Quantum computing

A 3 million times faster alternative to classical computing

(research done in Jan 2022)

                                         

Global industry insights  

Growth rate : The Global Quantum Computing Market was valued at USD 89 million in 2016 and is projected to reach USD 949 million by 2025, growing at a CAGR of 30% from  2017 to 2025 (as per MarketWatch)  

TAM of the applications sector of Quantum computing  

•  IonQ, one of the leading players that manufactures Quantum Computers estimates  the overall Quantum computing industry to be $ 65 Bn by 2030  

• There could be between 2,000 and 5,000 quantum computers worldwide by 2030. (Mckinsey, Consultancy.co)  

Market Size Forecasts  

Mckinsey claims that automotive will be one of the primary value pools for quantum computing with a high impact noticeable by about 2025. They also estimate $2 billion to $3 billion economic impacts of related technologies for the automotive industry by 2030.  

Adoption 

•  Out of the players working on and innovating in quantum computing, the majority are  startups (40%) and universities (33%) (PwC)  

• The number of qubits in quantum computers has been increasing dramatically from 2  qubits in 1998 to 128 qubits in 2018. (Statista)  

Science behind Quantum computing  

Everything that we enjoy today about computers and the applications created from it are  based on Moore’s law which states that “Number of transistors doubles every 24 months”.  However As transistors’ size reaches the size of an atom, (Current commercial size is 5 nm transistor. 1-3 nm is predicted as limit that’s expected to happen by 2022) its behaviour will be governed by quantum mechanics, not classical.  

How Quantum computing work?  

20 q-bits can store a million variables in parallel. As q-bits values are correlated, reading just  one gives you information about the rest. What this essentially means is quantum computers  can calculate all possible solutions at once. 

SWOT

Strengths Competitive Advantages: Superior  Parallel Computations present inherent advantages to Quantum computers in certain fields such as Security, Simulation and Communications.  Available Resources: Cloud platforms to  manifest the limited hardwares available  globally and create softwares much like the  existing cloud services work.  Well performing Products/Services: Most  of the companies are focussing on the  softwares and only few of the established  players are providing hardwares.

Weaknesses Competitive disadvantage(s): Lack of cheap hardwares discourages most companies from exploring the hardware part in Quantum Computers.   Lack of resources: Not enough trained users to explore the full potential of  Quantum Cloud computing. Underperforming products/services:  Not feasible cost wise to use a Quantum machine for any form of activity that a classical computer does, currently only limited activities which require high computations give Quantum computers an inherent advantage.

Opportunities Scope for improving operations:  New  programming languages required to  manifest the full potential of Quantum Cloud  providers.   New market segments:   High awareness and in-house consultancy   is required to make new market segments.

Threats Competitors:  Cannibalism is expected in this  industry because the limited hardware  makers are also building the necessary  software to go along with it, thus eating the  margins of the many software makers in  this industry who are basically dependent  on the hardware makers through the cloud.   Expansion of core operations:  High cost  may be a hindrance for early adopters to  generate sufficient demand for this new  technology.

Risks involved:  

Vision of what quantum computing can do will require developing fault-tolerant machines  that don't exist today. So it might be too early for a VC that expects to exit in less than 10  years post investment. However, the present industry is building and marketing real-life  applications with revenue much sooner than the quantum computer itself, thus giving credibility to early-stage investors that their investment won’t go to waste.  

Who is investing in Quantum Computing? 

Successful quantum computing software applications depend on superior algorithm  performance and close-to-market feasibility. Thus, bigger VCs are finding it a safe place to  invest in. Major investments in Quantum computing will be from the investors seeking a competitive advantage through the use of quantum computing technologies to improve and  accelerate business operations with greater AI capabilities, better security, and optimized  algorithms.  

The following is the list of investors making significant investments in Quantum  computing: 

• Andreessen Horowitz  

• Founders Fund  

• Canaan Ventures  

• DCVC  

• Sequoia  

• Data Collective  

• Quantum Wave Fund  

• Engineering and Physical Sciences Research Council 

Popular global quantum computing startups are as follows:  

• Xanadu  

• Rigetti  

• IonQ  

• Quantum Machines  

• Quantum Biosystems  

• Quintessence Labs  

• ID Quantique  

• Post Quantum  

• Cambridge Quantum Computing  

• Qxbranch  

• MagiQ  

• Nano Meta Technologies  

• 1Qbit  

• D Wave Systems  

• Quantum Circuits  

• Honeywell  

• IBM  

• Accenture  

Different areas of investment in Quantum Computing 

Applications:  

 Quantum Security & Networks  

 Quantum Chemistry  

 Machine Learning, optimisation  

Softwares: 

 Simulators & development software  

 Error Correction systems  

Hardwares:  

 Superconducting circuits  

 Quantum Annealing  

 Ion traps  

 Single photons  

 Quantum Dots  

 Components & EDA  

Latest trends of investments in Quantum computing 

• Recent Investment in quantum computing businesses in the United States has  increased significantly from $4 million and two deals in 2015 to well over $300 million  and seven deals so far in 2020.  

• PsiQuantum’s latest quantum computing deal with a deal size of $450 Mn is the  latest investment in Quantum computing made by Baillie Gifford, BlackRock, M12,  and Temasek. 

• In hardware, startups like Rigetti Computing and PsiQuantum are competing against  tech giants like Google and IBM. Rigetti has raised $190 million from blue-chip firms  like Andreessen Horowitz to build a quantum computer.  

• Then there's a layer of software companies that are tackling specific problems like  error correction, including Australia's Q-CTRL, which raised $15 million from  investors in 2019. On top of it all, there is a layer of companies trying to build  applications using quantum computing, from machine learning optimization or  cybersecurity companies and even companies thinking about chemistry. 

Financial Modeling  

Three Pure Quantum Computing companies : Rigetti, IonQ, and Quantum Computing have  gone public this year through SPAC route, however due to lack of financial statements, it’s  difficult to estimate the financials in this industry. The closest industry to the Quantum  Computing industry is that of the present software/hardware makers like IBM and Microsoft  who themselves are in the race to build Quantum solutions, however their prime business is  mostly based on classical computers/ software and even when they introduce Quantum  solutions in their business, it is important to model separately their Quantum business.  Otherwise simply modeling on the traditional business can yield erroneous results.  

Conclusion 

Quantum computing has exponential potential but some firms are hesitant to invest in  quantum computing because of the technology’s complexity, skill set restrictions, a lack of  available resources, and the expense. Quantum computing companies, certain cloud-service  providers, and independent software vendors are addressing these concerns by providing 

quantum cloud-based solutions that allow businesses to experiment with the  technology.  

A bulk of the investment in the USA is being poured into hardware, but there are also deals for  software and all manner of niche companies cropping up around both fundamental  underlying technologies and future applications.  

Indian market insights

Existing startups in Quantum Computing in India  

BosonQ, Qlabs Ai, Q Pi Ai, Q Nu Labs, Automatski Solution, QRD Lab, TAQBIT Labs,  Quantica Computacao  

Startups shortlisted

Qlabs Ai and TAQBIT Labs  

Reasons for shortist

1. They both are working in the Quantum computing industry’s PaaS or SaaS  area  

2. Experienced management teams (entrepreneurial experience and required  tech expertise to build the product)  

3. Ready-made products/ Orders received from clients  

Comparison between the two 

Startup	Qlabs Ai	TAQBIT Labs
Management	Founder & CEO: Nixon  Patel has a healthy mix of  business and technology  experience.   He has been in leadership  positions in several IT/ IT  product based companies in  the past including Brillio as  Chief Data Scientist and IBM as a Research Engineer. He’s an IIT Kgp (B. Tech.) Chemical Engineer) who went to the USA to complete his Master’s and Phd in related fields.	CEO : Animesh Aaryan  He’s a researcher who has  worked in the areas of   Quantum computing and  Cryptography. Due to his  young age (probably in his  early 30s), he probably has  the capacity to endure the  hard work and pull this off. Sugata Sarkar: He has  substantial brand, GTM and  Operations experience with  reputed brands. Advisor: Dr. R. Srikanth
Problem(s) being solved	Existing internet is limited in  its potential for use by the   cable/data speeds of   network providers. On top of   that, the internet is also   prone to security   vulnerabilities due to it’s   inherent open-source nature.	Present data security  systems rely on the computational difficulty of  certain mathematical functions which is prone to hackers.
Solution(s) offered	They are creating an entire  basket of products   catering for the internet  such as Quantum routers   (for faster communications),   Quantum cloud (for secured   computer protocols) and   Quantum AI (for improving   AI computations speed).	They are just focussed on solving one problem area at  this moment which is Data  security using technology  called Quantum Key  Distribution (QDK) to  establish a secure   communication method  using cryptography.
Customer(s)	There’s no information on  their customers available   publicly	They recently claimed to  have secured a national  tender from DRDO for data  encryption
TAM for specific areas of  Quantum computing  (globally as estimated by the UK govt.  office for science)	Cybersecurity : $ 164 Bn  Network Equipment: More  than 50 Bn by 2019	Cybersecurity : $ 164 Bn
Risk(s)	Absence of any business  data casts doubt on their  approach which seems to  be more like Waterfall   compared to Agile and  hence the risk of failing is  high, especially since   Quantum computing is a  very fresh domain across  the world	Focus on just one  area which is Data Security could turn out to be risky if they  don’t get sufficient business or companies unwilling   to switch over from their present solution(s) to their  offering.   Qlabs Ai uses an advanced   technology called Quantum Secure Direct Communication (QSDC) for Security which is a direct  competition to QDK
Comparative Advantage	8 process based  IPs which make them more powerful  compared to software based IPs (that are present in the USA but not in other parts of the world such as India)   It’s an MNC with offices in USA and India thus giving it the advantage of two markets with  different sets of clientele.	Focussed on only  one area of  Quantum computing   i.e. Data Security where they have secured a big   customer as well (DRDO), this enables them to be more nimble in their growth.   A relatively young team of promising researchers can  endure the necessary grind during the initial phase.

Business Model of Q Labs Ai:  

Since there’s no available data on the existing business of this company, and only information about the products they have/ are getting built is available, so I am making certain possible assumptions for the ways in which their products/services could be sold in the market :-  

For Quantum routers: Currently the company is experimenting with certain optical type  probes. If successful, this would have to make them manufacture the hardware for these  probes. This has immediate use in Spectral analysis in research labs, however owing to the  novelty of the product, they could rent out their devices for the necessary tests which could  be carried out by the company’s own staff on behalf of their clients and then the results could  be send back to the client.  

Quantum Security: Quantum Secure Direct Communication (QSDC) aims to send a  classical message in the form of quantum states from one party to another using a quantum  channel, without requiring any secret key. This would be manifested in the form of an online system protocol much similar to the existing internet protocols that we have at present.  

For AI models, they are building APIs that can run on any form of Quantum hardware  device. This could be manifested in the form of a B2B SaaS model.  

So Q Labs Ai could have some Capex in it’s business costs. But more importantly, it seems  that Q Labs Ai is creating an ecosystem of products/services which would reinforce  each/other and provide a superior market position to the company.  

Business model of TAQBIT Labs: 

The company’s Quantum Key Distribution (QKD)  solution is marketed on a custom basis to its clients such as DRDO at the moment. However, the company has successfully completed the inaugural batch of Fintech Valley accelerator which means they plan to use their solution for security in the Fintech/ Finance industry and  for that, they probably would have to create some standard solution and a B2B SaaS model would work here.