Quantum Computing: From National Security Risk To Investible Proposition
(Forbes) The revolution in quantum computing could mark a fundamental step-change and departure from what has come before, writes Paul-Noël Guély, the Founder and Managing Partner of Arma Partners, the independent financial advisory firm focused on companies and investors active in the global Digital Economy.
Initially, the technology was primarily conceived of as a security risk, due to its potential to crack the RSA and AES encryption system that underpins large volumes of secure data transmission globally. Accordingly, it had been viewed as a more obvious focus area for national governments, rather than venture capital firms with investment horizons, exit pressures and return expectations.
But going forward, “It is venture capital investment and growth financing activity that is likely to be much more buoyant, as quantum computing start-ups seek funding to support their growth and subsidize the expensive and tricky process of developing this cutting-edge technology. Paul-Noël Guély explains that global technology giants have been at the forefront of financing activity until now, principally through their venture capital arms, alongside funding their own in-house R&D.
Despite its monumental problem-solving potential, quantum technology has been, until recently, largely overlooked by the global investment community as a niche and somewhat esoteric segment of the technology landscape. However, there remains a clear opportunity for venture and growth investors to support the emergence of the global quantum computing sector in the coming years. Both financial and strategic funders will play an important role in the ecosystem. But recent breakthroughs are no guarantee of smooth sailing in the future. Venture and growth capital funds must recognize that this is a market where the technology risks are high – but commensurate with the potential returns on offer from backing a truly world-changing technology from the outset.
Paul-Noël Guély begins his discussion with an explanation of quantum computing and recent achievements. Google fired the starting gun in October 2019 with its claim to have reached ‘quantum supremacy’, meaning that it had built a functioning quantum computer capable of solving a problem beyond even the most powerful classical computer.
in December 2020 a group of researchers from four Chinese universities announced another seismic leap forward. Their prototype Jiŭzhāng quantum computer is reportedly 10 billion times faster than Google’s.
The commercial applications of quantum computing are developing rapidly. Terra Quantum, a Swiss start-up, has claimed a major breakthrough in encryption technology by being able to securely transmit data on existing optical fiber infrastructure over a distance of 40,000km. This development could pave the way for businesses to build quantum key distribution networks around the world, with immediate usability
These emerging commercial applications are helping to drive some incipient M&A activity in the field. Honeywell, the US technology conglomerate, is acquiring Cambridge Quantum Computing, merging the start-up with its in-house quantum computing operations and injecting up to $300 million into the new venture, in which it will hold a 55% stak
Quantum computing businesses like IonQ Inc and Arqit recently listed on the NYSE and Nasdaq respectively, via Special Purpose Acquisition Companies (SPACs), this shouldn’t be interpreted as a sign of market maturity.