Overview of Quantum Computing Startups

In the 1980s, American physicist Richard Feynman and Russian mathematician Yuri Manin proposed the concept of quantum computing (QC), a branch of computer science that deals with the principles of quantum theory.

QC pundits firmly believe that every investment in the industry is worth it because those next-gen machines offer quantum supremacy, meaning they can tackle complex puzzles that today’s computers cannot. As a result, governments, big tech giants and venture capital (VC) firms have expended billions of dollars in the industry in the hopes of helping build scalable, error-corrected QC machines capable of solving real-world problems.

Consequently, the QC market is growing at a breakneck speed. According to Fortune Business Insights, the global QC market was worth $554.6 million in 2021 and is projected to reach $4.75 billion by 2029. Although the stakeholders (governments, big tech companies, and venture capitalists) have played pronounced roles in transforming the fast-growing QC ecosystem, a plethora of Quantum Computing startups also play behind-the-scene roles.

Who are the startups shaping the QC space? Why is quantum computing gaining traction? Why do acquisition and partnership matter in the industry? Have QC startups been able to break even yet? What technical issues should we expect QC startups to solve in the future? Well, you will find insightful answers to all these questions and more in this article.

A Roundup of Quantum Computing Startups

By and large, QC companies are grouped into two broad categories: Hardware-focused QC companies and software-focused QC companies. At the last count, according to Quantum Intelligence Platform, there are nearly 600 QC companies around the world. These companies are carrying out extensive research into quantum mechanics and other related fields to deepen global knowledge of the rapidly evolving quantum technology.

Among these QC companies are the big tech players such as IBM, Google, Amazon, and Microsoft – now branching out into quantum technology – seem to be the cynosure of all eyes. However, over the past decade, there has been a sprout of new QC startups around the world. These QC startups are primarily quantum-as-a-service businesses that provide clients access to QC services, chiefly through cloud services. Findings indicate that a number of these new kids on the block are the spinouts of university’s research labs positioned to solve today’s real-world problems.

One notable name that easily comes to mind is Quantum Brilliance, an Australian-German quantum accelerator that enables the mass deployment of quantum technology and propels global adoption of the next-gen technology and its applications. Quantum Brilliance is an ANU (Australian National University) spinout QC startup and has raised over $13.7 million in seed funding.

Meet PASQAL, a QC startup birthed due to groundbreaking research into cold atomic physics in France. It is a spinout of Institut d’Optique in 2019 and has secured over $30.4 million after Series A funding. Lastly, there is Quandela, a French QC startup founded in 2017 as the spinout of the Center for Nanoscience and Nanotechnology at the French National Center for Scientific Research (CNRS) and has raised $18 million in funding.

The narratives of those aforementioned Quantum Computing startups are similar to several others that became a reality after extensive research studies in varsity labs. Indeed, those are some of the must-watch QC startups – thanks to their ingenuity and innovativeness that have earned them confidence and trust among venture capital firms who poured a lot of money into them.

As a result, they have become commercially viable ventures. From the United States to the United Kingdom, Australia to France, and Canada to Israel, QC engineers and researchers are racing to launch their startups – a move likely to see the industry hit $4.75 billion by 2029. At this point, one wonders, “Why is quantum technology gaining traction?” Now, let’s find out together.

Why is Quantum Computing Gaining Momentum?

Loads of new companies are launching into the QC space, with venture capital firms providing them with the funds required to achieve their objectives. What’s the motivation behind all this quantum frenzy? Well, think of it this way: today’s classical computers are millions of times more powerful than those used to land Apollo II in July 1969.

In a similar vein, quantum technology is getting all the attention it enjoys today due to quantum advantage. In other words, industry analysts believe that QC systems can be 100 million times faster than any classical computer in use today. Quantum computers, experts argue, could potentially do things that today’s machines cannot do. If this isn’t enough motivation, then what is?

Furthermore, just like the traditional computers, quantum computers will have real-world use cases and everyday people will use them to tackle numerous complex problems. In general, the cutting-edge technology will transform finance, logistics, cybersecurity, simulations, insurance, pharmaceuticals, energy alternatives, self-driving cars, weather forecasts, etc.

Early-stage startups are already teaming up with other companies and government agencies to deploy the next-gen technology in their various organizations to help step up their operations. To be crystal clear, quantum technology is gaining traction because it will add immense value to companies and government institutions in the foreseeable future.

Why Partnerships in Quantum Computing Matter

Partnerships, in this context, mean intra- and inter-industry collaborations. For example, over the years, QC companies have had to liaise with one another to grow. In truth, the QC industry is still in its infancy and so much isn’t known about the technology yet. Therefore, a need exists for two or more QC startups to team up, with spelled-out terms and conditions, to deepen their knowledge of the modern technology, develop quantum products capable of solving real-world problems, and facilitate the global adoption of the disruptive technology.

Two silver man made hands forming an example of partnership

For example, in November 2021, Honeywell Quantum Solutions announced a partnership deal with Cambridge Quantum, thus forming one of the world’s most powerful QC teams. The new company, Quantinuum, is now the largest and most advanced full-stack QC company. In other words, the two partners will share ideas, improve on the products, build a robust client base, and transform the computing world in more ways than one.

Away from intra-industry collaborations, we have seen QC companies and investors collaborate to help secure funds for furthering quantum mechanics and QC research. Most times, several venture capital firms plunge cash into QC companies; this is a form of partnership as they have equity stakes in the companies of interest.

In short, a researcher can rarely achieve any significant feat in an environment where there is a paucity of funds. Hence, quantum mechanics researchers – who are often the founders of QC startups – turn to government institutions and VC firms for financial support to advance their studies as well as develop, scale and commercialize their products. In today’s QC industry, pitching VC firms for financial investment has become the norm.

One commonly told story in the industry is that of Robert Schelkopf, an American quantum physics researcher at Yale University, who spent over 15 years studying the building blocks of QC systems. In 2015, he decided it was time to take his lofty ideas from the research labs to the real world by pitching them to VC firms. Within two years, he launched Quantum Circuits Inc. and secured $18 million in funding.

What’s more, another type of inter-industry partnership in the QC industry is the collaboration between two companies to experiment the application of quantum technology in certain fields. Put simply, inter-industry collaborations bridge the gaps in knowledge and expertise and help grow the two partners. In this article , we recalled how PSIQuantum collaborated with Perth-based iron ore company Fortescue in May 2022.

The crucial business deal would see the American QC company spearhead research into cheap and abundant green hydrogen as part of the Australia’s mining giant’s vision of becoming the world’s leading green energy group. The memorandum of understanding shows that the Perth-based fossil energy giant will finance the research.

Quantum Computing Startup Acquisitions

In addition to QC companies partnering with each other to achieve great things, cases abound of big QC companies acquiring promising Quantum Computing startups. These acquisitions have the following benefits:

It gives the new company additional staffers and skills (expertise)
The new company now has access to funds or valuable assets for robust development
It leads to diversification of products, services, and long-term business prospects
Acquisition helps to salvage underperforming businesses and lowers industry rivalry
Acquisition also reduces training costs because skills and knowledge are transferred.

Given all these benefits, many QC companies have taken the bold steps to buy up their not-so-big rivals. For instance, in March 2022, Quantum Machines, a QC company based in Tel Aviv, acquired QDevil, a Danish QC startup aimed at enhancing the science of quantum electronics. According to the Israeli company, the business strategy became a must-try due to her goal of building out its full-stack quantum orchestration platform. The acquisition bridged a fundamental skill gap in the well-funded Israeli company.

In May 2022, Colorado-based QC company ColdQuanta acquired Super.tech, a University of Chicago quantum software spinout. With this crucial move, ColdQuanta can now set up its office in Chicago to easily tap from the University’s talent and innovation pool and the city’s robust startup ecosystem. Interestingly, ColdQuanta retained the Super.tech team and assigned strategic positions to CEO Pranav Gokhale and Chief Scientist Fred Chong. Sure, this is without question one of the numerous benefits of acquisition as initially outlined.

Lastly, the leading QC firm, Quantum Computing Inc., inked an agreement to acquire QPhoton, a quantum photonic startup and spinout of the Stevens Institute of Technology, New Jersey. Excerpts from the press statement show that the business deal would see the two companies jointly sell and market quantum and photonic products.

Return on Investment (ROI) in Quantum Computing

Data culled from SkyQuest’s analysis indicates that $1.9 billion in public funding was announced in the second half of 2021, thus increasing the publicly disclosed industry funding to $31 billion from 2001. The stats also show that the United States accounted for 49% of the private funds, while the UK (17%), Canada (14%), and China (6%) follow in that order.

As breakthroughs accelerate, QC startups rocket, and VC firms invest more and more funds in QC startups, one wonders when their return on investment will start pouring in. According to global consulting firm Boston Consulting Group, the QC ecosystem can create a value worth $450 billion to $850 billion in the next 15 to 30 years. Similarly, manufacturers of quantum computers could generate about $5 billion to $10 billion in revenues in the next five years if the technology scales as fast as they promised the vendors.

Much as these projections could be wishful thinking, there is no denying that some QC startups (such as IonQ and Oxford Quantum Circuits) are already laughing all the way to the bank. While IonQ reported a 2011 annual revenue of $2.1 million, experts project that the revenue would hit between $10.2 and $10.7 million by the end of 2022. In 2021, IonQ made its cloud-based QC services available by collaborating with big tech providers like Google Cloud, Microsoft Azure, and AWS. Industry observers say that cloud-based QC services have become the new cash cow, with QC companies who offer them making a killing.

Conclusion: Expectations for the Future

In conclusion, as QC startups join the fast-growing industry in their droves, experts expect them to focus more on solving the perennial problems of quantum technology. As you know, there are several obstacles plaguing today’s QC industry, and it appears these challenges won’t fizzle out anytime soon. As these stumbling blocks continuously rear their ugly heads, it remains unclear when VC firms would start recouping their investments. Remember, QC systems are far from going ubiquitous because their prices have gone through the roof.

In addition to the high cost of purchasing the machines, there are other setbacks like unintended interactions between qubits and their environment (noise), qubits’ sensitivity to temperature and dust, and difficulty in significantly scaling up qubits. Truly, these drawbacks are as old as QC systems themselves, suggesting that eliminating them will take some time.

Therefore, QC startups gearing up to come on stream must focus on tackling those issues, not merely adding to the long list of existing QC startups. Without a doubt, solving those technical issues will help such QC startups build investor confidence, become profitable ventures, and carve a niche for themselves in the burgeoning industry.