Frostbite Comes to Quantum; Layoffs at Rigetti, Reported Cash Crunch at D-Wave, and Headcount Fre...

We have said for a long time that we do not expect there will be a Quantum Winter, but quantum in 2023 will be an uneven market with some companies getting frostbite. After several years of great expectations for quantum, investors are getting nervous and being a lot more cautious about making investments. And the overall tech environment hasn't been helped by the general downturn we are seeing in tech right now.

However, it is not all doom and gloom for every company. So far, this year we have reported on 11 venture capital investments. However, all of them were outside the United States with one each in China, Japan, Australia and Canada and another seven in Europe. In addition, some companies are continuing to announce significant customer partnerships and government grants.

But some companies are facing difficulties. Of the four companies that went public via the SPAC route in the last two years, their current stock price is now just a fraction of the price 52 week high price. If the stock price falls below $1 per share, the companies could face delisting on the stock exchange or other restrictions on their credit line. We expect that it is particularly difficult for companies that haven't picked up significant customer revenue or those that are missing their expected technical milestones.

There was a recent report in the Toronto Globe and Mail that D-Wave is facing a cash crunch. And Rigetti recently announced a layoff of 28% of their employees along with a change in their technical roadmap and appointments of a new CTO and CFO.

What is less public is that many companies are putting in headcount freezes and still others may be quietly implementing layoffs. As regular readers of the QCR know, we have a jobs board that shows open positions being posted in the quantum industry. As of February 11, 2023 we are now tracking a total of 349 such positions in commercial companies worldwide. A year ago on February 12, 2022 the number was 801.

As we have said for a long time, quantum is a marathon and not a sprint. There is a great potential for this technology in the long run, but expectations need to be managed. Companies need to focus on timely execution of their roadmaps and not to overpromise in order to get an investor to sign up. There is a lot of competition in quantum and companies need to think carefully and realistically about where they can uniquely provide value. The quantum market will continue to increase at the 20-30% rate we have seen over the past few years, but don't assume that those revenue increases will be distributed equally. Some will win out much more than others.

February 11, 2023