Quantum Computing - the next Frontier

DeepTech is emerging as a pivotal force across industries in the Indian economy. Given its disruption capacity, offering transformative potential across multiple industries, it has caught the attention of leading investors in the Indian venture capital ecosystem. 

Unlike traditional technology startups that focus on digital platforms or incremental innovations, DeepTech startups are rooted in scientific breakthroughs, advanced engineering, and disruptive technologies like AI, quantum computing, and biotechnology. This deep technical foundation positions them to address large-scale, complex challenges, from climate change to precision healthcare. For VCs, DeepTech offers long-term, high-reward investments that can redefine industries, though they require greater patience and a more hands-on approach.

India’s DeepTech startups are becoming critical pillars in the country’s innovation landscape. These startups drive progress in fields like artificial intelligence (AI), quantum computing, semiconductor research, space technology, and material sciences. Not only do they help in the country’s technological advancement, but they also position India to be a global leader in cutting-edge technologies.

According to NASSCOM, the Indian DeepTech startup ecosystem doubled from little over 1600 startups in 2019 to over 3,000 2024, with founders pushing forward in AI, quantum computing, and other high-tech sectors. The annual funding mark in the early stage DeepTech ecosystem has grown from $1.2B to $2B during this period.

It is also encouraging to see Indian Venture Capital teams building strong theses and directional views across sub-sectors of DeepTech. At Chiratae Ventures too, we continue to seek out opportunities in frontier technologies, and one area we are particularly focused on is quantum computing, which holds immense promise for the future. 

The Industry Impact of Quantum Computing 

Quantum computing has the potential to revolutionize industries globally. Major companies like IBM, Google, Microsoft, and even Alibaba are investing billions of dollars into quantum research. By 2027, the quantum computing market is projected to reach $1.7 billion, growing at a compound annual growth rate (CAGR) of 30.2%. For instance, Mercedes-Benz is working on using quantum computing to enhance the chemical composition of its electric vehicle batteries.  

In the healthcare sector, quantum computers could significantly speed up the discovery of new drugs by accurately simulating molecular structures. For example, quantum computing may help identify the type of amyloid proteins responsible for Alzheimer’s, potentially leading to faster diagnosis and treatment. Even in finance, quantum algorithms are being developed to optimize investment strategies and model financial markets more accurately than ever before. 

In logistics, DHL is working on quantum solutions to enhance routing and supply chain management, potentially saving billions in transportation costs while reducing environmental impact.

Quantum Computing: A Paradigm Shift 

Quantum computing is poised to revolutionize the way we process information. Unlike classical computers, which rely on bits that exist as either 0 or 1, quantum computers use qubits. These qubits can exist in multiple states at once, thanks to the principles of superposition and entanglement. This allows quantum computers to perform many calculations simultaneously, vastly outpacing classical systems for specific tasks. The potential computing power is staggering — Google, for example, demonstrated that their quantum computer could solve a problem in 200 seconds that would take a classical supercomputer 10,000 years to complete. 

Quantum computers aren’t just faster—they are better suited for simulating quantum systems themselves. This makes them invaluable for solving problems in drug discovery, materials science, and climate modeling, where classical computers struggle. Quantum computers can also help optimize complex logistics problems, such as supply chains, which is critical in industries ranging from manufacturing to e-commerce. 

The Future of Cybersecurity 

One of the most pressing issues surrounding quantum computing is its impact on cybersecurity. Current encryption systems, such as RSA, rely on the difficulty of factoring large numbers—a problem classical computers find hard to solve but quantum computers can tackle efficiently using Shor’s algorithm. This poses a direct threat to the security of sensitive data, from banking systems to government communications. 

According to a report by Gartner, by 2025, nearly 20% of organizations are expected to allocate budget specifically for quantum-resistant cryptography. In anticipation, companies like Apple have already begun upgrading security in applications like iMessage to prevent future quantum threats. Similarly, JPMorgan Chase has developed a quantum-secured network to ensure the integrity of data exchanged between its data centers.

The rise of “store now, decrypt later” techniques — where encrypted data is stolen today to be decrypted when quantum computing matures — underscores the urgency of developing quantum-resistant encryption methods.

The Current State of Quantum Technology 

Quantum computing technology has made significant strides in the past few years. In 2019, Google announced that it had achieved quantum supremacy, solving a complex problem faster than any classical computer could. IBM, not far behind, has developed Condor, a quantum chip featuring 1121 qubits, though error correction and qubit stability remain significant challenges.

However, the practical applications of quantum computing are still limited. As of now, commercial quantum computers are not yet available for widespread use, but cloud-based platforms from IBM, Google, and Microsoft are allowing researchers and developers to access quantum machines for simulations and research.

Drivers of Investment in Quantum Computing 

Moore’s Law, which predicted the exponential growth of classical computing power, is nearing its end as transistors approach atomic scales. Once transistors hit the five-atom size threshold, quantum effects such as Heisenberg’s uncertainty principle will disrupt classical computing. This creates a natural demand for quantum computing, which promises to solve problems classical computers cannot. 

Both governments and corporations are heavily investing in quantum research. Global funding in quantum computing is set to exceed $2 billion by 2025, with significant contributions from governments like the European Union, China, and the United States. Quantum computing is expected to drive breakthroughs in drug discovery, financial modeling, and materials science, making it a prime area for both public and private investment.

The Global Investment Race 

On the global stage, a race for quantum supremacy is playing out between the United States and China. In 2018, the U.S. government allocated $1 billion to quantum research, but China has consistently outspent the U.S., investing as much as $20 billion annually in quantum technologies since 2017. Chinese researchers have already developed the world’s most powerful quantum computer, which could outstrip Western advances in the near future.

Despite a brief downturn in 2023, where global funding in quantum technologies dipped by 50% due to the AI boom, investments have rebounded in 2024. According to reports from Quantum Economic Development Consortium (QED-C), the market is projected to grow consistently, especially with venture capital firms backing companies like IonQ, Rigetti Computing, and D-Wave.

India’s Quantum Leap 

India is actively pursuing quantum computing through its National Quantum Mission, which has allocated $726 million for research and development. In 2023, Indian scientists from DRDO, TIFR, and TCS successfully tested a 6-qubit quantum processor, marking significant progress. Indian startups like QNu Labs, QpiAI, and BosonQ Psi are also making strides in quantum cryptography, AI-based quantum modeling, and simulation tools.

For example, QNu Labs, based in Bengaluru, is developing quantum cryptography solutions for secure communications using quantum key distribution (QKD) technology. BosonQ Psi focuses on quantum computing software for applications like computational fluid dynamics and aerodynamics simulations, demonstrating that India is building a solid ecosystem for quantum technologies.

White Spaces and Opportunities

Numerous opportunities exist in the quantum space for startups and innovators. Quantum algorithm development tailored to specific industries, such as finance or pharmaceuticals, offers a substantial opportunity. Moreover, creating quantum-resistant cryptography is becoming increasingly crucial as quantum computers inch closer to breaking traditional encryption.

Startups can also capitalize on Quantum Computing as a Service (QCaaS), offering cloud-based platforms to make quantum computing accessible to businesses and researchers. There are also opportunities in quantum simulation tools, which can drive advancements in material science and drug discovery. Developing hybrid solutions that integrate quantum and classical computing will further accelerate adoption across industries. 

The Road Ahead

As quantum computing continues to evolve, its impact on industries, security frameworks, and global competitiveness will be profound. At Chiratae Ventures, we firmly believe that India is at a pole position to be a home for ground-breaking and industry-defining innovations in this space, driven by a combination of strong government support, world-class research institutions, and a growing ecosystem of startups and talent. Initiatives like the National Mission on Quantum Technologies and Applications (NM-QTA), with a budget of ₹8,000 crore ($1 billion), aim to develop indigenous quantum technologies over the next decade. 

At Chiratae Ventures, we are actively seeking to partner with companies pioneering innovations in quantum computing, with the ambition to drive transformative disruption across large-scale industries and use-cases globally. 

As part of Chiratae Sonic, the country’s leading Seed investment program targeting supporting cutting edge innovations from India, we are excited to meet founding teams building in Quantum computing space. The 2024 edition of Chiratae Sonic is live till 31st Oct 2024 at https://www.chiratae.com/chiratae-sonic/ and we invite founders to reach out with details of their venture and pitch deck. 48-Hour The companies applying to Chiratae Sonic will receive initial funding reviews within just 48 hours for requests up to USD 2 million. In addition, the founding teams receiving investments will gain invaluable insights from industry experts and access exclusive resources designed to accelerate their growth.