Can Quantum Computing be Democratized?
One of the most rapidly emerging fields in the computation space is quantum computing. Unlike a lot of emerging computing trends that seem to pop up out of nowhere, quantum computing is a term that has been around for a while. To properly understand where quantum computing is going, we need to look critically at the role that big companies AND small companies play in the space. This can be done quantitatively — with empirical data, and qualitatively — with high level analyses. Let’s do both.
The Quantitative
Starting with a quantitative look at the industry, the first recorded “quantum computing” deal was in 1949 with the IPO of NEC Corporation, a Japanese multinational tech and electronics company. Research in this field picked up in the early 2000’s with D-Wave raising its Series A and organizations like the Institute for Quantum Computing getting their first piece of grant funding.
For some perspective, D-Wave was the first company to commercialize a quantum annealing algorithm and has raised 200 million to date. The Institute for Quantum Computing is now a renowned organization in the space and funds foundational research and exciting small companies.
Strangely, the space has been consistently active for the past 20 years but hasn’t seen the exponential growth that other markets like Artificial Intelligence and Big Data have. Deal sizes over time have stayed almost constant, despite huge investments being made in the space. See the below graph for reference, which illustrates deal growth and deal type in the quantum space from 2015 to 2020.
TL;DR it’s pretty flat.
Today, the quantum computing space is adorned with big players like Google, IBM, Rigetti Computing, and more! No, I’m kidding. It’s really just them. These giants boast huge and functional quantum computers, with ~50 qubits each. According to Pitchbook’s emerging market analysis, the quantum computing space consists of only 139 companies with 334 deals, where deals include all venture rounds, IPOs, M&A’s, etc.
Right off the bat, you might think that this number seems low for how widely quantum computing is known. However, there has been over $2.99 billion dollars worth of investment activity in just these 139 companies, which is an average of 21 million dollars of deal flow per company. That’s a pretty late stage average.
The life cycle of a quantum computing company starts at intensive research and goes straight to rounds the size of a Series C or D, or even instant IPOs and acquisitions. There are very few small players reported at all. So, what does this mean for early stage innovation and venture investment in the space?”
The Qualitative
This question sheds light on a key barrier with the quantum computing industry: hardware. Many of the large players in this industry spend their time and money on research. Their goal is to investigate quantum mathematics and try to get it working on real quantum computers.
Unfortunately, quantum computers are in incredibly short supply, with only a few working ones worldwide. The computers that do work are maintained in incredibly specific conditions, as to not alter a qubit.
TL;DR we can do all the research we want, but quantum computing hardware is simply not available to quantum computing enthusiasts. And thus, early-stage companies don’t have the hardware access to make their quantum theory into anything more than a cool high school research project. They themselves end up staying as quantum computing enthusiasts and they never become startup founders at early stage companies.
What now?
We may ask, where is quantum computing headed? And can early stage companies and venture investors ever find a place in this market? The answer is yes.
Some founders have shifted the quantum computing space away from the research and the theory and towards possible enterprise use cases via quantum simulators. More and more early stage companies are trying to build software that can emulate the huge and unpredictable quantum computers locked away at Google or IBM, so that ordinary people can actually access those capabilities!
Quantum simulators allow early stage companies to leverage these theories without a dependence on hardware, which is why they are poised to transform the computation industry. We could talk for days about the ways in which quantum computing can do that, but for the purposes of our question, let’s focus on the two kinds of early stage companies we’re starting to see emerging.
- Companies building quantum simulators. These include but are not limited to Atos, Quantum3D, Bleximo Corp, etc. All are early stage SaaS companies selling their software to enterprises that want to leverage this tech.
- Companies using quantum theory to accelerate and optimize their own ideas. This has happened quite a bit in life-sciences companies that are leveraging quantum exponential capabilities in their own computational drug modeling and discovery. Energy researchers are using quantum tech to model molecular interaction and forecast safety in a natural gas line or a self driving car. Even defense contracted companies are starting to get contracts to develop new encryption methods that can combat the barriers Shor’s algorithm poses to factor encryption.
Data favors the big companies here, i.e. there’s a lot happening in the quantum computing space that the Pitchbook data cannot show us. The data shows us notable research advances and huge acquisitions, but it doesn’t show us these small, early stage companies that are fighting to make this technology accessible to all. As quantum simulators slowly trickle into the market, note that the companies leveraging this simulation technology won’t show up in the data either.
Quantum computing is an industry with a huge emphasis on research and hardware, making it almost impossible for early stage companies to break in. But pay attention to this industry folks, because simulation software, and the early-stage adopters that support it, are capable of truly democratizing quantum computing.
