Podcast with Christophe Jurczaj, Founder and Partner at Quantonation

My guest today is Christophe Jurczak, founder and partner at Quantonation, a quantum-focused venture capital firm. We spoke about his investment strategy, what he sees from his position as a Board member, vertical integration, and much more.

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THE FULL TRANSCRIPT IS BELOW

Yuval: Hello, Christophe, and thank you for joining me today. 

Christophe: Hey, Yuval. Good to be on board. Thanks for having me in your podcast. Thanks. 

Yuval: So, who are you and what do you do? 

Christophe: I'm Christophe Jurczak. I'm a partner at Quantonation, which is a fund dedicated to quantum technologies and deep physics, which I started a few years ago with my partners, Charles and Olivier in France. Now, I'm based in the US mostly, but we have made many investments, I think we're the largest investor in terms of number of participation in the quantum space with 15 lines so far. We made 17 investments, two exits, so we're having 15 companies in the portfolio investing as we speak. We have a couple of deals closing over the next weeks, and we’re proceeding with the quantum revolution! 

Yuval: How large is the fund? 

Christophe: So it's a bit tricky to answer. I will tell you a little bit about the story of how we came to be, and I think that's interesting also, because that reflects the dynamics of the sector. So maybe a few words about myself also to explain the origination of Quantonation. So I'm a physicist by training, which is relatively rare in venture capital. I did a PhD in quantum physics in 1996. That's a while ago, in neutral atoms technology, I did even a postdoc at the time but then focused my career mostly in the energy sector, renewable energy. 

And back in 2015, while I was living in Palo Alto, I decided to come back to the sector of quantum tech. That's when more or less IonQ, Rigetti were founded, things started to happen. I think quantum computing when I was thinking about that back in ’95 - ’96, that was really science fiction, but then it was extraordinary to see things evolving at that speed. So I came back to the sector, it took me a couple years to figure out exactly how, but then we started Quantonation with Charles Beigbeder, Olivier Tonneau and Jean Gabriel Boinot in Paris in 2018. 

And we did it not... let's say, just in one time. The sector was relatively immature for early stage investment. So it took us a little bit of time. We structured it in two phase. First, we did some investment from a vehicle. And then we converted into a fund, strictly speaking, GP/LP structure, traditional venture capital. So the fund Quantonation 1, which is the fund we're talking about, has been launched early last year, first closing. We put into the fund all the assets we had already invested in. That's why we have 15 investments already in the portfolio. 

And then, if all goes according to the plan, this month, in March, we should do our final closing for the fund. We should be around €80 million, which is rather substantial for an early stage fund since we're really investing in the first phases of a life of a company. So just at in corporation, or one or two years after, it’s what people call pre-seed and seed, and then we do some follow on investments. So 80 million for the fund, and that's where we are. So I hope we'll share the good news within a couple of weeks, either in March or April. But we seem to be on track to reach this number way past our original target, which was €50 million. So things have been good over the last months. Lots of progress, lots of very nice results from the portfolio companies. 

Yuval: And what's the investment thesis? Is it anything quantum, is it software, hardware, applications, quantum sensing, quantum communications, quantum computers?

Christophe: It's physics first, let's say. So I call that deep physics, maybe it's a weird term to many people, but let's say it's quantum, essentially, quantum technologies for its various applications, whether computing, sensing, communication, and also some things that are quite like it. But, let's say, not necessary quantum 2.0, with entanglement, superposition. For example, we have invested in photonic chips, which I put in this category. We're looking at this moment at new materials for long wave infrared sensing, which is very exciting. Not strictly speaking your quantum 2.0, as people say now, technology, but there's some consistency, because that's the same markets, same applications, same dynamics. 

But by and large, at the end of the day, it's essentially, mostly quantum plus some of these deep physics things, and the applications are the three ones I've mentioned : sensing, communication, computing. We do hardware and software, quite heavy on hardware, I must say. But lately, we have been also investing more and more into software. And there's a good balance in the portfolio in my view, and that's what's really important I think in this initiative. To have a balanced portfolio between things that are relatively short-term like quantum sensing with true markets, applications, revenues, and customers, real product development and things that are a little bit more speculative. 

And it's mostly on the quantum computing side for some technologies and some applications. So we have a good range of technologies, I think, different dynamics. And we have quantum for now with sensing things happening right now, and markets and technologies being deployed over the next couple of years for the other applications.

Yuval: And from a geography focus, do you see quantum happening in one particular continent? Or are your investments centered primarily in France or Europe? How does that work?

Christophe: We are global and that's very important to have the capacity to make the investment decision really based on the technology, on the team, on the value of the startup we're investing in. But naturally, we have also many connections in France and in Europe. So we have quite a lot of projects from France, from EU, from the UK. We have invested in Canada, several companies in the US. Not yet in Israel, that's something we've been looking at, but definitely could be a possibility. Southeast Asia as well, we have looked at a couple of projects. So yeah, it's important to invest globally. 

Of course, there are different dynamics, different ecosystems for these kinds of sector, non-dilutive grants, what we call the money that's not the equity, but the grants that the government essentially is giving to the company that's really important for the company to be well-positioned. So in general, I must say, if there's no such plan, I think there's a few chances that we see an ecosystem thrive and companies coming out of the country. When there's a well-structured plan, as is the case in the UK, in Quebec, and Canada, and US, in France, Italy a little bit. We have some projects in Spain, in Switzerland and Germany, of course, I mean, there, we see a good and healthy pipeline of projects. 

Yuval: I think that two of your companies have recently merged, Pasqal and Qu&Co. And so the result of that merger is essentially a full stack company, from hardware all the way to the applications. Maybe it's an obvious question, but do you think it's a good idea to create these full stack companies as opposed to allowing customers to choose best-of-breed hardware, software components, make sure the hardware can run any software, make sure the software can run on any hardware and so on?

Christophe: Yes. Now I think it's a good idea, obviously. We really were interested in sponsoring this initiative. I think there's a very good report by BCG about hardware and software, how things play there. And I think it's a question of time, in a sense. I think, as of today, especially in the phase where we are, where we don't have error correction, we don't have universal fault tolerant quantum computers, I think it's quite clear, there's a very strong connection between the hardware and software and the applications and the development. So there has to be strong connections between these different actors in the stack. In the long term more, let's say, hardware agnostic approaches definitely will make sense in my view, but for now I think there needs to be such a connection. 

So, one way to establish these connections and to make this efficient is for hardware companies to develop some software applications themselves. So directly, and Pasqal was already doing that. And then to accelerate, going to M&A and that has happened. That will happen. Rigetti had done that also a few years ago with QxBranch. That was the first operation in the sector, I think, and I expect things will happen. Again, there's also obviously, the Honeywell / Cambridge quantum computing merger, which is also in this category. But by far, that doesn't mean that that's the only model. For companies like Pasqal, Honeywell and others, the platform is available for partners to develop applications on it. 

But one thing, for sure, I think is that there needs to be a strong connection. So how it is built, I mean, that's open under different mechanisms, strong partnerships, privileged access to the platform. Access to the hardware will be a key challenge over the next years. There are not that many machines that are available. There will not be that many. And I see that it'll be an issue people tend to underestimate... As soon as we reach quantum advantage, of course, people will want to use these machines. So the connection with the hardware will be super important. 

But full stack is one option, which is, I think, has a lot of value in the current stage, doesn't mean it's exclusive. And I think there's a lot of value in the collaboration with specialized software developer, people who are developing platforms as well. It’s very open, and I think it's way too early to decide about how the stack looks like and how the different actors will position themselves. I think it's open, it'll be open for quite time. Let's see.

Yuval: You have a great seat to see the industry progressing because I'm guessing that you either you personally or your partners sit on a lot of quantum computing boards in a way you see not just the marketing story, but also how the sausage is made. And so what are you hearing from or what are your companies hearing from end customers? Is the view of the enterprise company changed over the last year or two? Do you think that people are more open, less open? What is the sense that you're getting about the direction of the enterprise market? 

Christophe: So I've been in this for a while now. Before starting Quantonation, I've worked a bit also with QC Ware in the US, with Matt Johnson and the team there, really very interesting work. So was trying back in 2016, ’17 to work on the applications and software. And I've seen the situation change or evolve drastically over the years. I think I see the industry now moving really into the direction of, not only, let's say, exploring with proof of concepts and trying things, but really seriously putting quantum into their roadmap, whether it's for a product next year or in five years. I mean, obviously we're not there yet. There's still things that need to happen so that we reach this quantum advantage we all hope is on the horizon. But I see industry taking these technologies much more seriously and starting to integrate or put quantum computing, QPUs into their workflows. 

That's true in particular in finance, I must say. So there's a bank, a customer from Pasqal and Multiverse, which are two portfolio company, that’s called Credit Agricole Corporate Investment Banking. They published a press release last year and since I'm in the board of Pasqal I follow things a little bit there, not to go into too many details, but I think that they did really an outstanding job putting resources from the company into the dialogue with the software and the hardware vendors. And that was pretty spectacular. The level of engagement, seriousness, the profiles they put into these conversations. I think that's something we did not necessarily have five, six years ago. And I think now people take this much more serious and authentically, want to put that into their roadmap.

The number of customers and companies to bring in, I think, that's increasing, but we need more initiatives such as, for example, hackathons. And I want to mention one that we did with an association I co-founded in France that is called QuantX, alumni of École Polytechnique and I did that with Elvira Shishenina. She's working at BMW and Alexandre Krajenbrink from Cambridge Quantum Computing. And essentially we’re working on hackathons of a new kind. Technical hackathons, relatively standard, let's say, with vendors. The first one we did 10 vendors, different technologies bringing super interesting use cases, but then we have a phase also working on the business and the business case on how to turn what has been developed into a useful product, how to interface also and to interact with the companies and the end users. That was super interesting.

This initiative, building bridges between end users and tech developers, I think we need more of that, not only the companies developing the technologies themselves, but also ecosystem wide initiatives with not-for-profits. So QuantX, Unitary Fund, I'm a board member of Unitary Fund as well, doing exceptional things in open source space and hackathons as well. Also Xanadu is doing great hackathons, they have been super helpful. 

These initiatives that create some connections within the ecosystem between the different parties are still very important at this stage. And I've seen that happening over the last couple of years. I think it makes a huge difference. It helps bring new customers to the table, new companies, that you are not thinking about when we started working in quantum computing and application. So yeah, I think the space is growing. We see more customers, also more business units in these companies and professionals really getting involved, not only the R&D people, but also the business people. And that's super important. 

Yuval: Let's talk a little bit about the national level. What would you like to see governments do to help move quantum along? And what do you think about the nationalistic, I need a quantum computer, because I might not be able to use your quantum computer if there's a conflict or something like that, the quantum's arms race?

Christophe: Yes, I think for investors obviously, we want less friction. I mean, we want as many connections as possible. Capacity for these companies to do business wherever they want. And obviously, there’s some nationalism, I hear you. And what we try to do is building connections and keeping lines open between ecosystems. And one way to do it I think is working on the very concrete initiatives at ecosystem level, not necessarily national level, but also regional ecosystem. Thinking for example, connecting a few great ecosystems in Europe like Munich Quantum Valley, there is Paris center at Saclay, as well. There's Delft in the Netherlands, very strong ecosystem in Canada, such as Sherbrooke, I am very close to the ecosystem there. They're doing really exceptional things. I think building connections between these ecosystems, not only the governments, but also the companies, the universities, the users that interact at this level, I think is one way to go. 

Seeing also in Europe, for example, these initiatives in the HPC space, connecting different countries with Euro HPC that’s also a very good idea. But we can extend that also, not only to Europe, but countries outside of Europe, obviously, we need that to happen. I think quantum... we have so many things to do in order to improve the quality of the processors in order to get to long-term fault tolerant computing that we all dream of. I think it's not over by far, and it would be really damaging for everybody if borders were closed now, from this perspective.

I mean, quantum is coming from labs essentially. I mean, from academic collaborations, which have been there forever. And researchers have been quite free to interact and develop together projects. So we must pursue the possibility to build these connections and this collaboration, I think it's super important. It's way too early to close doors. I think we're not at the stage where these machines represent a threat just right now for implementing Shor's algorithm, for example, we know it will take some more time. 

So we should be careful, and not let people think that it's a weapon as of today already, and it's there. Of course, there's a threat, but it's longer term, and there are ways to protect against that. But that's one part of the story. Everybody, I think the startups, the communities, I mean, the governments must be careful not to overdo it also in terms of assessment of the maturity of this technology. We're still very early. We need collaboration within countries, between countries, between continents. That's absolutely necessary.

Yuval: Do you have any concern that a quantum winter is coming?

Christophe: So I don't know exactly what that means, but no. I'd say, if I'm looking first at quantum with respect also to all the other technologies that have an impact like blockchain, AI, et cetera. I think when I hear sometimes people tell me, okay, there's I mean too much money in quantum. I mean, what does that mean when you compare so to such other technology or autonomous driving for example? Given the impact in the long term that quantum will have, which is huge, and which starts to be well assessed now, I think definitely, we're not putting enough money in quantum, in my view, in order for us to reach this level. So quite the contrary, we need more. 

One thing we must be careful about is to manage expectations, I think. And sometimes I see, let's say, statements that are a little bit too aggressive in my view about reaching this and that given application being implemented in quantum computer within a time where quite frankly, I don't think it makes sense. I think that's a difficulty and a challenge. It's difficult to assess still the horizon for application of quantum. I think that's what we do with Quantonation. I think we do it well. As I said, we have a portfolio companies, we are able to assess the different levels of maturity. We invest in some technologies that are very early stage. Some that are a little bit more mature. 

My view of quantum, it's a journey. We'll have applications with that will be implemented very early. And I think maybe even as soon as this year or next year, and I really think, seriously that we will have quantum computer implemented in workflow at this stage, not for dramatic applications, let's say. It'll be part of the workflow. It'll have an impact. Maybe it's sampling, for example, which is something that's very useful for many applications. 

Long-term, we'll do extraordinary things, but the important is to assess the dynamics and to understand the journey. It's not going to happen all at once. We will have more and more applications. And I think the BCG report which was published I think was last year, was very good at explaining that. That we will unlock different pools of applications. I think that's definitely it, and that's important.

So we must be careful not to overpromise, that could have negative impacts. But overall, I think we need more money. We need more investors, more investments in early stage in late stage. And I'm quite optimistic about the fact that we will have enough applications demonstrated over the next year so that this will go on. I mean will be consistent. When I started in 2017, ‘18 in making these investments, that was much more difficult because there was not much to show at the time Really we were talking a lot about the science. Which is great, obviously, but it's not easy to convince investors based on that. 

Two years later, we had proof of concept projects. We had some real hardware devices, things to show our customers. And I think the journey has been extraordinary, very fast as well, true. But I see continuous progress. We must be careful about assessing properly the maturity of this technology, be aware and mindful of the hype. But if we keep that collectively under control, I don't think there will be a backlash or anything like that, that quantum winter might represent, well, this terminology, as I understand it. So we must be careful. That's a large part the responsibility of the quantum community, but I'm quite optimistic. 

Yuval: So as we get close to the end of our conversation today, let me put you in a position where you are a master of the universe, or at least master of the quantum universe, what would you like companies to do in the next two years, both your portfolio companies as well as broader companies in the ecosystem? What would you like us to be focused on? 

Christophe: Yeah, well, the next couple of years … I think the quantum education, I think we still miss that. And I think the industry is doing well, is progressing really well in the hardware, et cetera, but it takes time and things will happen. I think we still missing attention to the ecosystem as such as a whole. And I think I see some governments and some plans where people will put money into quantum technologies that’s great, taxpayers money getting into these technologies, these companies, but they tend to neglect all the other aspects, which are the glue that would help all these things being consistent. 

So I'd like very much that there are more ecosystem level activities, regional, national, and global, more connections between countries. There are more funds as well, more investors. I think we need, as I said, more money. And it's good to be here and to be the first, but we welcome obviously, other investors, other people to invest into quantum technologies. That's very important. 

But I think the community as such needs to structure itself and to grow. And that's very important. That's the way we will have more projects also, more companies, the deal flow for us as investors is super important. We need more. I mean, we need an acceleration there on the number of companies that's created every year that gets into the ecosystem. And that's going to happen because we have a strong ecosystem. So working at the same time at building these great companies, but also don't neglect ecosystem level activities with not-for-profits, for money that has to go there as well. And that in my view is very important. If we don't do it, we risk really not to be in a position to grow at a pace that we should have. And again, I think sky is the limit there. I think we have a bright future ahead of us, but we need to have these activities.

Yuval: Christophe, how can people get in touch with you, and what investments are you looking for? 

Christophe: Easy to get in touch with me. I mean, I've got my email on the website and it's christophe@quantonation.com. One thing we like very much to do a lot, I think is talking also to people who are structuring or thinking about projects even before they incorporate. That's early investment. That's a lot of work for us obviously, but that's part of the job. And I think that's very important, because there are things to do, things not to do as well. After 15 investments and growing, we have learned some lessons. So we'd like to share that as well. 

So I'm really open to have conversations with people on early stage project even if it's not very mature. We're interested in, as I said, various geographies, North America, Europe, Southeast Asia projects there, hardware, software. I mean, the thesis is on the website, I'd say. We will go on. We will not change. I think very with where we are and what we have learned and done. So look at the companies we've invested in, that might give you some ideas. And we look for new projects all the time. I think it's exciting founders, teams, exciting science, really open to have these conversations early on.

Yuval: Excellent. Well, thank you so much for joining me today. 

Christophe: Thanks, Yuval.