State of Quantum 2024 report: capital, sovereignty, and readiness

To learn more, Electronic Specifier’s Harry Fowle had the opportunity to speak with Stephen Nundy, Partner & CTO at Lakestar, and Christina Franzeskides, Senior Associate at Lakestar, who gave their insights into the shifting space of quantum computing, highlighting the shift in capital, the growth of government interest, the necessity of quantum readiness, and the importance of quantum sovereignty.

The shift in capital

Amidst the quantum sector in 2024, one key theme emerged, the rise of government interest and spending alongside the subsequent decline in venture capital. Whilst this by no means signifies a loss of interest in the technology, it does mean that the tech needs a period to mature into something that will be able to have a solid base of ROI value amongst other things. The shift can be attributed to many things, but most notably a significant decrease in available risk capital and the strategic importance of quantum technology in national and economic security.

The venture capital landscape for quantum technology has experienced a notable contraction globally in recent years. This decrease in available risk capital has led to a cautious approach among investors, who are now seeking opportunities with clearer and more certain returns. The initial enthusiasm for deep tech and quantum ventures has waned, particularly among those who were considering but had not yet invested in the sector. “The venture capital pot has just got smaller over the last year or two, which is a global phenomenon. There’s just a lot less risk capital to be deployed in general and the capital that is there is looking at the hurts that have happened in the industry,” noted Nundy. This trend is coupled with the impact of large investments made a few years ago by deep-pocketed investors and sovereign states, he continued, which have yet to yield expected returns. As a result, there's a reluctance to further invest in these high-risk, high-reward technologies.

Beyond just the raw monetary factors, the sheer importance of quantum technology to national governments is also crucial in the shift. For Nundy: “Quantum is in the group of technologies technologists call critical infrastructures. You can see this in countries like the UK, where the government has highlighted quantum as an integral part of their 2030-oriented tech strategies, and many other European countries are following suit. This is one technology we simply cannot fall behind on.” This is one of the driving factors for the increased role governments are having within the quantum field. Governments are increasingly recognising the strategic importance of quantum technology, likening its significance to the space industry. Their investment approach is threefold: stimulating growth through grants to attract top talent, deploying capital through pseudo-sovereign funds for long-term economic and sovereign benefits, and directly awarding commercial contracts for national benefit. This multifaceted strategy, similar to that used in space technology, not only advances the quantum sector but also provides investor confidence through non-dilutive funding and guaranteed revenue streams, creating a more stable environment for quantum technology development which can then benefit the nation. “Governments are going to help keep the momentum going, and then eventually you will see VCs and corporates more strongly interested, we’re talking about macro-waves here,” attributes Nundy.

The increasing role of governments

So why are we seeing national interest in quantum now more than ever, and what role are governments playing? Over 30 governments have committed more than $40 billion to quantum technologies within the next decade, with over 20 formulating coordinated policies and roadmaps. Driving this direction is a combination of national labs and quantum computing centres which are accelerating the practical applications of quantum technology.

“I think governments are doing the right thing by increasingly recognising quantum as being important right now,” says Nundy, and the idea of sovereignty is key to this. Given the nature of quantum tech as being a critical infrastructure of the future, governments around the world are realising that this isn’t something that they can simply rely on global exports for, especially as globalisation wavers.

Nundy explained this position: “There are concerns currently in Taiwan, in Israel, in Ukraine, potential for a change of administration in the US, amongst many more.

“Compare this to 10 years ago when positive momentum was at a high. If we think back to London 2012, compare how things were globally then versus how they are now, and the contrast is staggering.

“So, I think it’s a good thing that governments are taking control of some of these key infrastructures right now. In the past couple of decades, the UK has missed things such as the Cloud or payments waves and didn’t realise what the ramifications of that were, they cannot do the same with quantum.”

Government interest is also crucially driven by the potential positive impacts it can have both economically and socially for a nation. In the UK for example, quantum technology's potential for positive economic and social impact is quite significant. The technology can yield substantial improvements in crucial sectors like medicine, for example, through enhanced efficiency in drug development and molecular modelling. Even marginal gains in these areas could lead to earlier drug market introductions and reduced healthcare costs, contributing positively to the economy and easing pressure on the NHS. Additionally, quantum computing's ability to optimise complex decision-making processes could revolutionise government spending and project management, leading to more efficient use of public funds in a variety of sectors. This technological advancement, aligning with AI and digitalisation, positions quantum as a transformative tool for government and society and an integral part of the digitalisation stack.

Whilst Nundy does believe that governments are on the right track and that sovereignty over the technology is important, countries should not fall into a ‘home-turf strategy’ trap. “Take if the UK was to turn around and say we want to have X number of quantum computers by Y, and they must be built on shore. No importing components from France, Germany, or Finland, and we will only invest in British-owned companies, that build in Britain and are British-employed. That is a losing proposition but something that might naïvely happen.”

The need for quantum readiness

Increasingly, developing quantum readiness and expertise is becoming a priority across various sectors. As outlined in the State of Quantum 2024 report: “It’s no longer just about having the technology; it’s about having the ecosystem and mindset to integrate and leverage it effectively.

“The quantum leap in computing power isn’t just an opportunity, it’s a looming cybersecurity challenge that we must prepare for today.” These factors are precisely what quantum readiness refers to. There is a considerable need for a strategic, full-stack approach to quantum technology development, that incorporates hardware, software, interfaces, and talent into one.

Franzeskides believes that quantum readiness is becoming increasingly crucial, particularly in industries like FinTech where its optimisation capabilities can greatly impact a number of processes, also noting other sectors such as logistics, medical, and national defence/intelligence. Within these fields, even marginal gains can have dramatic impacts and it’s for these reasons we are seeing the most excitement. But excitement can very quickly be replaced with fears, especially in a post-quantum world that now has to deal with quantum cyber security. “How can we make sure that we are ready for a post-quantum world? And how can we use quantum to secure ourselves in a post-quantum world at a national level? How can you make sure that we are thinking about these things? People seem to be aware of them but don’t seem to be acting on them, I think that we’ll realise too late just how big of a security threat quantum can be.”

The race for quantum security is marked by an almost paradoxical urgency. Nations and organisations are in a competition to develop quantum decryption capabilities, realising the immense advantage this technology holds. The first to achieve it could potentially go on the offence and decrypt sensitive data or defensively know how to counter it, presenting a significant strategic and monetary value over those who cannot. This race crucially highlights the need for a transition to a quantum-secure world today, where quantum encryption makes data impenetrable, something that isn’t being readily deployed.

“The longer corporates, technology companies, and governments don't employ post-quantum cryptography the more of tomorrow's and next week's and next month's conversations are going to continue to be read and understood by good and bad people alike,” added Nundy, and this is the reality of post-quantum and the ‘store now, hack later’ crisis.

There is also the need to be ready for the exponential growth of quantum alongside AI, Franzeskides highlighted the key relationship these two emerging technologies have with each other. “You can use quantum to overcome a lot of the issues with high-performance computing and AI development. But then, on the other side, use this more advanced AI to overcome some of the challenges with building advanced quantum computers. Thus, I think there's going to be a very interesting relationship that evolves from this that feeds into a lot of use of applications and cases.” It could be that the development of quantum comes at a far quicker pace than anybody anticipated, just look at the emergence of AI since OpenAI launched ChatGPT back in November 2022.

Looking ahead to the next report

Overall, the future of quantum is bright, poised to pioneer a new age of computing, so what might this future report look like in 5-10 years?

“I'd like to think that we're in a world where we have seen benefits to using quantum to further science, manufacturing, healthcare and the such and that we're in a world where people on the streets have for the first time felt the effects of quantum; that you could talk to your mum or dad or you could talk to a friend in a pub and there's something that has touched them that would not have been possible five years before if it hadn't been for quantum. I don’t mean some algorithm has been created by OpenAI, or that my TikTok feed is smarter, but that there's something that for the first time you can say: ‘You know what that could not have happened five years ago.’ I'd like us to be in a position that any person who picks up that future report will feel touched by quantum,” enthused Nundy.

For Franzeskides: “I can see us building on the points we made around security, some kind of breach happening which kicks quantum cybersecurity off. I also think that technologies will increasingly merge, as we are already seeing with AI and quantum, and that they will increasingly become something that’s used in a lot of what we do on a day-to-day basis.” Franzeskides also hopes that in the coming years, the big European quantum companies will come together to build a stronger, unified force, something she would “really like to see.”

“I would also like to see on the educational side of things, that quantum stops being solely in the ‘realm of the nerds.’ Hopefully quantum becomes something that is appreciated and understood by people coming into the workforce now that schools and universities have access and embrace the technology,” finishes Nundy.

If you would like to read the full “State of Quantum 2024” report, then please click here.