Xanadu Quantum Technologies Inc. has raised $100 million following a scientific breakthrough that put the Toronto startup at the forefront of the global race to develop super-powerful quantum computers.
The transaction, led by Canadian private equity firm Georgian and supported by Porsche Automobil Holding SE POAHF, values Xanadu at US$1 billion, including cash received.
Other investors in the transaction include US funds Alumni Ventures and Pegasus Tech Ventures, Dubai-based Forward Ventures and previous backers Bessemer Venture Partners, Jeff Skolls Capricorn Investment Group, BDC Capital and US venture capitalist Tim Draper. Silicon Valley Bank provided approximately $10 million in venture capital.
The valuation is three times the level granted to Xanadu when it raised $100 million a year earlier, at a time when valuations for tech companies were already rising. In the first quarter of 2022, Georgian set the terms for the latest deal, which The Globe and Mail reported in May was in the works.
Since then, the stocks of publicly traded quantum computing developers Rigetti Computing, IonQ Inc. and Canada’s D-Wave Quantum Inc. have all plummeted. This means that on paper, Xanadu is one of the highest rated companies today trying to develop processors that derive their performance from exploiting the quantum physical properties of subatomic particles.
It also has enough cash to fund Xanadu through 2026, said CEO and founder Christian Weedbrook.
Margaret Wu, Georgian’s lead investor, said in an interview that her firm came to a valuation earlier this year “based on what we’ve seen in the public markets” and for other quantum computer developers.
“We think there is potential for a much greater return over the long term than the valuation at which we invested,” she said. “Xanadu has scaled efficiently, so this is a reasonable rating.”
Despite the drop in peer ratings, other new investors came forward, including Porsche SE, the German holding company that controls automakers Porsche and Volkswagen. It’s one of eight technology investments Porsche has made outside of its core auto holdings, and the first in Canada and quantum computing.
“By investing in Xanadu, Porsche SE is investing in a key technology with enormous market potential,” said Porsche board member Lutz Meschke in a statement. He added that his team and technological approach “convinced us that Xanadu will play a leading role in bringing this technology to a wide range of users.”
In June, Xanadu announced that his machine had achieved a “quantum advantage” – meaning it was delivering a result beyond the practical reach of a traditional computing system. It returned a series of numbers within a certain probability range in 36 millionths of a second in an operation that would have taken the world’s most powerful supercomputers more than 9,000 years to match. Google was the first company to demonstrate quantum advantage with its computer in 2019.
The feat has no immediate application, and it could take four to five years for Xanadu to develop its machine to the point where it makes a difference in solving customer problems – a timeframe Mr Weedbrook added: “In principle it is achievable, but it’s a stretch goal” that “takes a lot of things to get our way.”
There are several approaches to developing quantum computers. Xanadu’s method uses photons in a process known as “squeezing light” that involves firing lasers, allowing light particles to create quantum effects on thumbnail-sized chips. Its technology is based on Mr. Weedbrook’s doctoral research at Australia’s University of Queensland. It works at room temperature unlike competing machines that require an elaborate supercooling process to achieve quantum effects.
Industry players believe that quantum computing could one day help in drug discovery, materials science, financial risk modeling and optimization exercises like traffic management. One challenge is to develop enough “qubits” — entangled pulses analogous to ones and zeros in a conventional computer, but more versatile because they contain a mix of values — to correct errors that creep into a quantum system. The magic number, Mr. Weedbrook, is one million qubits. Xanadu’s newest computer is a 216 qubit device.
Mr Weedbrook said his 150-person company is initially focused on developing next-generation batteries as automakers have started putting together quantum teams “so you don’t have to convince them of the science or the benefits”.
Xanadu recently announced a quantum research program with Volkswagen to simulate battery materials. Quantum computing “could have a significant impact” on the development of safer, lighter and less expensive batteries for electric vehicles, said Arne-Christian Voigt, VW’s head of breakthrough technologies and innovation. “We could deploy it as soon as possible once the technology is ready.”
Ms Wu said Xanadu, which has also developed software that works with various types of quantum computers, “executed and showed that they were able to achieve the qubit counts and milestones that they wanted to achieve,” and spent efficiently at the same time. “We are doubling down and showing our belief in this company.”