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Early-stage quantum venture will likely remain the specialist VC’s domain

By IQT News posted 20 Jan 2022

(TechCrunch) Although many VCs seem to be new to quantum technologies, some investors foresaw this movement several years ago and are now making their first quantum exits.
Maria Lepskaya, senior associate at Runa Capital, leading investments in different branches of quantum technologies and advanced materials, penned this essay for TechCrunch. She discusses investors’ willingness to invest in quantum technologies, even without maturation of the technologies.
Take IonQ, a U.S.-based manufacturer of ion-trapped quantum computers, for instance. The company was founded in 2015, and it went public in 2021 through a SPAC at a $2 billion valuation. Berkeley-based Rigetti will also go public through a SPAC this year, raising $458 million at a $1.5 billion valuation. The company is developing a superconducting quantum computer, which already could scale up to 80 qubits.
IonQ and Rigetti’s IPOs set the valuation benchmarks for the whole industry, which impact the valuations of all quantum deals. More importantly, these IPOs show venture capitalists could make money from the quantum industry without significant commercialization of the technology.
In the next three to five years, quantum computers manufacturers are expected to generate revenue of $5 billion to $10 billion.

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“Although technology maturity will still take many years, the future winners in the quantum computing market will be determined in the next two years. We are expecting a first consolidation phase led by the 10 leading full-stack quantum hardware players,” said Benno Broer, CEO at Qu&Co. This is a path the quantum industry may follow, collecting pieces of the stack via acquisitions.

NOTE: Lepskaya’s indepth comments are for TechCrunch subscribers only.
She concludes in the for subscribers section: Investing in quantum computing is a long-term game that demands patience, expertise and commitment. The situation is unlikely to change soon. Generalist VCs certainly could participate in the growth rounds, but it’s likely that the early-stage quantum venture remains the specialist VC’s domain.”

She describes how her team studied the  quantum landscape. Their information features 120 startups, of which 31% are in the product stage, 47% in the prototype stage and 22% in the R&D stage. There are not so many startups in the R&D stage out there. Often, spinoffs are in stealth mode for a long time in labs and are in no hurry to emerge.
About 400 laboratories are dealing with quantum technologies worldwide, and a maximum of two startups can spin off from each laboratory, it’s possible to estimate how many quantum startups are in the future and anticipate this figure to remain stable in the coming years.

According to Crunchbase, there are about 300 active quantum startups worldwide that have emerged from stealth mode. According to Crunchbase, only 15 VCs, including venture capital funds and accelerators, have invested in at least three quantum startups. Together with entrepreneurship and university programs (Creative Destruction Lab and Innovate UK), incubators (European Innovation Council and AGORANOV), micro VCs (Acequia Capital), investment banks (Bpifrance), government offices (In-Q-Tel, National Science Foundation and SGInnovate) and agencies (EASME), this number increases to 30.
The undisputed leader by the number of investments is Paris-based Quantonation, which has backed 15 quantum startups to date.

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