One of Canada’s most heavily financed technology development companies, quantum computer maker D-Wave Systems Inc., has secured a $40-million financial contribution from the federal government.
The funding, through Ottawa’s Strategic Innovation Fund, follows a year of reset expectations for D-Wave, a leader in the global race to develop computers whose chips draw their power by harnessing natural properties of subatomic particles to perform complex calculations faster than conventional computers.
Burnaby, B.C.-based D-Wave is the first company to offer a commercially available quantum computer, but after 20-plus years of development and more than US$300-million in funds raised, it is still in the early stages of building a sustainable business.
Last year D-Wave promoted Silicon Valley veteran executive Alan Baratz to chief executive officer, replacing Vern Brownell, to step up commercialization efforts. The company also parted ways with other top executives and long-time board members.
Mr. Baratz, who led Sun Microsystems Inc.’s effort in the 1990s to transform Java from a nascent programming language into the internet’s main software-writing platform, directed D-Wave to stop selling its shed-sized computers, which listed for US$15-million and had just a handful of customers including NASA, Google, Lockheed Martin and the U.S. Los Alamos National Laboratory.
Instead, D-Wave has focused on selling online access to the technology and expanded its software applications, which Mr. Baratz had started developing after joining as chief product officer in 2017. Customers including Volkswagen and biotechnology startups have used D-Wave’s technology to find answers to dense optimization problems, such as improving traffic flows in big cities, identifying proteins that could become breakthrough drugs and improving the efficiency of painting operations on vehicle production assembly lines.
D-Wave also completed a costly US$40-million refinancing last year that wiped out most of the value of some long-time investors, including the U.S. Central Intelligence Agency’s venture capital arm, Amazon CEO Jeff Bezos and fund giant Fidelity Investments. The capital restructuring cut D-Wave’s valuation to less than US$170-million, down from US$450-million, The Globe reported in October. Investors that ponied up, including Public Sector Pension Investment Board, D-Wave’s top shareholder, BDC Capital and Goldman Sachs, maintained their relative stakes, limiting their writedowns.
“Over the years [D-wave has] had to raise money and more money and more money ... and as such you end up getting diluted over time because every third quarter it seems like you run out of the $50-million that you raised,” Kevin Rendino, CEO and portfolio manager of D-Wave investor 180 Degree Capital Corp., told his investors last November. “D-Wave has been a source of bitter disappointment for all of us.”
Meanwhile, D-Wave faces years and tens of millions of dollars more in costs to continue developing its core technology. The government aid will support a $120-million project to advance D-Wave’s hardware and software and “will help place Canada at the forefront of quantum technology development, and will create new jobs and opportunities to help Canadians and advance the economy,” François-Philippe Champagne, Minister of Innovation, Science and Industry, said in a release.
During a press conference to discuss the funding, the minister was asked if the government would review potential takeovers of quantum computing companies, as the U.S. government is considering doing. Mr. Champagne provided a non-committal response, saying “I’m sure you would expect us to be eyes wide open when it comes to whatever we would need to take in terms of steps to protect….[intellectual property] that has been developed in Canada.
“We’re always out there looking at how we can improve to make sure that new technologies and inventions and improvements and IP that has been developed in Canada stays in Canada.”
D-Wave faces a slew of competitors including Google, Microsoft, Intel, IBM and Honeywell that are also trying to build the first quantum machine that can outperform “classical” or conventional computers. In addition, a new class of startups including Toronto’s Xanadu Quantum Technologies Inc. and College Park, Md.-based IonQ Inc. believe they can build quantum chips that don’t have to be supercooled to function, as D-Wave’s system and others in development do. IonQ said this week it would go public through a special purpose acquisition company become the first publicly traded quantum computing-focused company.
Mr. Baratz said in an emailed statement that since D-Wave’s launch last September of of its latest quantum chip and expanded efforts to sell online access to its computers “we’ve been encouraged by the positive customer response to the value delivered by a quantum system designed for practical, in-production business-scale applications. We’re eager to see even more developers, academics, and companies leverage it to solve larger, more complex problems.”
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