Who is responsible for the quantum leap?

Quantum computing is expected to disrupt a wide range of industries in the next 10–20 years, though the specific time frame strongly depends upon scientific and engineering results. Currently we have several market forecasts, though it is important to understand the high degree of uncertainty within this field.

Market Reports World, for example, states that the quantum computing market will grow by $7.3b during 2021–2025, with a compound annual growth rate (CAGR) of 19%.

Meanwhile, Research and Markets valued the quantum computing software market at $472m in 2021, and predicted it to grow to $1,8b by 2026. This effectively demonstrates the variability in market forecasts.

In 2019, BCG prepared its vision, which identifies three phases of development in quantum computing technology:

1. The NISQ era until 2024, with an up to $5b market. Using scientific and specialized applications, NISQ (Noisy Intermediate-Scale Quantum) devices are capable of performing useful, discrete functions, but are also characterized by high error rates that limit functionality. Error correction therefore will likely remain quantum computing’s biggest challenge for the better part of a decade.

2. Experts then predict the development of a quantum advantage phase in 10–20 years, which can lead to a potential economic impact of $25–50b. This era will be characterized by quantum computers achieving superior performance in industrial tasks. Specifically, increases in speed, cost, and quality are expected.

3. The final phase will be marked by the development of full-scale, fault-tolerant quantum computers, that will almost certainly disrupt a wide range of industries. Experts predict this to occur in roughly 20 years. Problems with scale and stability will also be solved.

In this article, I’d like to present a map of start-ups in the field of quantum technologies. In total, we identified 197 companies that are developing technologies connected with quantum computing. This map was derived from how we classified the companies, based on our understanding of the technology landscape. The specific classifications are detailed below.

Quantum computing platforms refer of the physical platforms on which the quantum computer is built. The list below gives an outline of the major types of quantum computing platforms.

• Superconducting quantum computing refers to the implementation of quantum computers in superconducting electronic circuits. Currently the most developed of the platforms. Research using superconducting quantum computing has been conducted by several major companies, including Google, IBM, Intel, and others.
• Trapped Ions. In these platforms, qubits are stored in stable electronic states of each ion, kept in electromagnetic fields. Consequently, quantum information can be transferred through the collective quantized motion of the ions in the shared trap. Lasers are then applied to induce coupling between the qubit states.
• Neutral atoms. For these platforms, uncharged ions are trapped in optical lattices or tweezers, then handled using lasers.
• Photon platforms use qubits as photons that are encoded on a chip or in free-space, which is also known as polarization.
• Other less widespread or established platforms, like NV-centers and spin-based platforms were categorized under this catch-all category.

In this report, we do not distinguish between universal quantum computers and special purpose quantum machines (co-processors), since universal computers are yet to successfully be developed. We also decided to add a special section of the map for photonic-based co-processors, which are not quantum computers fundamentally, but are instead an intermediate stage of development, and are designed to speed up artificial-intelligence computations.

Naturally, we could not omit software from our analysis, and have further divided this section into high level and low level software. High level software includes areas of application for quantum computers (ML, drug and material discovery, etc.). Low level software covers algorithms for quantum computers (search, factorization, software development, etc.), as well as software to design quantum computers. I would also like to clarify that we have deliberately included post-quantum cryptography companies as a sub-segment of software, and have moved hardware-based cyber-security companies to another section.

Cybersecurity & Communications. We decided to combine hardware-based cyber-security technologies and secure communication channels, as they are logically linked.

The sensors section includes photonic sensors, atoms, and electron measurement instruments, DNA sequencers, and other related technologies.

Others refer to companies working with quantum technology not included in the remit of the other sections, such as component parts for quantum processors, connectors, single photon source, lasers, and cryo equipment.

In addition, I’d like to note that companies specializing in quantum technology consulting were not included, as in most cases these are not venture backed.

We have carefully calculated all known investment deals and sizes of rounds known to us from 2017 to the end of April 2021. From these calculations we can observe a very strong 320% growth in investments made in the sector in 2020, with the sum of total investments reaching $969m. The 2021 sum of investment rounds has already exceeded $1.1b, up 13% from 2020, and based on this, we expect a ~3x Year-over-Year (YoY) growth rate in 2021.

Not all deal sizes are published, however, so we decided to count the number of deals. From the corresponding figure, we can see that the growth of the number of deals in 2020 is 133%, which is dramatically less than the growth of the total monetary increase.

The marked growth in the volume of capital invested in this market is largely due to substantial individual deals, including PsiQuantum at $230m, and Luminous Computing at $100m, as well as an increase in average deal volume, which rose 67% from $7m to $11.8m. It is worth noting, though, that we excluded extreme values when calculating the average, and did not count deals under $0.5m or over $100m. The average percentage of deals with undisclosed size is 30% over the last 3 years.

We also found it interesting to look at the number of companies by technology sector. According to our research, software is currently the leading sector within quantum technology, with 74 companies. The quantum computing platforms segment includes 34 companies, and is characterized by a $22m average round size. The more than 2 times large number of companies in the software segment is driven by lower capital intensity, with the average deal size being 3x lower, at $7.5m.

We also decided to analyze the companies in the main technology sectors by location. Both the Americas and Europe have the same number of companies developing quantum computers, although Europe has 25% more companies in the software segment.

Based on our current knowledge of the market, we have created a list of the top 10 most expensive quantum startups. From this, we can identify two unicorns, both of which are forecasted to grow in 2021. 6 out of 10 companies are situated in the USA, while Canada, Australia, UK, and Switzerland are all represented by one company. Altogether, these 10 companies raised $1.4b in the last 3 years.

I will now detail the most notable deals in this market of 2020 and 2021.

IonQ, a US developed trapped ion quantum computer, raised $650m in cash via SPAC from a group of investors including the Hyundai Motor Company and Kia Corporation, MSD Partners, Bill Gates’ Breakthrough Energy Ventures, Mubadala, and New Enterprise Associates.

PsiQuantum, a US silicon photonic computer, raised $220m, in a round led by Atomico, with participation from Quantum1 Group, Pitango Venture Capital, Redpoint Ventures, Founders Fund, BlackRock, and others.

Luminous Computing, the developers of a US photonic chip co-processor, raised $100m from Schox Patent Group, Helios Capital, Gigafund, Travis Kalanick, and others.

Rigetti Computing, whose product is a superconducting quantum computer, and who are also based in the US, raised $79m from Bessemer Venture Partners, Andreessen Horowitz, Battery Ventures and others.

Cambridge Quantum Computing, a UK-based developer of high level software for quantum computing, raised $50m of funding from Honeywell Ventures, JSR, and IBM Ventures.

IQM Finland, a superconducting quantum computer, raised EUR 39m from MIG AG, Tencent, QED Investors, Vito Ventures, VSquared Ventures, and others.

To expand our understanding of the current market landscape, we further identified the top 10 countries with the highest number of quantum startups. We also analyzed the aggregated data by country in the context of investment volumes, and can conclude that while Russia and the Netherlands have a relatively large number of startups (both in the top 10), neither have been particularly successful at fundraising. It is also worth noting the high opacity of the Japanese and Chinese markets, making them more difficult to effectively analyze.

We subsequently broke down the 197 quantum startups we found by geography, and roughly categorized them into North and South America, Asia and Australia (including MENA and Israel), Europe, and the CIS. Almost 49% of all companies are represented by Europe and the CIS, while the combined Americas generate 34% of the total volume of start-ups (67 companies), including Latin American companies from Chile and Uruguay.

In addition, in terms of investment from 2019 to 2021, the American companies are also leading, with $1.9b in capital raised between them.

Now, let’s explore what countries are developing quantum technologies through the lens of public investments. I would like to briefly acknowledge and thank Qureca for the data used for this section.

Europe’s total past and planned investments are approaching $7b, largely due to special programs in France, Germany and the UK.

Canada is considered one of the world’s leading nations in quantum research. This is effectively illustrated by the amount of capital it has committed to the sector, with more than $1b having been spent on quantum research over the last decade.

Similarly, the USA has committed $1.2b for the next five years in a national quantum initiative.

Asia is also hugely investing in quantum technology. China, specifically, has unofficially invested about $10b in quantum information research, and built the world’s largest quantum laboratory in Hefei. In 2020, India and Taiwan also announced significant investment in quantum technologies on a national scale, with the countries investing $1b and $0.3b, respectively.

It may also be interesting to explore recent Quantum Daily reports on this topic.

It should be noted that we can see the result of these investments in the growing number of patent applications in this field, which have multiplied by approximately 100 times in the last 20 years. Similarly, more than 4500 related scientific publications were registered over the last 10 years.

Corporations, public companies, and academic institutions that have made great progress in creating quantum computers were not included on our map. We briefly introduce some of the them below.

Google was close to setting a quantum superiority during its experiment in 2020, that was run on a chip dubbed Sycamore, which contained 53 superconducting qubits.

IBM was the first company to successfully put a quantum computer on the cloud.

Honeywell achieved a quantum volume of 64 qubits on its trapped ions quantum computer.

The Tangle Lake quantum processor by Intel contains 49 superconducting qubits.

The University of Science and Technology of China (Hefei) created Jiuzhang, an optical circuit, that detected a maximum of 76 photons in one test, an average of 43 across several tests, and achieved quantum advantage in 2020.

I would like to thank the entire Phystech Ventures team and Kirill Chumachkov personally for his assistance in preparing this analytical report.

Special thanks to Runа Capital for its “Quantum startups map” that inspired us for this research.