Exclusive Alphabet spinoff Sandbox AQ raises $500 million for cybersecurity and other quantum work

By Jane Lanhee Lee

OAKLAND, Calif. (Reuters) – Sandbox AQ, a startup spun off from Alphabet Inc. last year, announced on Tuesday that it has raised $500 million to help customers prepare for a quantum computing future.

Quantum computers, whose processors run on the basis of quantum physics, could one day perform certain calculations millions of times faster than today’s fastest supercomputers, but they are still years away from a big change like decrypting the encryption.

But because hackers can now collect data and wait to decrypt it when quantum computers are ready, last year the US Department of Commerce’s National Institute of Standards and Technology selected new cryptographic standards that might be more resilient to quantum computers.

The US government has declared quantum computing as one of the key technologies important to national security.

Sandbox AQ’s software scans companies’ systems to determine which parts are using legacy cryptography, which parts are in urgent need of replacement, and sets about strengthening the company’s encryption, CEO Jack Hidary said.

“Right now a lot of banks and pharmaceutical companies and governments are still using these old protocols,” Hidary said. “The average bank takes five to seven years to transition. … Hopefully they take care of their important private customer data first.”

Sandbox also has a business that sells powerful simulation software to speed up drug and materials development.

The simulation doesn’t currently need quantum computers to work, Hidary said. He said over the past 18 months chips running artificial intelligence have become powerful enough to perform some of the math for quantum physics. When quantum computers are ready, this work would accelerate even more.

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Sandbox AQ also uses existing types of sensors based on quantum physics. For example, these have long been MRI machines, and Sandbox has developed a prototype device for monitoring the heart. It can also be used to monitor subtle local changes in the Earth’s magnetic field, making navigation systems much more precise, he said.

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Last month, Sandbox AQ announced that it had been awarded a contract with the US Air Force to research these quantum navigation technologies

Former Google boss Eric Schmidt is both chairman and investor of the start-up. Additional investors include Breyer Capital, T. Rowe Price Funds and TIME Ventures, Founder of Salesforce.com Inc, Marc Benioff.

Schmidt said in a statement Sandbox AQ has already signed more than 15 enterprise and government customers and is working with 30 universities to train graduate students and other needed talent.

Some of the team and inspiration for Sandbox came from Alphabet in 2016. But Google’s parent company isn’t a shareholder, as Hidary said he wanted the company to be independent to also work with the other big cloud companies.

(Reporting by Jane Lanhee Lee; Editing by Jonathan Oatis and David Gregorio)