When should quantum researchers seek start-up funding?
It’s extremely common in the quantum technology space to see start-ups emerge from the academic environment as spin-outs (or spin-offs, if you prefer) of university research projects. It makes sense because so much new discovery and innovation is happening at universities, and those that make the transition from research project to start-up can emerge with ready-made teams of talent to advance their aspirations (no small advantage amid a quantum skills shortage.)
That said, many research teams may not have a good sense of when they should make that jump, and particularly when they should seek outside funding from a venture capital firm.
The good news, as two partners from VC firms said at IQT’s The Hague event last week, is that you can never be too early in seeking funding for your quantum innovations.
“What I tell a lot of researchers is to look at your research, look at how differentiated you are from other research findings,” said Manjari Chandra Ramesh, partner at Amadeus Capital Partners. “Do you believe that you can answer a problem that the business world is having? If you believe that that’s possible, then that is the right time. You don’t have to worry about the team you have at present, especially in the quantum space. You don’t even need a prototype as such. You just need to have the research and the theoretical fundamentals that form the basis for your product.”
Rick Hao, partner at SpeedInvest, agreed. “Basically, our strategy is that we love to speak to the researchers or founders as early as possible. Say for example, you just have a rough idea. You have no clue about the business plan, but you want to speak to someone to get some clarification and discuss it. We love to speak as early as possible because particularly for quantum… you may the technology, but may not have the product prototype yet.”
Hao also said there’s something that start-ups founders coming from university background may not want to believe, but they need to hear: “You don’t need to pretend like you know everything. This is very normal actually for very early stage tech startups not to have everything figured out.”
He added, “Details can be worked out later, but you need to show that you have basically thought about the critical questions and convinced us we can make your venture successful. I think that’s very, very important… to really convince people you have clear thinking and you have a clear idea of what you are planning to do.”
Both Amadeus and SpeedInvest focus on helping start-ups figure out those later details, one in particular being “product market fit.” Aspects of that included helping the founders figure out the first application they want to pursue, as well as the bigger application they should be structuring the company for over the long term.
One thing VCs need to have a sense of certainty about early on is how disruptive the start-up’s technology could be in the marketplace. Amadeus is most interested in platform technologies that are core to quantum. “We don’t want something that is sitting in the periphery of the quantum landscape, maybe making something else better by 10% or 20%. We are answerable to our underlying shareholders, and so we have to invest in something that has the potential to be completely disruptive.”
