure adoption of the benefits of quantum” — Dr. Daniel Volz, Project manager at BASF
- A major established trend of 2021 was that hardware companies continued to seek acquisitions or mergers with software start-ups. We have observed at least three cases of this. ColdQuanta, acquired Super.tech, a Chicago-based leader in quantum software application and platform development. Quantinuum, a spin off from Honeywell’s Quantum activity, merged with the Cambridge-based CQC, and is now raising $300m to integrate both hardware and software in a true full stack company. In addition, the Delft-based start-up Qu&Co, a quantum algorithm and software developer, merged with French company Pasqal.
Startup Map
Geographical distribution
The US continues to lead in terms of total investment in quantum technologies. In 2021, US companies invested $1.38b in the sector, constituting a 2+x increase over 2020. The most substantial growth in investment was in the UK, which retained its second position in the “ranking”, and increased its volume of investment in quantum startups by 3 times, to $466m. Canada rounds out the top 3, with $156m invested in 2021.
However, if you look at the specific metric of investment per million inhabitants of the country, the leaders are the UK, Israel and Finland.
In 2022, the number of quantum startups grew from 197 to 267 companies. As with investment volume, the US, UK, and Canada retained their leadership in terms of quantum startups, with 59, 38, and 34 companies based in the countries, respectively. Canada and Germany exhibited the highest growth rate in this area, at 160+%.
Our forecast
Despite the sizeable growth observed in 2021, we do not expect a notable increase in investment in quantum start-ups in 2022. This is both due to the coming economic recession and the relatively slow progress of companies in the space. As you might have noticed from our brief review of the articles, we are only expecting major breakthroughs. Conversely, growth in investment can be expected after 2023, after the economic downturn passes its minimum.
Today quantum computers are starting to perform necessary and relevant tasks. In the next 6–8 years, we expect a time when a quantum computer will act as a co-processor, solving complex but narrow computational problems in a short time and transmitting the results to classical computers. We expect quantum computers to produce computations that match the capabilities of their architecture, which is limited by qubit control ability, constraints on qubits entanglement, gates creation, error correction, etc.
Scientists today are addressing a variety of engineering issues in order to build and scale a quantum computer. Encouragingly, most of these questions are of an applied nature, but a number of tasks, such as 1000 fully connected logical qubits, are extremely challenging.
Finally, we expect that the development of quantum computers is crucial for making further breakthroughs in regard to life-extending technologies, including in drug discovery, gene-editing, biochemistry, and high-performance computing. Сlassical computers are not designed to simulate complex quantum mechanical systems, like enzymes or other molecule structures. Furthermore, other industries like finance, logistics, material science, and many others will also likely leverage quantum computational power to improve performance.
