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The truth is that we are not there yet. While the term “quantum computing” rolls off the tongues 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. Could.
And here’s the problem? As things stand, companies working in the quantum computing field are engaged in cutting-edge development work at a time when no one can be entirely sure what the market will look like in five or ten years. The assumption is that there will be customers and there will be use cases but, as things stand, it is impossible to predict which technologies they will choose to adopt. In the meantime, startups must continue funding their development work while trying to establish some sort of foothold in a market that doesn’t really exist.
So what does this look like in practice? How are young companies finding their footing in an industry that promises to change the world – but not yet? I spoke to two UK quantum startups about their progress from drawing board to marketplace.
According to data published by Markets & Markets, revenues in the sector are expected to be around $899 billion in 2023, rising to $4,375 million in 2028. The development of quantum hardware and software is something that governments are keen to encourage. For example, the UK government wants the UK to become a “quantum-capable” country by 2033 and has committed £2.5 billion to support 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 its payroll – has raised £40 million to date. Phasecraft – a software startup – has secured £17.4 million in equity finance, plus an additional £3.7 million in grants.
Dr. Chris Ballance, co-founder and CEO of Oxford Ionics, says that despite the risks associated with technologies still under development, it is hard to see how there isn’t much value in machines that can perform calculations significantly faster than traditional supercomputers. will be. “As a company, we are willing to bet on this and we are asking investors to do the same,” he says.
The key, he says, is to find the right investors – those who understand not only the potential rewards in the market but also the risks. He says a certain amount of investor education is needed. “We are tough on our investors. We will tell them why they should not invest.” This is not an exercise to unnecessarily scare sources of finance. It is about ensuring that the investor and the company are united.
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And as Ashley Montanaro, CEO and co-founder of PhaseCraft, says, VC finance has been crucial in enabling her company to develop its software algorithms. “There are different ways to finance yourself,” he says. “For example, some companies offer consulting. We see it as a distraction. “VC finance allows us to focus on hard R&D.”
Grant funding has also played a role in the PhaseCraft trip. “Financially, it’s important but not essential,” Montanaro says. “But grants are also important in enabling collaboration and providing recognition for what you are doing.”
Perhaps the most important aspect of attracting inquiries is the ability to demonstrate commercial feasibility. In the world of quantum computing, the basic 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 be best suited to meet demand. The key is the development of reliable hardware that not only provides a sufficient number of qubits to allow supercomputers to perform optimally but also a low enough error rate to make the technology useful and practical.
And in some form or another, that’s what all the quantum hardware companies are working on right now. Although there are many hardware technologies that have been proven to provide quantum functionality, the difficult part is to ensure the kind of consistent performance that can be exploited commercially. That’s when banks, research institutes, multinational corporations and virtually everyone who would benefit from the technology will start buying.
But here is the question. How do people who are developing technology know what their potential customers are looking for?
“We spend a fair amount of time talking to customers for exactly this reason,” says Ballance. “Normally, we would talk to people with PhDs in quantum computing. “We ask them what they want.”
Billing itself as a quantum algorithms company, PhaseCraft specializes in quantum simulation and analysis of materials with solar panels and batteries. It is also in regular contact with potential users of its services. “We have several 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 Righetti.
Business models are also being developed. Both Ballance and Montanaro believe that the main route to quantum solutions for most organizations will be through a quantum-as-a-service model using third-party hardware and software. This does not mean a direct relationship with the providers. This is a complex area where users and suppliers are likely to work closely together. Some organizations will purchase their own in-house systems.
The adoption of quantum computing will depend on precision engineered hardware that can outperform supercomputers on a reliable basis, which in turn will nurture a specialist software industry. Ultimately, some technologies will win out while other technologies will fail to gain traction. But with the potential for quantum to revolutionize tasks such as drug discovery, materials development or financial modeling, the expected rewards mean that startups able to demonstrate the feasibility of their technologies have a fighting chance of securing VC capital.
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I’m a UK-based journalist and writer with over a decade of experience writing about startups, tech companies and fast-growth businesses. My career in journalism began as business editor for BBC World Television’s pan-European text news services. Before going freelance there, I edited eBusiness and PLC Director magazines. I am the author of three books, including The Unauthorized Guide to Business the Jamie Oliver Way, which has been translated into five languages. Follow me on Twitter @trevorclawson
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