Monday, May 16, 2022

VC investor Bill Bartee says what you need to know about investing in quantum technology

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Australia is becoming the place to look to venture capitalists looking for the next big thing in quantum technology.

In the lingering shadow of the global financial crisis and the dotcom crash, Vikram Sharma decided to create Australia’s first quantum technology company.

Born from his research into quantum cybersecurity with the Quantum Optics Group at the Australian National University in Canberra, QuintessenceLabs creates products that harness the power of quantum mechanics to protect sensitive data, such as random number generators and highly secure encryption.

But getting the fledgling company off the ground was no easy feat, as gun-shy investors pulled out their wallets in the wake of the economic crisis.

Undeterred, Sharma collected just enough capital from his personal savings and a handful of private investors to get QuintessenceLabs up and running in 2008.

QuintessenceLabs founder Vikram Sharma

“Back then, there was little investment in deep tech and venture capital markets were shallow,” he said.

“Raising capital was quite difficult.”

Fast forward 14 years, and QuintessenceLabs has become a global leader in the emerging field of quantum cybersecurity, with Westpac Group and the Australian Department of Defense in its growing pool of investors.

Last October, the Canberra-based company raised $25 million in a Series B round led by CSIRO innovation fund Main Sequence and Canadian investment firm Telus Ventures.

QuintessenceLabs will use its new funding to expand its global footprint, including establishing offices in the UK and developing strategic partnerships in Japan and India.

“We are very much looking forward to the next step of building an Australian headquartered quantum cybersecurity company that serves the global market,” said Sharma.

The company’s winning combination of good market timing, strong sales and strong product portfolio was what caught the attention of Bill Bartee, co-founder and managing partner of Main Sequence, in its latest round of financing.

“Everyone is starting to understand that systems are vulnerable, and we felt that QuintessenceLabs is part of the solution and has a bright future ahead,” he said.

Fueling tomorrow’s quantum

QuintessenceLabs’ success story reflects the growing interest of venture capitalists in Australian-grown quantum technology companies.

In May 2017, Silicon Quantum Computing was launched with over $83 million in equity funding from the Australian Government, University of New South Wales (UNSW), Sydney, Telstra and the Commonwealth Bank of Australia.

In August 2021, Quantum Brilliance, a quantum computing hardware startup, raised $13.4 million in an seed funding round led by Main Sequence and the founders of QxBranch, which produces quantum computing applications.

Three months later, an Australian company developing quantum control firmware, Q-CTRL, raised $25 million in a Series B round led by Silicon Valley venture capital firm Airbus Ventures.

“There’s hardly been a better time to get a venture funded,” Sharma said.

Australia is set to be a fertile ground for tomorrow’s hottest quantum tech startups, with the federal government announcing a $111 million investment in the sector last November.

It includes $70 million for a Quantum Commercialization Hub, which will build strategic partnerships with other countries to turn Australia’s quantum research into commercial opportunities.


Bill Bartee

And in the same month, Tech Central’s Quantum Terminal in Sydney opened its doors to its first tenants: QuintessenceLabs, Q-CTRL, Sydney Quantum Academy (SQA) and Quantum Brilliance.

“Australia has the brainpower to play a significant role in the future of quantum technologies worldwide,” Bartee said.

“We have to make an impact here.”

SQA is a partnership between Macquarie University, UNSW Sydney, the University of Sydney and University of Technology Sydney that is building Australia’s quantum economy with support from the New South Wales government.

It plans to host a series of events in the new Quantum Terminal to connect potential investors and budding entrepreneurs. The free Quantum Innovators Network series offers the opportunity to hear from the best in the global quantum startup ecosystem, including international experts, fast-growing deep-tech start-ups and pioneering university spin-offs.

SQA also hosted the Quantum Australia 2022 conference in February, attended by more than 800 researchers, business and government leaders and investors. The conference included a panel with a representative from Tech Central and venture capitalists, including Bartee, who discussed what drives investments in quantum technologies.

Diving into quantum investing

When looking for emerging quantum stars to invest in, the first attributes Bartee looks for are a strong founder and management team, a compelling vision, great market potential, and a product that gives the company a competitive advantage.

He then assesses whether the company’s product can be used across multiple sectors and technologies, an indication that it is likely to have a major impact.

For example, Q-CTRL is developing quantum computing software that reduces the number of errors, the Achilles heel of all quantum systems.

The company’s potential to benefit the quantum field at large is what convinced Bartee to co-invest in the company during the Airbus Series B round last November.

“We were looking for a sort of pick and shovel investment in quantum: we didn’t know where the goldmine was or what architecture was going to win, but we knew all quantum systems would need these tools to suppress errors and have a handy computer system,” he said.

Before quantum-curious investors start pumping dollars into the next QuintessenceLabs or Q-CTRL, it’s important that they educate themselves on the basics of the technology and understand its potential applications. But to get a foot in the door, you don’t need to have a PhD in quantum mechanics or computer science.

For example, Bartee keeps his finger on the pulse by reading scientific articles, talking to quantum researchers and keeping a close eye on quantum companies.

“It gives me an idea of ​​who is doing what, where, when,” he said.

As quantum opportunities begin to mature, investing in them is not for the impatient or the faint of heart.

The field is growing rapidly but is still relatively young, meaning investors have to play the long game before seeing results. But if investors play their cards right, returns could be “huge” in a few years, Bartee said.

“If you have the risk appetite and capital and are willing to educate yourself, it’s worth exploring,” he said.

* Vikram Sharma, founder and CEO of QuintessenceLabs, and Bill Bartee, co-founder and managing partner of Main Sequence, featured in the Quantum Australia 2022 Conference and Career Fair.

You can still view all recorded panels and presentations on-demand for the next two months. The program featured the latest advances and ideas in quantum technology from more than 60 leading quantum researchers, corporations, government decision-makers, start-ups and big tech.

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