20. December 2012–
Quantum Wave Fund is a new VC firm dedicated to quantum technology. That’s the industry that uses – or hopes to use – research at atomic and subatomic level to create new, practical devices and processes.
The firm, headquartered in Boston, has so far managed to raise $40million for its first fund. It hopes to close it at $100m.
There are some solid links here, including to Harvard University. Yet the firm’s catchphrase – “riding the wave of quantum technology revolution” – seems premature. Quantum technology is not widespread. The internet is littered with dodgy-sounding products. The science is complex, and the holy grail – commercial, industrial-scale quantum computing – is still out of reach.
One of the business brains behind Quantum Wave Fund is Serguei Beloussov (above), the founder of software companies Parallels and Acronis and a senior partner at Moscow- and Berlin-based VC Runa Capital. Here, he justifies his latest venture:
Where did this idea come from? When did you first talk about setting up the fund?
I graduated from Moscow Institute of Physics and Technology, which was a top school in the Soviet Union for physics and technology… Two of my classmates are now professors at Harvard – Eugene Demler and Mikhail Lukin.
I kept contact with these guys over the years… I got involved in business after graduating but I stayed interested in physics. About three years ago, I got involved in the creation of the Russian Quantum Centre. After that, I also got involved with the Singapore Quantum Centre…
While establishing the Russian Quantum Centre, I went and looked at a number of tech centres for quantum information processing, all over the world. In Europe, in Asia, in the US, in Canada. I realised that this is a very, very interesting field.
It’s a very hard field. There is a lot of expertise needed… But it’s a very valid field because the technologies are very advanced. This is technology that can really change the world.
We’ve actually been working on Quantum Wave Fund for almost a year already. Now it has an office, there is a formal deal. We’ve already done several investments.
Which quantum technology do you consider the easiest to commercialise, the most likely to be a commercial success?
In general, there are three areas of quantum technologies. Area number one is quantum computing… There are not many commercial companies in this field. There’s only one company shipping something, which is D-Wave and there’s a lot of controversy about what they ship. It’s a Canadian company.
The next area, which already has a number of technologies shipping, is quantum security, cryptography and communications. There are already a lot of companies here, like MagiQ; companies like NAC and Toshiba… So that’s more a near-term area.
The last area is quantum sensors. In the past 20 years, physicists have learned how to manipulate matter at the scale of a single atom or single photon. That’s a very powerful metric. Magnetic fields, electric fields, gravitational fields, acceleration, time, distance – all can be measured precisely with the help of quantum effects. So, that’s an area where we’ll also be doing a lot of investments, and where we see a lot of practical applications today. There are small-scale atomic clocks, for example; there is a company in the US called Symmetricom.
Do you have any measures for the value of the quantum industry right now, what is currently being shipped?
No, but we’re talking about the low hundreds of millions of dollars. It’s quite small but quantum tech is what underlies the physical reality of the world. It’s the smallest scale effect known to mankind today. So, it’s capable of making the smallest and most importantly the fastest devices… It’s going to be a huge industry.
There’s some scepticism about whether quantum is a buzzword, just used to get media attention. What do you say to that?
Quantum theory is almost 100 years old. The difference, which really happened in the last 20 years and mostly in the last 10 years, is physicists have learned how to manipulate matter on the scale of single quantum mechanics. The articles about this are quite new; some of the most famous articles are 10, 15 years old. The Nobel Prize this year was awarded to Serge Haroche – he’s a physicist – for research he did about 10 years ago, maybe 15 years ago…
So, it’s not a buzzword. It’s exactly what we’re trying to accomplish. We’re trying to bet on devices that will do computation, communication or measurement based on single quantum effects. We naturally believe this is possible, knowing what’s happening in physics and knowing what’s happening in the industry. We’re sure that when – and if – it’s possible at industrial scale, it’ll be the best way to do things.
One thing, which is quite important. We only invest in companies that already ship devices. [And] in order to do due diligence, you will have to involve a professor at Harvard in experimental physics – to understand the science behind the devices, to understand the market, the applications where they can be used and so on.
How are you going to convince institutional investors to back Quantum Wave, devices that are not in widespread use?
First, we already have close to $40m in the fund. Second, $100m is not that much money in this field. If you look at what funds in internet are raising, it’s billions of dollars globally. So $100m is really tiny and we’ve already raised 40 per cent of it.
Third, we’re not betting on institutional investors. We would welcome them but we believe this is a long-term plan, that the world will change… This is the first fund and we’re inviting whoever will join to this fund, whether institutional or private investors. At the very least, they can look at what we do now and invest in a fund II or a fund III.
Fourth answer: while it looks space-age, it’s not really that space-age. Investors that know the field can kind of grasp, after some explanation, that the field is valid. There are very few teams that invest in this field that are capable of doing due diligence, capable of helping the companies… If anybody wants to invest in quantum tech, we’re the best place to go. We think we will have no trouble raising a fund of $100m.
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