By André König
At Global Quantum Intelligence, LLC we have the privilege of working on investor due diligence for many quantum startups small and large; currently we have 13 live deals for a total fundraise of approx. $1.5B.
This not only speaks to the expertise and quality of our team but also offers us a unique vantage point into the dynamics of raising capital in quantum tech.
My takeaway: The obvious is now essential.
1️⃣ We see a dramatic capital flight to quantum computing hardware and later stage rounds. While as recently as 18 months ago we would see significant investments into quantum sensing, quantum safe or quantum software, deals are now highly concentrated in QC hardware. It is clear that the market believes this to be the breakthrough technology and without hardware everything else is meaningless. To underscore that point, rounds are getting larger and larger, often into the hundreds of millions. We know startups who don’t like this; reality is this is what you are now competing with. IPOs are on the horizon…
2️⃣ Everybody is struggling to find lead investors. This is a lengthy and painful process, with term sheets that might not meet the founder’s dreams. And we see an increasing number of Asian strategics and European VCs step into the role of saviour. Key to success: A good story! There is now a considerable ecosystem of a small dozen of vendors with great qubits, credible roadmaps and breakthrough announcements – to be successful, you need more than the best qubits in the game. You need a purpose.
3️⃣ Commercial traction is now a real thing. While we cannot divulge numbers, on-premise QC is the game to play and the number of deployments that a small handful of vendors are able to demonstrate is staggering. Take your best guess (be bold) and triple it.
4️⃣ A new term has entered QC pitch decks: M&A. We now see a handful of vendors that are making acquisitions a strategic asset of their roadmap with dedicated budgets for it. They are becoming “consolidators” with clearly defined targets and many times advanced conversations.
5️⃣ Industrial scale is coming. PsiQuantum’s announcement of their Chicago facility is only the tip of the iceberg when it comes to thinking big; behind closed doors other QC vendors are working on similarly ambitious plans. Is it too early for that? Maybe, maybe not – but this is what you are now competing with.
Every rule has exceptions and we see those too. But if you are looking to fundraise it helps to understand where the market is at and how to talk to it. In the classical world of venture capital, reality is a cold, harsh truth.
August 14, 2024