So, you have that big name VC coming in next week and you want to impress them with how great of an opportunity lies in investing in quantum and, in particular, your own company. You know they like to invest in companies that address large markets with portfolio companies that have the potential to become billion dollar unicorns and make a lot of money for everyone. You want to provide them with a quantum market forecast that is as large as possible to create some FOMO and incentivize them to shower you with boatloads of money. So here’s some tips on how to inflate those forecasts to be as large as possible and make a great impression. Good luck!
- Show Your Investors Market Value instead of Market Revenue Forecasts
Several consulting firms have released reports with long term market forecasts based upon market value. For example, BCG has made an often-quoted estimate of $450-$850 million in a Full-Scale Fault Tolerance era (roughly 20+ years from now) and McKinsey has estimated nearly $700 billions of value in quantum computing for four key industries by 2035. But these estimates are for quantum value which includes not only the revenues that quantum providers will accrue, but also the profits that will accrue to the end users of quantum computing. We do not see this methodology used very often in classical computing. It’s important to note that of this total value, BCG estimates that based upon what they have seen previously with classical computing 80% of the value will go to the end users of the technology and 20% will go to the providers of the technology. These estimates are certainly valuable for a government policy analyst who wants to understand how their government funding will help their country’s economy. But for an investor, not so much. Investors should be more concerned with the provider side of the equation along with how big a slice of this pie their invested company might be able to get.
- Use Cumulative Numbers Instead of Yearly Numbers
Most market forecasts we see are based upon annual numbers. But it doesn’t always need to be done this way. For example, one could quote cumulative revenue for the period from 2022 to 2030. Although we expect that revenues will be increasing every year, a cumulative number for several years will still be larger than quoting a number for a single year.
- Be Ambiguous About Which of the Several Quantum Sectors are Included in the Forecast
Many people will separate quantum technology into three separate segments including quantum computing, quantum communication, and quantum sensing. We might also throw in something called quantum-inspired, which really is a way of using innovative new classical computing techniques which may have been developed after someone had reviewed a quantum-based approach. So, by bundling the forecasts for all these many segments together, one can increase the overall forecast, even if your quantum company only addresses a subset or perhaps just one of them.
- If You Can Choose from Multiple Forecasts, Pick the One that Has the Highest Numbers
The good news about the quantum market is that there is no shortage of forecasts available that one can use. They all have different numbers and are based upon different assumptions and methodologies. So, if you want to impress someone, the easiest course is to use the forecast shows the large. This is a time-proven technique that is used frequently by many folks in many different markets.
Although the above article was written tongue-in-cheek, we have seen all of these obfuscations used before in various presentations that discuss quantum market size. So, the real lesson is for the viewer of the forecasts. Before relying on any of them, one should review the forecasts carefully and understand all the assumptions and methodologies used in creating them. We realize it is important to have an idea of the size of the total available market before making an investment, but you need to be sure that the estimate you are using is truly relevant for the investment you are trying to make. Forecasts for more mature markets are often made by looking at past history and extrapolating growth trends into the future. But this won’t work in quantum because it is a new market and could develop in ways that no one anticipates. So, it is wise to keep in mind the assumptions that were included in the forecasts and keep track of how the assumptions are holding up as times goes by.
April 9, 2022