As someone who made it through the downturns of the DotCom Bubble and 9/11 Events of 2000-2001 as well as the Financial Crisis of 2008, we are confident that the quantum industry will bounce back stronger than ever once the coronavirus crisis passes over; similar to what occurred previously. However, we do expect that today’s situation with the coronavirus will have a definite short term impact on the quantum computing market. The lockdowns, social distancing and other measures will last several months and will also trigger a global recession that will last several more months after the virus itself is under control.  It probably will be tough going for the next year for many quantum companies. The key during this time is to position your company so that when the virus is contained and the recession is over, your company will be in the best position to come roaring out of the gate and flourish.  Companies that achieved this after the 2000-2001 downturn include Amazon, EBay, and Priceline.  After the 2008 Financial Crisis, companies such as NetFlix, Groupon and Airbnb did well too.

So here are our thoughts on selected topics of what to expect and how to manage through this based upon our previous experience:

Hardware Progress Will Slow in 2020, but Software Progress Will Not
In a previous article, we had forecasted that quantum computing qubit counts would achieve a Moore’s Law like doubling every 1-2 years. By that measure we had expected to see in 2020 gate level machines with qubit counts in the 100-200 range.  Although many quantum researchers will be able to work from home (see below), it is much more difficult for hardware engineers to be as productive while doing so.  There could also be supply chain disruptions if some of their components vendors reduce production or even divert resources to build more components for critical medical related markets. Although there may still be some announcements of higher performing machines towards the end of this year, it is probable that these would occur several months later than originally planned.

Software development will be a completely different story.  Since access to quantum computers is already cloud based, it matters little where the job is submitted from.  Software programmers are quite adept at using all the online tools available for software development and team coordination so we expect that most of their work will stay on schedule.

New Business Development in the Enterprise Market Will Get a Lot Harder In the Near Term
In times of uncertainty, corporate managers are much less eager to take risks or start up new efforts.  In addition, with so many people working at home decision-making will be slower than normal even for those projects that eventually get approved.  For those of you who were projecting you would get a bunch of new customers in 2020, you will likely be disappointed.

Raising More Venture Capital Will Also Be a Big Challenge in the Near Term
We had previously heard even before the coronavirus that some quantum startups were having difficulty closing new funding rounds.  Many potential investors were concerned about the long lead-times to get a return on their investment, a possible quantum winter, too many startups, and other things.  Due to all the uncertainties, venture investors will now have another reason to delay fundings due to the overall economic situation.

Government Funding
There is one big difference between the current situation and the DotCom Bubble and Financial Crises before. Governments did not have in place large funding programs for DotCom companies in 2000 nor were they providing any grants to the large financial companies prior to 2007.  Even after the DotCom bubble burst in 2001, the government still did not provide bailout funds to the DotCom companies.  Once the Financial Crisis hit, the situation was different and the government did provide large bailout loans because they deemed some of these firms as “too big to fail”.

Today, there are already several large (> $1 billion) government programs that were previously established to support quantum computing.  These include the United States National Quantum Initiative Act, the European Union’s Quantum Flagship, the Chinese national laboratories, India’s National Mission on Quantum Technologies and Applications, and several others.  These programs will certainly not be decreased during a recession and could possibly be increased as part of a stimulus efforts.  Many governments view having a strong quantum computing capability as a key national security issue.

Companies that haven’t pursued in the past getting government funding grants as aggressively as they might have should take another look at these programs and see if they can win some to offset any business that might be lost in the commercial sector.  As this article is being written we are hearing of additional economic stimulus packages being proposed by government including low-cost loans and other measures.  Although we are not certain if any of these will be applicable to a quantum computing company, it will still be worth examining them once the programs are finalized.

Watch Your Expenses
The venture capital firm, Sequoia Capital, recently put out a memo to all their portfolio companies that conveys this message better than we ever could.  We recommend you read the letter here.

Work at Home Will Become Both a Temporary as Well as a Permanent Thing for Some People
Due to the virus, a large majority of companies are encouraging their employees to work at home.  We expect that this change will have a lot of ramifications that go beyond the near term.  For one, we expect that some workers as well as their employers will discover that working at home will actually increase productivity.  There may be less distractions (depending upon your home situation) and fewer time-wasting meetings.  In addition, we think that many of these new at-home workers will be forced to learn new skills, such as use of the Zoom or Webex video conferencing programs or the Slack messaging platform, that make them more productive.  Workers who don’t have to commute to an employer’s facility won’t have to deal with traffic and may save a significant amount of time each work day.  Once the lockdowns due to the virus are over, we expect that there will be a much larger permanent work-at-home workforce than we had previously. And employers that were reluctant to allow this in the past, will be a lot more willing to do so once they see that this arrangement does not impair and may even improve productivity.

This will have some interesting aspects for quantum computing. With an extra hour or two in their day because they are no longer commuting, some employees may have time available to receive increased training on things like programming quantum computers. Quantum companies may want to take advantage of this to improve the quality of their documents or create training videos that demonstrate their products and how they can be used for different applications.  Although the quantum companies may not get immediately purchase orders from the corporate managers, they will gain mindshare with the employees who work for them and this will turn into new business once the economic conditions get better.

Laid Off Employees Will be Seeking to Develop New Skills
Unfortunately, as the economy moves to a recession some companies will have problems and will need to lay off good employees.  Like the at-home workers mentioned above, these people will also have time available and may be interested in studying quantum computing. You can use the same collateral material mentioned above to help these folks get training too.  And when the economy improves, they will be able to find employment at another company and recommend use of your product.  Or perhaps, you can hire these folks for yourself, once you are ready to resume hiring.

Will Quantum Computing Be Able to Contribute in Solving the Current Coronavirus Problems?
Unfortunately, we do not think so.  We do believe that solutions including vaccines and treatment protocols will be developed using classical means within the next 12-18 months and the current state of quantum computing is just not far advanced enough to make a meaningful contribution in that time frame.  However, in a few years from now when quantum computers are much more powerful, coronavirus will be studied to help understand where quantum computers could be used for any future similar situation.  So although quantum computing won’t be able to help by simulating the virus or discovering a drug this time around, it is likely that when another pandemic comes up they will make a difference. People say that these pandemics are a once every 100 years phenomena.  So if we do see some new pandemic in the year 2120, you can be certain that your great-grandchildren will be able to leverage quantum computing and create a quick solution to fight it!

So although things will be tough in the near term, we still expect a very bright future for quantum computing this decade.  Recessions have a way of winnowing out the weaker companies but the companies that make it through will be stronger and poised for success. Think about how you can make your company be one of these.  Look for those areas where you can create a differential advantage and provide a unique service or capability or approach that the others don’t have. Think about the issues your future customers may face and see what you can start developing now to solve those problems.  If you do have the money available, there may be some good opportunities to pick up some great members for your team. We expect that workforce availability will be a continuing problem throughout the 2020’s and it may be easier to recruit good quantum folks now because once the economy picks up again, recruiting will likely get a lot tougher.

But most important, keep up the optimism and stay healthy.  Good luck!

March 17, 2020