Employees at a Photonic Inc. lab in Coquitlam, B.C., in 2023. Blue-chip Canadian companies are joining in a funding round for the quantum computing developer.Tijana Martin/The Globe and Mail
Royal Bank of Canada RY-T and Telus Corp. T-T have joined a growing list of Canadian blue-chip institutions backing the country’s emerging quantum computing sector.
The pair have invested in a US$130-million equity financing by Vancouver quantum computer developer Photonic Inc., bolstering its standing as one of the most promising players in the field.
The deal, led by British climate technology financier Planet First Partners, values the startup at “multiple billions” of dollars, said Photonic chief executive officer Paul Terry in an interview. Photonic could raise up to another US$70-million, as the round hasn’t yet closed, he said.
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Past backers Microsoft Corp. MSFT-Q and pension giant British Columbia Investment Management Corp. also participated in the funding.
Microsoft isn’t just an investor, but a key partner: It plans to install Photonic technology within its Azure cloud-computing facilities and provide access to its quantum power to customers over the internet.
Other investors in Photonic, which has raised US$271-million to date, include the British government’s National Security Strategic Investment Fund and Canadian financiers Inovia Capital and Yaletown Partners.
Canada now has now produced three quantum computer developers valued at billions of dollars apiece, which have drawn backing from Canadian pension plans, banks and venture capitalists.
Publicly traded D-Wave Quantum Inc. QBTS-N, founded in Burnaby, B.C., but now based in Silicon Valley, is valued at more than US$10-billion, although its product is only a partial version of a quantum computer.
Canadian pension giant PSP Investments and the Business Development Bank of Canada were among its biggest investors when D-Wave went public in 2022, though both subsequently sold out.
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Toronto-based Xanadu Quantum Technologies Inc. plans to go public by merging with a Nasdaq-listed special purpose acquisition company. The proposed offering anticipates raising up to US$500-million and would value the combined entity at US$3.1-billion. Private investors have committed US$275-million of that, including chip giant AMD, BMO Global Asset Management and CIBC Asset Management, and Canadian VC firm Georgian Partners. Past investors include Ontario Municipal Employees Retirement System.
Canada’s early lead in the quantum field has been the source of much excitement and hype, but also angst about whether it can maintain its advantage.
Industry proponents have long promised that quantum computers will some day solve tasks that are out of reach for the world’s most advanced computers, opening new applications in financial forecasting, drug and material discovery, and machine learning.
Quantum computers could also enable bad actors to pick the locks on cryptography algorithms that secure the world’s digital economy. Canada’s intelligence and defence establishment has recognized the threat for years and governments and financial-sector players have been put on notice to quantum-proof their critical infrastructure.
Unlike conventional computers, quantum systems don’t derive power from manipulating bits of information but by tapping into the peculiar properties of matter and light at microscopic scales. Instead of the 1s and 0s that are the basis for any digital computer calculation, quantum computers employ qubits, which can hold a mixture of those values at once.
Interest in the sector has surged on the heels of a series of advances in recent years and industry participants claim the highest scientific hurdles to commercialize the technology have been largely cleared.
“People are less interested now in funding the next big physics breakthrough” and more focused on funding the technology’s commercialization, Mr. Terry said.
Canada was an early leader in quantum: Three companies – Photonic, Xanadu and Sherbrooke, Que.-based Nord Quantique – are among 11 that have advanced to the second stage of a U.S. Defense Advanced Research Projects Agency, or DARPA, competition challenging developers to show they can build a commercial-grade quantum computer by 2033.
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Those who complete the third and last phase could get US$300-million from DARPA and would be viewed as leaders in a global race featuring startups and giants including IBM and Google.
But domestic proponents have warned that without adequate support at home, nascent developers could be wooed to move away.
To counter that, the federal government has committed up to $23-million to each the three Canadian DARPA contestants – matching funding they’ve already qualified for – and a fourth player, Anyon Systems Inc., which has sold a system to the department of national defence.
There are several approaches to developing quantum computers. Photonic uses silicon chips. The Photonic system’s qubits consist of tiny flaws within the silicon, whose quantum properties can be transmitted and manipulated with laser light by using a quantum transistor invented by Photonic founder and chief quantum officer Stephanie Simmons.
One advantage of this approach is that quantum calculations can be distributed among multiple interconnected components that are relatively easy to manufacture. These can be added to in a modular fashion to achieve a device that operates at a commercially relevant scale while avoiding some of the challenges that arise when a computer is built around a single quantum chip.
By using silicon – a well-understood material in the computer industry – Photonic must only cool its chips to one degree above absolute zero, or -273.15 Celsius. While that is colder than deep space, it’s relatively balmy compared to other kinds of quantum computers whose qubits must be kept even colder. That difference means Photonic can use widely available helium for cooling, rather than more precious Helium-3, required for colder systems.
As a result, Photonic has been relatively capital-efficient, spending less than US$100-million to date, and anticipates reaching positive cash flow with its new capital. It also didn’t sell early versions of its computer to customers for research purposes, as others did, which meant it didn’t have to invest in sales and marketing early on.
“By focusing on the science so far, it has set them up well,” said Emil Mahjoub, a partner with Planet First, which has also invested in Xanadu. “All their capital has gone into engineering the product.”
Mr. Mahjoub said Planet First considered investing in 20 quantum companies “and Photonic really stood out. On the four key things we looked at, which were speed, cost, fidelity and size or scalability, I think this team has a very credible path to address all four.”
He added that its networked silicon approach and Microsoft partnership should help spur sales once the technology hits the market.
With reports from Ivan Semeniuk