The criteria for evaluating a quantum startup are the same as any other startup: team, value proposition, and market opportunity, said Duality mentor Scott Walbrun, MBA ’19, principal at BMW i Ventures, the venture capital arm of BMW Group.
“Quantum has some unique challenges because many quantum startup business models rely on demand that is ultimately predicated on quantum technology advancing to enable commercial value,” he explained. “Therefore, a view on whether quantum advantage can be realized in a reasonable amount of time needs to underpin these investments.”
When evaluating these criteria, Walbrun poses several questions:
- Do you have a cohesive team with complementary skills and full-time commitment that can progress this business and technology?
// Value proposition:
- What leading indicator demonstrates your solution will be mission critical to your customers? How have you validated this need exists today?
- What data points do you have that suggest your technology is a step-function improvement from other solutions?
- Is your technology productize-able, scalable, and able to be delivered at an attractive price point?
// Market opportunity:
- What challenges still require innovation versus engineering?
- Once you get to market, will there be enough demand to create a venture-scale outcome?
- What are the specific technical and market risks—both real and perceived? For each of these risks, what are the underlying assumptions that need to be validated? How can you systematically reduce those risks upfront as much as possible?
One aspect Walbrun will not compromise on when making an investment decision? The team.
“A focused team can overcome most challenges,” said Walbrun. Similarly, his advice to the early-stage startup is to not compromise on the investor team. “Determine whether this investor is someone you want to build a business with and can add value as a member of your board,” he said. “What skills and relationships do they have that can help you get to the next level? Don’t forget, they are going to be a part of your company for a long time.”
Christophe Jurczak, founder and partner at Quantonation, an early-stage VC fund dedicated to deep physics and quantum technologies, echoed the importance of the team – who should have a long-term vision and an open mindset. “This is the trick,” he said, “and is important for hiring and convincing investors over time.”
The founding team must also want their product to have an impact on society. “Sometimes, some teams are too narrowly focused,” said Jurczak, who explained that investors need to position themselves to create maximum value. This means getting involved early, he noted.
Still, the biggest risk around any nascent industry is the uncertainty. “Fundamentally it is impossible to know with certainty how a nascent industry will evolve, but if the right team is attacking an interesting problem space, then the goal set can often be adjusted amid new information to capture an attractive opportunity. This is why a top-tier team is key,” said Walbrun.
While substantial capital has been invested in quantum over the last two years, the full potential of quantum is yet to be realized – and “a fair amount of innovation” is required, said Walbrun.
“That being said, quantum technologies have not yet hit the ‘trough of disillusionment’ in the hype cycle, which is also likely to come about over the next five years,” said Walbrun. “While disillusionment isn’t exactly sought after by industry participants, it is also when the most interesting companies tend to rise above the rest.”
Over the next couple of years, Jurczak said he expects several new companies to emerge out of the ecosystem, supported by resources like the Duality accelerator. “We need more initiatives like [Duality],” he said.
“I expect that things will change drastically,” Jurczak added, “but we need more projects, more companies, and ecosystem-level initiatives to support their creation.”