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 the country’s domestic 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 financing was led by British climate technology financier Planet First Partners and drew backing from U.K.-based Firgun Ventures, 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 British government’s National Security Strategic Investment Fund and Canadian financiers Inovia Capital and Yaletown Partners. Photonic has raised more than US$350-million to date.
Canada has now produced three quantum computer developers valued at billions of dollars apiece, drawing backing from Canadian pension plans, banks, Crown corporations, venture capitalists and wealthy entrepreneurs.
Xanadu Quantum Technologies Inc. XNDU-T, which went public in late March and has seen its valuation peak above US$10-billion, was more than 60-per-cent-owned by Canadian investors, including three banks, pension giant Ontario Municipal Employees Retirement System and BDC, when it started trading; most are locked up and can’t sell any stock until September. Planet First is also an investor in Xanadu.
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D-Wave Quantum Inc. QBTS-N, founded in Burnaby, B.C., but now based in the U.S., once counted Canadian pension giant PSP Investments and BDC among its biggest investors. Both sold out after D-Wave went public in 2022.
Photonic founder and chief quantum officer Stephanie Simmons said Canadian capital providers accounted for more than half of the round and that domestic investors own more than half the company’s equity. Canadians, she said, “are learning quickly from the AI experience,” – 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. 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.”
“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; none have yet done so. Those who complete the program could receive more than US$300-million from DARPA.
To counter concerns that nascent developers could be wooed to leave Canada, the federal government has committed up to $23-million to each of the three 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 fundraising 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 by merging with special purpose acquisition companies. Several others, including IQM, Terra Quantum and Quantinuum, have announced plans to follow suit. Two of the four quantum companies that went public earlier this decade – D-Wave and Silicon Valley-based Rigetti Computing RGTI-Q – were founded by Canadians.