Australia’s Diraq has lifted its Series A round to USD 35m, bringing total funding to USD 135m and clarifying a near future of general-purpose quantum computers based on silicon chips made in traditional foundries

Allectus Capital, a deep tech investor with a significant focus on Asia Pacific, has been hunting quantum computing start-ups globally for six years yet made only two investments. Both are in Australia.

In January 2023, Allectus joined an approximately USD 50m round for Q-Ctrl, a company ultimately envisioned as an operating system provider for quantum computers when they become fully functional and mainstream. Q-Ctrl’s early commercial progress is quantum sensors that work underground; it has several military and industrial contracts in this area.

The bigger bet is Diraq, a company that expects to have a full-scale, fault-tolerant quantum computer in operation and commercially deployed by 2028. Several companies claim to have already developed quantum computers, but these are inflexible machines, generally unable to interface usefully with classical computers.

Whether they are physically large or small, current quantum computer prototypes operate using fewer than 10 qubits, the rudimentary informational units analogous to the ones and zeros of classical computing. Diraq says its first wave of commercial machines will process 1m qubits in economically compact formats using minimal refrigeration equipment.

“To get to 1m qubits now, you need a hangar-sized data centre with lots of fridges and coolant and huge amounts of power. And that will be for one computer that will take a week to do one algorithm,” said Matthew Gould, head of quantum computing and artificial intelligence (AI) at Allectus.

“There’s no point in having a computer that dims the lights of the suburb it’s in every time you turn it on. No matter how impressive the service is, if customers can’t afford it, they’re not going to buy it. As an investor in a technology, it doesn’t have to be mass market, but it has to be bought by at least the top 200 companies in the world.”

Allectus took a majority stake in Diraq in 2022 when it supported the start-up’s spinout from the University of New South Wales. It went on to invest USD 20m as part of a Series A round last year and recently joined a USD 15m extension of the round led by France-based sector specialist Quantonation. Total funding comes to about USD 135m, including government grants. Allectus’ position is now 32%.

Quantum momentum

The latest investment says much about the momentum for quantum in Asia Pacific. It cements Australia as the region’s runaway leader and arguably the leader globally in terms of privately funded start-ups. In addition to Diraq and Q-Ctrl, VC-backed companies in the local ecosystem include Quantum Brilliance, QuintessenceLabs, and Silicon Quantum Computing.

The deal also signals quantum’s increasingly mainstream profile as an investment category. Allectus, for example, is a VC arm of ICM Group, a Bermuda-based investment group diversified across resources, fixed income, capital markets, utilities, healthcare, defence, and logistics among others.

Allectus has historically invested via the ICM balance sheet but is moving toward a fund model, with Asia-based vehicles dedicated to fintech, health-tech, and high-performance computing (HPC) currently in the planning stages. Gould, based in Sydney, will lead the HPC fund, which will target USD 100m and be seeded with existing positions in Diraq and Q-Ctrl. The fund will be about 35% deployed in quantum.

The firm’s HPC thesis is based on the idea that the proliferation of data-guzzling technologies such as generative AI are leading to a “compute gap,” where demand for processing power outstrips supply of electricity and computational resources. Several advanced computing paradigms are considered prospective for bridging this gap, but quantum is generally not among them.

The exception may be in Diraq’s specific domain expertise. In theory, a silicon-based quantum computer will be more efficient in terms of energy and computational inputs than those based on concepts such as superconducting, photonics, or ion traps. Diraq claims it has proven a way to deliver billions of qubits on one chip by relying on traditional semiconductor production methods and a single refrigerator.

“We’re at home with it because we invest in mining, railways, and airports that take five to seven years to go from architecture through proof points. There’s still risk here, but it’s engineering risk. There’s no base science that must be solved. That’s why we have very high conviction in Diraq,” Gould said.

“Investors have forgotten what it means to be at the early stage of an infrastructure shift. It’s like when we went from copper to glass in cabling. The glass guys were laughed out of the room until companies like AT&T started laying thousands of kilometres of it. We’re in that space with compute overall.”

Commercialisation, realisation

Taking the silicon route could also translate into a significant capital-raising shortcut for Diraq. The start-up is expected to raise small bridge rounds from strategics in the near term but is otherwise considered sufficiently capitalised to realise its core plans. This is because it will be able to leverage existing semiconductor infrastructure rather than build entirely new fabrication foundries.

Meanwhile, the commercial case for quantum computing – which can handle exponentially larger datasets than classical computing – is reverberating ever more urgently in the corporate world. Boston Consulting Group estimates the technology will mature in 2035, at which point it will add as much as USD 3.5trn to the revenues of adopting companies.

EY found that 33% of enterprises and organisations expect quantum to reach sufficient maturity to play a significant role in their industry by 2026. Among them, 44% said they would hire a quantum computing leader in that timeframe. Simulations, system optimisations, machine learning, and cryptography are considered the biggest near-term areas of usage.

“In five to seven years, you’re going to have a commercial result, even if that result is acquisition, and that’s very likely,” Gould said. “There’re only two companies in the world that have got qubits working on silicon at the levels and fidelities that are required to scale quantum computers. One is Intel, and Intel is using Diraq’s designs and patterns. So, it’s a very commercial pick for us.”