Australia is becoming the place to watch for venture capitalists looking for the next big thing in quantum technology.
In the lingering shadow of the global financial crisis and dot-com crash, Vikram Sharma decided to establish Australia’s first quantum technology company.
Born out of his research on quantum cybersecurity with the Quantum Optics Group at the Australian National University in Canberra, QuintessenceLabs creates products that harness the power of quantum mechanics to protect sensitive data, such as random number generators and highly secure encryption.
But getting the fledgling company off the ground was no easy task, with gun-shy investors tightening their purse strings in the wake of the economic crisis.
Undeterred, Sharma cobbled together just enough capital from his personal savings and a handful of private investors to get QuintessenceLabs up and running in 2008.
“At the time, investments in deep tech were few and far between and venture capital markets were shallow,” he said.
“Raising capital was pretty tough.”
Fast forward 14 years, and QuintessenceLabs has grown into a global leader in the emerging field of quantum cybersecurity, counting Westpac Group and the Australian Department of Defence in its swelling pool of investors.
In October last year, the Canberra-headquartered company picked up $25 million in a Series B round led by CSIRO innovation fund Main Sequence and Canadian investment firm Telus Ventures.
QuintessenceLabs will use its fresh funding to expand its global footprint, including establishing offices in the United Kingdom and developing strategic partnerships in Japan and India.
“We’re really looking forward to the next step of building an Australian headquartered quantum cybersecurity company that serves the global market,” Sharma said.
The company’s winning combination of good market timing, large revenue and strong product portfolio was what caught the eye of Bill Bartee, co-founder and managing partner of Main Sequence, during the latest funding round.
“Everybody is starting to understand that systems are vulnerable, and we felt that QuintessenceLabs is part of the solution and has a good future going forward,” he said.
Fuelling tomorrow’s quantum
QuintessenceLabs’ success story reflects the growing appetite among venture capitalists for Australian-grown quantum technology companies.
In May 2017, Silicon Quantum Computing launched with over $83 million in capital funding from the Australian Government, University of New South Wales (UNSW) Sydney, Telstra, and the Commonwealth Bank of Australia.
In August 2021, quantum computer hardware start-up Quantum Brilliance snapped up $13.4 million in a seed funding round led by Main Sequence and the founders of QxBranch, which produces quantum computer applications.
Three months later, an Australian company developing quantum control firmware, Q-CTRL, secured US$25 million in a Series B round led by Silicon Valley venture capital company Airbus Ventures.
“There’s almost been no better time to get a venture funded,” Sharma said.
Australia is becoming fertile ground for tomorrow’s hottest quantum tech startups, with the Federal Government announcing a $111 million investment into the sector in November last year.
It includes $70 million for a Quantum Commercialisation Hub, which will build strategic partnerships with other countries to turn Australia’s quantum research into commercial opportunities.
And in the same month, Tech Central’s Quantum Terminal in Sydney opened its doors to its first tenants – QuintessenceLabs, Q-CTRL, Sydney Quantum Academy (SQA) and Quantum Brilliance.
“Australia has the brainpower to play a major part in the future of quantum technologies globally,” Bartee said.
“There’s impact to be made here.”
SQA is a partnership between Macquarie University, UNSW Sydney, the University of Sydney and University of Technology Sydney that is building Australia’s quantum economy with support from the New South Wales Government.
It plans to host a range of events at the new Quantum Terminal to connect potential investors and budding entrepreneurs. The free Quantum Innovators Network series provides an opportunity to hear from the best in the global quantum startup ecosystem, including international experts, fast-growing deep tech start-ups, and pioneering university spin-offs.
SQA also hosted the Quantum Australia 2022 conference in February, attended by over 800 researchers, business and government leaders, and investors. The conference included a panel featuring a representative from Tech Central and venture capitalists, including Bartee, discussing what drives investment in quantum technologies.
Diving into quantum investing
When on the hunt for rising quantum stars to invest in, the initial characteristics Bartee looks for are a strong founder and management team, a compelling vision, large market potential and a product that gives the company a competitive edge.
Next, he assesses whether the company’s product can be used across multiple sectors and technologies, a clue that it will likely make a big impact down the line.
Q-CTRL for instance develops quantum computing software that reduces the number of errors, the Achilles heel of all quantum systems.
The company’s potential to benefit the quantum field overall is what convinced Bartee to co-invest in the company during the Airbus Series B round in November last year.
“We were looking for a sort of ‘picks and shovels’ investment in quantum: we didn’t know where the goldmine was or which architecture might prevail, but we knew that all quantum systems would need these tools in order to suppress errors and make a useful computer system,” he said.
Before quantum-curious investors begin pouring dollars into the next QuintessenceLabs or Q-CTRL, it’s important they educate themselves about the basics of the technology and build an understanding of its potential applications. But getting a foot in the door doesn’t require a PhD in quantum mechanics or computer science.
Bartee, for instance, keeps up to speed by reading scientific papers, talking to quantum researchers and keeping a close eye on quantum companies.
“It gives me a sense of who’s doing what, where, when,” he said.
While quantum opportunities are beginning to ripen, investing in them is not for the impatient or faint-hearted.
The field is fast-growing but still relatively young, which means investors will need to play the long game before they see a pay-off. But if investors play their cards right, the return could be “huge” in a few years, according to Bartee.
“If you’ve got the risk appetite, capital and are willing to educate yourself, it’s well worth looking into,” he said.
* Vikram Sharma, founder and CEO of QuintessenceLabs, and Bill Bartee, co-founder and managing partner of Main Sequence, featured in the Quantum Australia 2022 conference and careers fair.
You can still catch all recorded panels and presentations on-demand for the next two months. The program covered the latest developments and ideas in quantum technology, from over 60 world-leading quantum researchers, businesses, government decision-makers, start-ups, and big tech.