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Xanadu Quantum Technologies Inc. has raised US$100-million on the heels of a scientific breakthrough that vaulted the Toronto startup to the lead in the global race to develop superpowerful quantum computers.

The deal, led by Canadian private capital firm Georgian and backed by Porsche Automobil Holding SE POAHF, values Xanadu at US$1-billion, including cash received.

Other investors in the deal include U.S. funds Alumni Ventures and Pegasus Tech Ventures, Dubai’s Forward Ventures, and past backers Bessemer Venture Partners, Jeff Skoll’s Capricorn Investment Group, BDC Capital and U.S. venture capitalist Tim Draper. Silicon Valley Bank provided about US$10-million in venture debt.

The valuation is three times the level accorded to Xanadu when it raised US$100-million a year earlier, at a time of already heightened valuations for technology companies. In the first quarter of 2022, Georgian set the terms on the latest deal, which The Globe and Mail reported in May was in the works.

Since then, values of publicly traded quantum computing developers Rigetti Computing, IonQ Inc. and Canada’s D-Wave Quantum Inc. have crashed. That means that, on paper, Xanadu is now one of the most highly valued among the crop of companies trying to develop processors that derive their power by harnessing the quantum physics properties of subatomic particles.

It also has enough cash to fund Xanadu through 2026, chief executive officer and founder Christian Weedbrook said.

Margaret Wu, lead investor with Georgian, said in an interview her firm arrived at a valuation earlier this year “based on what we saw in the public markets” and for other quantum computer developers.

“We think in the long run there is potential for a much larger outcome than the valuation we’ve invested at,” she said. “Xanadu has scaled efficiently and so this is a reasonable valuation.”

Despite the drop in peer valuations, other new investors signed on including Porsche SE, the German holding company that controls car makers Porsche and Volkswagen. It is one of eight technology investments Porsche has made outside its core auto holdings and its first in Canada and quantum computing.

“By acquiring a stake in Xanadu, Porsche SE is investing in a key technology that has enormous market potential” in several sectors, said Lutz Meschke, a member of Porsche’s board of management, in a statement. He added its team and technological approach “have convinced us that Xanadu will play a leading role in making this technology available to a wide range of users.”

In June, Xanadu revealed its machine achieved “quantum advantage” – which means it delivered a result beyond the practical reach of a conventional computer system. It provided a series of numbers within a specified range of probability 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 to demonstrate quantum advantage with its computer in 2019.

The feat doesn’t have an immediate application and it could take four to five years for Xanadu to develop its machine to the point where it makes a difference solving client problems – a timeline Mr. Weedbrook added “is in principle achievable but it’s a stretch goal” that will “take a lot of things to go 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, enabling light particles to generate quantum effects on thumbnail-sized chips. Its technology is based on Mr. Weedbrook’s PhD thesis at Australia’s University of Queensland. It functions at room temperature unlike rival machines that require an elaborate, supercooling process to achieve quantum effects.

Industry players believe quantum computers could some day help with drug discovery, materials science, financial risk modelling and optimization exercises such as traffic management. One challenge is developing enough “qubits” – entangled pulses analogous to 1s and 0s in a conventional computer, but more versatile because they hold a mix of values – to correct for errors that creep into a quantum system. The magic number, Mr. Weedbrook, is one million qubits. Xanadu’s latest computer is a 216-qubit device.

For now Mr. Weedbrook said his 150-person company is focusing on next-generation battery development, as car makers have begun assembling quantum teams “so you don’t need to convince them” about the science or benefits.

Xanadu recently announced a quantum research program with Volkswagen to simulate battery materials. Quantum computing “could have significant impact” in the development of safer, lighter and more cost-effective batteries for electric vehicles, said Arne-Christian Voigt, VW’s head of breakthrough technologies and innovation. “We could use it as soon as possible once the technology is ready.”

Ms. Wu said Xanadu, which has also developed software that works with several types of quantum computers, “has executed and shown they’ve been able to progress toward the qubit counts and milestones they set out to achieve” while spending efficiently. “We’re doubling down and showing our conviction in this company.”

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