Employees work at a Photonic Inc. lab in Coquitlam, B.C., in 2023.Tijana Martin/The Globe and Mail
Canada’s institutional investors often face criticism for not investing enough in homegrown startups. The burgeoning quantum computing space has proven to be the outlier.
On Tuesday, Vancouver-based quantum developer Photonic Inc. said that BCE Inc.’s BCE-T Bell Ventures and three other government-backed agencies – Business Development Bank of Canada (BDC), Export Development Canada and InBC Investment Corp. – had joined Royal Bank of Canada RY-T and Telus Corp. T-T in backing a US$200-million-plus financing round that values the company at US$2-billion, including the money raised. The news comes four months after Photonic said it had raised US$130-million with more to come.
The deal was led by British climate technology financier Planet First Partners and backed by U.K.-based Firgun Ventures as well as a subsidiary of Abu Dhabi sovereign wealth fund Mubadala Investment Co., and early investors Microsoft Corp. MSFT-Q and pension giant British Columbia Investment Management Corp. Other investors include the U.K. government’s National Security Strategic Investment Fund and Canadian financiers Inovia Capital and Yaletown Partners. Photonic has raised more than US$350-million.
Canada has now birthed three quantum computer developers valued at billions of dollars each, backed largely by Canadians – pension plans, banks, Crown corporations, venture capitalists and entrepreneurs. Xanadu Quantum Technologies Inc. XNDU-T, which went public in March, was more than 60-per-cent-owned by Canadian investors, including Ontario Municipal Employees Retirement System and BDC, when it began trading; most are locked up and can’t sell any stock until fall. Planet First is also a Xanadu investor.
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D-Wave Quantum Inc. QBTS-N, founded in B.C. but now based in Florida, once counted Canadian pension giant PSP Investments and BDC among its top investors. Both sold after it went public in 2022.
Industry proponents have long promised that quantum computers, which derive their power by tapping into the peculiar properties of subatomic particles, will some day solve tasks that are out of reach for the world’s most advanced computers, opening new applications in financial forecasting, machine learning, and drug and material discovery. Interest in the sector has surged in the past two years on the heels of a series of advances.
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, and governments and financial-sector players have been put on notice to quantum-proof critical infrastructure.
Photonic founder and chief quantum officer Stephanie Simmons said Canadians funded more than half of the latest round and own more than half of Photonic. Canadians “are learning quickly from the AI experience,” she said, referring to the fact many pioneers and future leaders in artificial intelligence were trained in Canada, but most of the commercial value in the space has been created elsewhere.
“This is our spot and if we play it right it won’t go the way of AI,” she said. “I think there has been an awakening, and I’m grateful because right now is where the market is made, it’s not after the ChatGPT moment.”
Canada was an early leader in quantum computing. 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. Those who complete the program could receive US$300-million from DARPA.
The federal government has committed up to $23-million to each of the Canadian DARPA contestants – matching the U.S. funding they’ve already qualified for – and a fourth player, Anyon Systems Inc., which has sold a system to the Department of National Defence.
Photonic chose to pursue private capital at a time when rivals are rushing to go public. In addition to Xanadu, Infleqtion INFQ-N and Horizon Quantum HQ-Q went public this year; several others, including IQM, Terra Quantum and Quantinuum, have announced plans to do the same. Two quantum companies that went public earlier this decade – D-Wave and Silicon Valley-based Rigetti Computing RGTI-Q – were founded by Canadians.
Asked if Photonic planned to go public, Ms. Simmons said “it’s possible. We don’t need to rule that out or make that a plan of record on the moment.”
There are several approaches to developing quantum computers. Photonic uses silicon chips, relying upon a quantum transistor invented by Ms. Simmons to tap its system’s computing power. One advantage of this approach is that quantum calculations can be distributed among multiple interconnected components that are relatively easy to make, using silicon, a familiar material in the computer industry. The distributed approach avoids some of the challenges that arise when a computer is built around a single quantum chip.
The use of silicon comes with other advantages. Photonic must only cool its chips to one degree above absolute zero, or -273.15 C. That’s relatively balmy compared to other quantum computers, which means it can use widely available helium for cooling, rather than more precious Helium-3 used by others.
Photonic has been relatively capital-efficient. It anticipates reaching positive cash flow with its new capital. The company also didn’t sell early versions of its computer for research purposes, as others did, meaning it didn’t invest in sales and marketing early on.
Microsoft is a key partner: It plans to install Photonic technology within its Azure cloud-computing facilities and provide access to its quantum power to clients over the internet. One of Photonic’s earliest investors, former Microsoft Xbox head Don Mattrick, became CEO in March, succeeding another early investor, veteran supercomputer technology executive Paul Terry, who became chief product officer.