The UK – perhaps surprisingly – is the world’s second nation in terms of private investment in quantum, and the number of existing quantum companies.
This excludes China, where government investment dwarfs even US government investment – but where it is almost impossible to distinguish between public and private investment.
On March 15, 2023, the UK government announced an additional £2.5 billion (just over $3 billion) investment in quantum, spread over ten years (the UK National Quantum Strategy). This may appear to be a small amount in global terms, but given the government’s existing relationship with university-based research and a hoped-for spur to the private venture industry, it is likely to have a significant effect on the UK quantum market.
SecurityWeek spoke to Quantum Exponential (QE), a UK VC firm that specializes in startup quantum investment in the UK. Its portfolio already includes Arqit, Siloton, Aegiq and Universal Quantum. As a VC firm, it is excused the current conundrum of choosing between very expensive growth investments in existing firms during troubled economic times, or the generally lower amounts needed for startup. Quantum companies are, by definition, almost always startups.
The UK government adoption of quantum was early. “The establishment of university hubs and a ‘joined-up’ approach was quite a bit earlier in the UK, compared to other nations,” points out QE. The government has funded 139 projects involving 141 quantum organizations through its Innovate UK Commercializing Quantum Challenge alone.
There are four primary goals to the government 10-year plan: ensure the UK is a home for quantum science and engineering; make the UK a go-to place for quantum businesses and the global supply chain; drive the use of quantum technology for the economy and national security; and create a national and international regulatory framework that supports innovation and the ethical use of quantum technologies,
The hope is that the new money will increase the number of new companies and spur the addition of extra private funds for VC to invest. “The plan is to eventually hold a 15% share of the global quantum technologies market and a 15% share of the global private equity investment into quantum technology companies,” says QE.
Globally, there is significant interest in developing post quantum cryptography able to withstand large quantum computer decryption of asymmetric encryption. The US is leading this charge with the results of its NIST-sponsored quantum safe competition. A UK startup, Incrypteon, has a patent-pending solution to produce quantum secure (as opposed to just safe) encryption.
But noticeably, there is no distinction between quantum hardware and quantum software in the UK’s quantum development plan – and while quantum hardware interest is primarily focused on the large-scale general purpose quantum computers being developed by major firms such as IBM and Google, the UK has been developing its own niche market.
“We’ve got several quantum hardware companies in the UK – two of them in our own portfolio,” explained QE. Examples of quantum hardware companies include Universal Quantum (spun out of Sussex university) and Oxford Quantum Circuits (spun out of Oxford university).
“Oxford Quantum Circuits,” QE continued, “actually has a quantum implementation up and running on Amazon so people can use their quantum computers.” They’re not on the scale of future expectations for general purpose quantum computers but are nevertheless powerful and here now.
On March 14, 2023, it was announced that OQC’s quantum computers will be installed in the Equinix Tokyo International Business Exchange data center. Last summer, Universal Quantum received the largest ever quantum order (€67 million) from the German government. “We’re already punching above our weight in the quantum contracts area,” said QE.
QE’s belief is that government funding will put more money into the universities leading to more spin out startups eventually requiring private funding. “There is an organization called Innovate UK, which does a lot of grants. We imagine fair amounts of the government money will go into grants. That will effectively subsidize the investees we’re looking to support and will make our money go further.”
The general belief is that the expanded government funding will lead to more quantum startups generating quantum software, solutions to the looming quantum decryption threat, and developing quantum hardware. These companies will eventually need venture capital funding – which is QE’s specialty.
“We raise our own money,” said QE, “but we also accept monies from any UK or NATO-friendly investors (the days of accepting investment funds from China, for example, are gone). We expect to get that investment money from ultra-high net worth family offices, professional investors, and maybe some endowments as well.”
The UK is already a world power in quantum computing. The government funding is designed to cement and further this position.
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