The search for the next big investment trend has led savvy venture capital firms to D-Wave Systems Inc., a Vancouver high-tech startup that is racing to develop a commercially viable quantum computer.
Headed by former University of British Columbia student Geordie Rose and Ukranian physicist Alexandre Zagoskin, D-Wave recently secured commitments for up to $7.1-million (U.S.) from a group of investors led by Draper Fisher Jurvetson (DFJ), one of Silicon Valley's best-known venture capital firms.
The financing is part of a broader attempt by DFJ and other investors to cash in on the growth of nanotechnology, a revolutionary approach that aims to solve engineering and scientific problems by understanding how materials work at the molecular level.
DFJ managing director Steve Jurvetson said his Redwood City, Calif.-based firm is investing in nanotech startups such as D-Wave in the belief that there are few industries that won't be affected by nanotechnology in the future.
"This is, generally speaking, an industry that will be maturing over the next five to 10 years rather than in the next five to 10 months," he said.
D-Wave fits into the nanotech space because it is developing a quantum computer to engineer molecule-sized components that could one day be used as enabling tools in sectors, such as biotechnology and alternative energy.
Widely seen as a possible next generation, quantum computers have the potential to perform certain calculations that are far beyond the scope of conventional technology.
The company is hoping that quantum computers could be applied to solve problems by taking the linear structure of a protein, for example, and predicting what its shape will be when it folds.
However, in an interview, Mr. Rose, D-Wave's chief executive officer, said it could be at least another year or two before the company is able to define what it is that constitutes a commercially viable quantum computer.
"We hope to have an early commercial win in a very specific kind of problem, which will enable us to branch out," he said.
A PhD in physics, Mr. Rose launched D-Wave in 1999 with the help from Mr. Zagoskin, a 39-year-old physicist from Kharkov, Ukraine, and Haig Farris, who is now the company's executive chairman.
A fixture in the Vancouver high-tech scene, Mr. Farris, is a co-founder of Ventures West Inc., one of Canada's oldest and best-known venture capital companies.
D-Wave has 13 full-time employees in Vancouver and is collaborating with more than 60 researchers, not only at UBC, but at universities in the United States, Holland, Sweden, Britain and Germany.
Mr. Rose said he initially broached the idea of building a quantum computer while taking Mr. Farris's high-tech entrepreneurship course at UBC.
By that time, he had met Mr. Zagoskin, who was working as a researcher at UBC after writing a PhD thesis on the quantum properties of point contacts.
Mr. Farris helped them write a business plan and introduced them to financiers in Silicon Valley, many of whom - at least in the early stages - considered the quantum computer concept too far out to be worth sinking any money into.
"The reaction was always the same,"' Mr. Rose said. "This is a very interesting story, but I don't understand how it fits into my investment philosophy.''
Still, making the rounds in California eventually paid off when financiers such as Mr. Jurvetson, who largely missed out on the late 1990s tech bubble, were starting to focus on nanotechnology in the hope that it could replace computer software as the next big investment trend.
"When we did our last financing round, it was they who approached us,"' Mr. Rose said.
Under a deal that was completed in June, D-Wave has received the first $2.1-million from a group of financiers led by DFJ, and including GrowthWorks Capital of Vancouver and Business Development Bank of Canada.
The remaining $5-million becomes available once investors such as Mr. Jurveston, who has taken a seat on the company board, are comfortable that D-Wave is on track with its business plan.
"They key problem for us is not [determining]where we want to go, but how long it will take to get there,'' Mr. Rose said.
The quantum computer that D-Wave is developing is roughly the size of a small finger nail, and consists of little more than a tiny sapphire chip that contains the aluminum circuitry and quantum bits, or qubits, that give the computer its processing power.
Mr. Rose said it takes 30 qubits on a single chip to create something that can compete with a low-end supercomputer. So far, the company has been able to mount two qubits on a single chip. "That is where we are in terms of trying to create our first commercial stage machine," he said.
Venture capital sector sources believe the company faces a key hurdle in attempting to determine where it stands in comparison with major competitors from the computer industry who are thought to include the likes of IBM and NEC.
"They key is to fabricate and design the system in such as way that you don't lose the quantum coherence properties that give you the computing power," Mr. Zagoskin said.
However, more funding will become available if D-Wave is able to reach certain milestones as it works to develop its quantum computer.
"They will raise more money in the future and we are looking forward to participating actively in that,"' Mr. Jurvetson said.
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