Private investment in the quantum industry cools to close to freezing point

Martyn Warwick
By Martyn Warwick

Feb 2, 2024

  • Sums invested in 2023 down by half on 2022 as confidence in quantum sector ebbs in the US 
  • Generative AI getting the lion’s share of the cash – and producing immediate returns for investors
  • Rapid evolution of a full quantum technology stack needed now – plus a “Roadmap to Revenue”
  • New State of Quantum Report 2024 says despite setbacks, the sector remains resilient to overall downturns in the global economy

Interesting – and perhaps disquieting – data is contained in the new “State of Quantum Report 2024”. It shows that over the course of 2023, quantum computing companies raised just half the venture capital they did the year before. In 2022, investment was US$2.2bn. Last year that was down to £1.1 bn. This happened as investors opted to spend their money speculating on generative AI in the expectation of making lucrative returns now from what has already become easily available technology rather than waiting and hoping for dividends that may come from quantum computing at some time in the future, but perhaps not for at least a decade or even as long as 20 years. A bird in the generative AI hand is better than two in a superpositioned bush.

Nonetheless, the new report produced by The Quantum Insider, (a respected company and website that tracks developments in quantum technologies and provides quantum market intelligence), and compiled in association with IQM, (a company that actually builds quantum computers), with additional input from the venture capital companies OpenOcean and Lakestar, has it that, despite the halving in investment in quantum computing over a twelve-month period, the sector has proven to be resilient to overall downturns in the global economy.

It noted that “strong government backing and continued investment momentum in Europe has buoyed the industry” and that even as some private investment in quantum has dwindled, individual European governments and the EU itself have made major commitments to continue to fund quantum developments. In total “over 30 governments have committed to more than $40bn in public funding commitments to quantum technologies which will be deployed in the next 10 years.” 

It is in the US that investors seem to have lost confidence in quantum computing, or at least in making a killing from it right now. Nonetheless, and despite the severe 80% fall in investment in quantum in North America, the State of Quantum 2024 Report contends that “investment pullback is attributed to an overall decline in technology investing, and not to falling interest in quantum technology.” Well, some will be not so sure about that given the new money, presumably diverted from what would have been investments in quantum, now being ploughed into generative AI .

What’s more, the US was not alone seeing quantum investment plummet. It also declined by 17% in the Asia Pacific (APAC) region. Growth was reported in Europe, the Middle East and Africa (EMEA) but at a mere 3% and that is nowhere near enough to even begin to balance the downturns in the US and APAC.

The report covers key themes identified from interviews with senior personnel from across the quantum value chain. They show that organisations of every stripe expect they need internal quantum expertise either now or in the near future. They also accept as a “serious priority” they need to be ready to deploy quantum, especially in sectors such as financial services, healthcare, material sciences and pharmaceuticals where quantum computing has already been demonstrated to have an immediately applicable role. Attention is also being paid to the (relatively short-term) importance of quantum hybrid systems, not least because they have the potential to provide immediate value to enterprises. 

Not a quantum winter – yet – but baby it’s cold outside 

So, it seems then that organisations and enterprises are starting to prepare for the quantum era. As the report shows, more than 300 end users across a wide range of sectors are already exploring use cases and strategically building towards quantum readiness, even though any quantum advantage may be years away. They are, according to the report, ”Taking steps, today, to prepare for the long runway towards commercial quantum computing.” 

And surely, that’s the point. Whilst quantum research and development continues apace, investors now realise that most on-premise commercial quantum services and applications are still years away. The new report stated, “There is not a quantum winter, but the investment landscape is certainly colder [than in 2022]. Startups need to be realistic, and manage their funding roadmaps carefully.”

It is a fact of life that, now and probably for the foreseeable future, generative AI will get the lion’s share of investment money and exposure to the public consciousness. However, AI and quantum computing are technologies that can be mutually beneficial and, in something of a plea, it is important to remind the industry that quantum is a tremendous long-term prospect, and that “investors should take care that the hype around AI does not cannibalise attention on quantum.” The trouble is, it looks as though that’s already happening. 

In a comment, Ekaterina Almasque, general partner at OpenOcean, said, “While venture funding temporarily cooled, our research confirms the steady momentum towards the quantum era. The findings signal that 2024 can become a year of growing confidence in quantum computing’s potential, despite still a relative lack of private capital flowing into that space. Significant use cases are emerging to unlock its commercial promise. Having said that, achieving widespread adoption requires a full quantum technology stack to evolve.”

She was echoed by Stephen Nundy, partner and CTO at Lakestar, who said, “To fully realise quantum’s potential, we must take a strategic, full-stack approach – ensuring hardware, software, interfaces and talent develop in harmony. This requires actively partnering with corporate end users to understand commercial needs and co-create domain-specific solutions. If we can come together to solve these engineering challenges, the chance remains to build the next era’s leading multibillion-dollar quantum corporations.”

Nundy added, “The quantum hype cycle climbed quickly and has [now] recalibrated back closer to reality. But the greater collaboration emerging between software and hardware players on bridging immediate needs reaffirms that quantum-readiness remains an inevitability.”

Meanwhile, Ekaterina Almasque emphasised, “We have a chance to establish trillion-dollar quantum software leaders, but only by ensuring hardware, algorithms and interfaces serve particular real-world use cases. As macro conditions evolve, pragmatic innovation focused on quantum-business fit will be key. Many industries that are not preparing for the quantum era would risk falling behind in the quantum future.” 

– Martyn Warwick, Editor in Chief, TelecomTV

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