Inside Quantum Technology

IQT’s “Journal Club:” A Dive into VC Funding and Quantum Computing

A new paper in Communications of the ACM assesses the current investment level and market readiness of the quantum computing landscape.

A new paper in Communications of the ACM assesses the current investment level and market readiness of the quantum computing landscape.

IQT’s “Journal Club” is a weekly article series that breaks down a recent quantum technology research paper and discusses its impacts on the quantum ecosystem. This article discusses an arxiv paper discussing quantum computing and VC funding. 

A recently uploaded arxiv paper by Christophe Jurczak of Quantonation discusses the crucial role of Venture Capital (VC) in developing Quantum Science technologies, particularly in the phase where these technologies transition from the laboratory to practical applications. It emphasizes that while public funding programs play an important part, VC is vital in supporting startups, especially those emerging from academic institutions. These startups are instrumental in driving technological innovations in computing, sensing, and networks, potentially impacting society significantly.

A Case Study in Venture Capital

The paper uses the case study of Quantonation I, the first dedicated quantum fund, to illustrate its thesis. Quantonation I has significantly impacted the production of scientific knowledge, job creation, and funding in the quantum industry. This fund focuses on early-stage investments in Quantum and Deep Physics startups, ranging from computing to sensors, and combines hardware and software developments. The portfolio of Quantonation I includes 25 startups located in Europe and North America, showing substantial growth in terms of scientific papers submitted, patents filed, and jobs created.

The paper highlights the unique challenges and opportunities in funding quantum technologies. Quantum startups, categorized as “Deep-Tech,” face higher scientific, technological, and market risks than conventional tech startups. This requires a longer timeframe to mature and establish product-market fit. However, they also offer the potential to disrupt incumbent technologies and address significant problems.

Public funding is shown to be a crucial component of startup funding strategies, especially in the early stages. Grants, often part of national strategies, play a significant role alongside VC investments. The paper also emphasizes the importance of public procurement in supporting the quantum industry, drawing parallels with how U.S. government purchases fueled the growth of the integrated circuit industry in the 1960s.

A Proposal for More Sustainable VC Funding

Looking to the future, this paper proposes recommendations for the sustainable development of the quantum technology industry. It suggests that to create a steady flow of new startups and support the growth of existing ones, it’s essential to support emerging Quantum Venture Studios. These studios can facilitate the transformation of scientific research into successful entrepreneurial ventures. They can do so by providing aspiring founders with the necessary resources and coaching, leveraging existing research infrastructure, and adapting to local funding ecosystems.

Lastly, the importance of continued funding for fundamental research in quantum science is highlighted. Breakthroughs in quantum technology often take years, if not decades, to mature from fundamental research to commercial applications. Maintaining a healthy balance between funding for fundamental and applied research is vital for the long-term success and impact of the quantum technology industry.

Kenna Hughes-Castleberry is the Managing Editor at Inside Quantum Technology and the Science Communicator at JILA (a partnership between the University of Colorado Boulder and NIST). Her writing beats include deep tech, quantum computing, and AI. Her work has been featured in Scientific American, Discover Magazine, New Scientist, Ars Technica, and more.

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