Deep-Tech Newsletter | October 2021
The potential consequences of Rigetti's SPAC and one year anniversary for quantumformalism.com.
Is the Rigetti SPAC another test case for more quantum hardware SPACs in the pipeline?
In October 2020, we published a post entitled 'Amazon's NISQY Business: Is Rigetti in the Shopping Cart?'. One of the cases for an M&A that our team made was the following:
The Case for M&A (Rigetti)
Rigetti's executives and investors are certainly aware that we are years away from fault-tolerant quantum hardware despite the current media hype. Likewise, they are aware that it will require significant R&D investment going forward, not just in the development of fault-tolerant quantum hardware, but in the NISQ paradigm. To make things even more challenging for Rigetti, other quantum hardware startups seem to be making progress also. Just recently, IonQ, a company using an ION trapped approach to quantum hardware made a PR release that it has achieved '32 perfect qubits with low gate errors.' Indeed, the community still needs to wait for some sort of independent validation of the claim made in the IonQ's announcement.
Hence, Rigetti will most likely need to raise significant amounts of extra capital over the coming years in order to pursue its full-stack strategy against the likes of IonQ and even other superconducting startups. The question is then, how sustainable will private fundraising be for Rigetti? Will the company decide to test the IPO waters?
Acquisition by Amazon could, however, provide Rigetti with a massive amount of R&D capital and the required distribution power via AWS's existing global developer community. We project that a price tag of $3.6B - $6B could be reasonable for a company in an early stage industry that can unlock so much innovation and revenue potential for Amazon. Even if there is the risk that the superconducting architecture pursued by Rigetti and others may not be the most viable option in the future, a write off of $3.6B - $6B will probably not anger Amazon’s investors too much!
At this point, it seems Rigetti has decided to pursue a $1.5bn SPAC (see investor presentation here). The SPAC deal is of course less than what we projected for an acquisition (if there was ever an offer!) by Amazon. Nevertheless, if successful, it will enable the company to remain independent, whilst being armed with the much needed capital to spend in R&D over the coming years.
Additionally, the following are the key conclusions & consequences that we take from Rigetti’s SPAC:
It's simply too early yet for meaningful revenue generation despite the hype! There are still many years of high-risk R&D investment needed to get the QC industry to that point. This is not a bad thing necessarily, it simply means that the industry is just getting started, and that there are no winners yet in the hardware space (software too). Hence, patient investing with a timeline for a meaningful ROI of around 15-20 years is probably more suitable to the QC industry at this stage. This could potentially clash with the current 10-year ROI/Exit cycle adopted by most early-stage VC firms. Thus, it may force VC-backed QC founders to lose focus on the long-term value building and switch to what could be called ‘low hanging fruit value building’ in order to try impress existing investors and new investors with ‘artificial progress’ so that these participate in the next round of funding.
If both Rigetti and IonQ stocks keep performing well over the coming weeks and months, we'll most likely see other SPACs featuring companies pursuing the same qubit technologies as that of Rigetti (Superconducting) and IonQ (Trapped Ions). We may also have other companies follow suit pursuing alternative qubit technologies such as Photonics.
There may be the temptation felt by some quantum software/algorithm companies to join the SPAC party! This is where it gets trickier, simply because we don't have (yet) the quantum hardware to run useful quantum algorithms. Nonetheless, as noted here, there are several research papers claiming that despite their limitations, Noisy Intermediate-Scale Quantum (NISQ) hardware may still be useful to solve non-trivial problems. Unfortunately, as of today, no one has yet come up with a useful and game-changing quantum algorithm that can be implemented on current NISQ devices.
This week there were some Twitter threads by well-known quantum founders & researchers about a claim made in this media piece by a quantum software startup that recently raised a €10m seed round. Amongst other things, the CEO of the company was quoted saying the following:
‘‘For some problems like optimising investment portfolios and machine learning to detect banking fraud, quantum computers can already outperform classical computers today.’’
Here are some of the follow up responses on Twitter about the claim above and other past claims in general:
It’s ok for nontechnical journalists covering complex topics such as quantum technologies to get a subtle point wrong or out of context. However, in our opinion, it is very important that founders & researchers, in particular technical people in companies (corporates and startups) that are being covered, to reach out to the journalists and make the necessary corrections. This helps the general public, government stakeholders and investors not get false expectations of what is possible right now in this nascent industry. Especially given it has so much potential to change world for the positive when the current qubit engineering challenges are solved.
For companies such as Zaiku Group, exploring the quantum software/algorithms layer, we need the quantum hardware companies to keep making significant progress before our theoretical quantum algorithms can make any difference in the real-world. Until then, we’ve got our heads down working to create long term IP value to our stakeholders.
Quantum Formalism Community
It has been a year since we started the quantumformalism.com community. This is our initiative aimed at exposing abstract mathematical topics to a diverse group of STEM professionals, especially those with the intention of breaking into the nascent quantum computing industry or other emerging deep-tech topics such as AI (e.g., Geometric Deep Learning).
We’re delighted to have delivered over 60 lectures so far, with more advanced/special courses such as the one on ‘Noncommutative Geometry’ and its potential applications recently announced for next year. We’ve been also humbled and honoured to have learners coming from both academia and industry as highlighted below.
Industry: We have community members working at well-known companies including; Google, IBM, Microsoft, Unity, and Cisco.
Academia: We have graduate students from academic institutions such as; Bristol University, Oxford University, University College London, University of Maryland, University of Michigan and Iowa State University.
Exposing advanced mathematics to the community is not the sole purpose of our mission, we also want to help the learners with the opportunity to apply what they learn with us to important real-world problems. Consequently, we have created the following two initiatives (more to be announced):
Industry Career Fellowship: The goal is to place the top learners who graduate from our courses with our company or partner companies recruiting STEM professionals with advanced mathematics exposure.
Deep-Tech Incubator: The idea is to encourage some of the top learners who graduate from our courses to start enterprise deep-tech, software/algorithm-driven companies! Some of our readers (e.g., VCs) have already received an invitation for potential partnerships. If you haven’t received an invitation and you would like to learn more, please fill out this form or reply to this newsletter.
Finally, we’re also thrilled to announce our community’s first hackathon that will take place next year, after Module II (Lie Groups, Lie Algebras & Representations). This is a great opportunity for our learners to showcase their newly gained advanced mathematical knowledge in code! :)
Many thanks for reading. We look forward to sharing our deep-tech community building journey with you.
Zaiku Group team
Disclaimer: Any opinions, newsletters, research, analyses, prices, projections or other information offered by ZAIKU GROUP is provided as general market commentary, and does not constitute investment advice. ZAIKU GROUP will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.