Today’s Canadian economic climate, much like many other countries around the world, is growingly uncertain.
Slowly emerging from the catastrophic effects of the COVID-19 pandemic, Canada although robust in some areas, is expected to enter a recession as early as the end of 2022 and early 2023. Economic experts suggest that the recession is expected to be mild and short lived and is primarily due the Bank of Canada’s aggressive interest rate hikes and the need to rebalance inventories after a worldwide supply chain disruption.
The question however remains, is the quantum technology sector positioned to withstand the turbulent economic climate in Canada? In short, the answer is a resounding yes…for now.
Because the sector is still in its early stages, the impacts of the expected recession is anticipated to be minor, if at all observed by players in the field.
An abundance of government and venture capital funding in the industry and the expectation that quantum projects are long term, without Venture Capitalists’ expecting any immediate return on investment, has built-in a resilience for quantum computing start-ups and companies against the market downturn. This resilience however may be short lived as VC investors become more cautious in selecting investments, leaning more towards companies that have shown or are working towards showing their technology’s scaling potential and applications with a true quantum advantage (a result not otherwise possible by a classical computer).
One such company that has catapulted its way above others amidst the impending recession is the Toronto based quantum computing company, Xanadu. Xanadu raised $100 million USD in its Series C round financing placing the company’s valuation at $1 billion USD, close to 3 times its valuation only a year prior. Canadian equity firm Georgian led the deal which was backed by Porsche SE, Forward Investments, Alumni Ventures, Pegasus Tech Ventures, Silicon Valley Bank, along with previous investors Bessemer Venture Partners, Capricorn, BDC Capital, and Tim Draper. Notably, Porsche’s investment is the automobile company’s first in Canada and in the quantum computing space. Porsche’s interest in Xanadu may be rooted in Xanadu’s focus on next-generation battery development which aim to provide safer, lighter and more cost-effective batteries for electric vehicles. The uptake in interest in Xanadu may be further supported by Xanadu’s technology achieving a quantum advantage. Although no immediate applications were noted, the reveal of a quantum advantage provides comfort and a sense of security for the future of the technology to investors in the quantum space.
Unlike Xanadu, other major players in the Canadian quantum space, particularly those that are publicly traded have slipped in the turning market.
D-Wave out of Burnaby, British Columbia, has seen its stock price decline since it was added to the New York Stock Exchange in August 2022. Similarly, other publicly traded quantum computing companies in the United States, such as Riggetti Computing out of Berkeley, California and IonQ Inc. out of Maryland, have declined in value over the last year. In some cases, the decline in value is a result of too much focus on developing the technology and too little on commercialization aspects. In a turning economy, it is imperative that these companies spend just as many resources on commercialization of the technology they work so tirelessly to develop.
The future of start-up and publicly trade quantum computing companies is just as uncertain as the Canada’s economic climate. However, companies would benefit from expelling more resources on commercialization and proof-of-concepts that show the potential for application scaling or a quantum advantage in order to emerge unscathed out of a downturned market.