The best time to invest is always when the market’s down. I am utterly incompetent when it comes to investing in the stock market. I’ve cofounded and exited two very nice large public companies, and so I got to know intimately how to communicate to the market that we were any good. But when it comes to actually picking stocks, no idea. When it comes to VC investing, I’m much better at that, because VC investing is about building conviction, and I’m reasonably good at looking at where you can match your investment hypothesis to the kind of companies that look promising and you can build conviction around.
In terms of investing in quantum startups, while we, through our HAX program, are one of the most prolific hardware investors in the world, I have yet to see a quantum hardware play that I would be going after, because there’s a lot of capital already chasing that, and the return profile is pretty slow. The sweet spot, the investment hypothesis that we’ve developed, is that quantum hybrid/classical compute that can be quantum-enabled is the place to look. And there are always a lot of good software startups around to invest in.
The ones that have already started to investigate quantum now are the ones that are going to be winners, and here’s why: You’ve got a five- to 10-year time horizon to build a software company of real worth. Yes, we see overnight successes, but every overnight success I’ve ever seen has 10 years of history behind it, including OpenAI. If you get in now, by the time those businesses have built a successful business around classical compute, if they are thinking about and are incorporating either quantum hybrid techniques or just preparing for an overall move to quantum, quantum will be a really big change in their cost base.
You might have a company that in five years’ time is looking to go profitable, and then suddenly, it creeps along for a while, and then suddenly, quantum compute catches up and they can change their margins enormously. And then you’ll have a spectacular return, because a lot of investment that I’ve seen in the quantum space, people are thinking, “We’ll build it, and then we’ll wait for quantum computing to come. And then, somewhere along the line, we’ll be expert at what we’re doing.”
And then, by that time, they’re going to have a long road ahead of them just to make the business successful, because a business is all about the customer, and if you can’t deliver to the customers already, that takes time to build. Even if you’ve got the best quantum solution in the world and you come out of the blue, it takes quite a long time to get adopted. My investment hypothesis is, go for companies that are getting toward adoption or are adopted on a classical basis but that have deep understanding of what quantum algorithms they’re going to need to change their cost base.