Quantum & AI

Thank you very much. And so up next we have quantum which is obviously a technology that has a strong Danish heritage and legacy but it's difficult to understand what are the opportunities out there in quantum as well. So we have Owen Lozman here from 55 North to run us through what is quantum but what does it look like for the opportunities for the future of quantum itself. So, I'll let Owen take it away now. Thank you.

Oh, thank you. Thank you, Oliver. And thank you for the opportunity to uh come and talk to you about a completely different topic. So, I know we're a little bit far into the day. Everybody's had coffee, but probably not enough.

So, I'm going to start with a little uh warm up to get everybody. So, can everybody just stand up for a sec? Is that all right? Just going to make sure we wait because if data centers were complicated, you better strap yourselves in. So, um, stay stood up if you've made an investment in AI or use AI.

This is a good start. Stay stood up if you understand what a Vanoyman bottleneck is. I'm hoping that Meta from Microsoft still stood up. But, uh, so that kind of proves the point that So, Oliver asked me to explain um what quantum is and none of you understand what AI is. Okay.

So, I'm just going to I'm not going to explain what quantum is. I can happily do that offline, but I'm going to tell you what it does or what it can do, and then we can take it from there in terms of how it's going to disrupt things. So, um I'm managing partner of 55 North. We're a newly formed, uh early stage venture fund in Copenhagen. Um and, uh I'm going to explain to you a little bit about how quantum is going to be relevant in this area.

So, my previous job, I was uh I'm a scientist, a chemist. I was working in R&D, developing new materials for chips, uh, so making smaller transistors. I then spent an awful lot of time building technologies and invested in companies that enabled all of the GPUs that we have now. So the technology that allowed us to do these large language models and deploy them at scale. So I was kind of in when Yep and the previous speakers were talking, I was kind of in the chip layer, but investing in the technologies to produce those chips.

And that's what's led to this AI revolution that we have now. And everybody thinks about AI as being this huge disruptive technology, but it's took 70 years from the first computer to get to the point where we can really deploy these kind of models on the on on systems at scale. So it's took a long time to get there. And I just want you to keep those few things in in mind as we go through a little bit. So what is quantum computing?

This is what computing looked like in 1900. This was the Babbage's first machine developed in Manchester. It was a mechanical uh computer that added things up. It was probably easy to add things up on an abacus. Um, this is kind of okay, it's a it's a AI image, but this is what computing looks like today.

It's completely different. Okay, this is what chemistry looked like in 1900. And this is what chemistry looks like today. Pretty much the same. This is what physics looked like in 1900.

And apart from the cigar, it doesn't look too different now. So, you know, we have a lot of highly trained people uh pouring liquids and washing up and we have them making devices and measuring them. And then this is a slide that my wife doesn't like. This is what biotech looked like in 1900 and this is what biotech looked like today. So, after all of that pouring and washing up, we then take those chemicals, we make devices, we see what happens.

We make displays, we make semiconductors, or we inject it into animals or people and see what happens. And then we make drugs and and things like this. Okay. something a bit wrong with this. What's happened in the last 100 years?

Why can't we do these things? The answer is we can cover the entire planet with data centers, but we can't calculate things at the quantum mechanical level. And that's what quantum computing does. Quantum computing allows us to calculate these things so that we can turn all of this kind of experimentation into deterministic experiments. calculate stuff, go make it, make discoveries, deliver more sustainable materials, better batteries, uh, better drugs for patients and so on.

This is just a kind of a small fraction of the promise that the quantum offers. We're not there yet, but it's not too far away and it's getting very close. And this is something that people like the Nova Nordis Foundation have identified um, as a real opportunity. Uh, clearly they're very motivated having had, you know, been a player in this. My old company Merc the German science technology company also had a very interesting quantum because you don't want to be the second pharma company to save $10 billion on your next drug pipeline right so there's a big opportunity for people and nobody wants to get left behind and that's why Nova Nordisk and Epho um have invested in us and invested a billion um uh euros over the last 5 years in the Danish quantum ecosystem and it was actually one of the quite nice that the three talks previously have actually explained that as We have big international players like Microsoft.

Um we have the Neils Bore Institute. There's a long legacy. Um and it's not like AI where okay we can deliver data centers. We can we can get applications and we can build software but we're not going to be we're not part of the trillion dollar industry. We're not making the chips.

We're not really benefiting in that un in that fundamental layer. And in quantum there's still an opportunity. There's a right to play and a right to win. And that's why we think it's exciting. So the market opportunity is really we're we're kind of moving through this era if you I like to go back to things that I understand like semiconductors.

We're going through this era of going from you know the first vacuum tube based computer this is like an iron trap machine to you know the first transistor first cubits then to the integrated circuits and fair child and the original kind of this is where VC came out of actually so you know venge capital was born out of this integrated circuit and then you see what happens right so those integrated circuits you can make clock radio some mainframes pong anybody old enough to remember pong Um then you know mobile phones this is like where where adv this all of this is driven by early stage making transistors smaller make more integrated circuits then we start to figure out how do we put these together better and that's where things like system on chip advanced packaging we get the mobile phone we get things like AR glasses we get A6 GPUs blockchain mining um and then that's led now to the AI revolution and a lot of these technologies are also feeding into the quantum space too so this is how we expect the market to develop firstly we'll we'll start with like simple things like clocks and actually that's where quantum is starting it's starting in very very accurate clocks that will replace GPS so you don't need to have a satellite you can do this through a 5G network and you can time things very accurately to things like I don't know if you'll have a pong I don't don't run doom on quantum computer yet but uh you know these kind of applications so we're seeing how and and if you ask people in the 1950s what is what can you do with computers they would say adding up and you know nobody could envisage large language models even probably 5 years ago 10 years ago Right. So big of revolution happening driven by these new architectures. Um and as I said I invested a lot into M law advanced packaging and then really what comes next? I'm a chemist. I want to simulate molecules.

You can't do that. So the next wave, the next paradigm in computing comes from this new disruptive technology which is quantum. Okay. So markets, we're not talking about, you know, trillions of dollars of revenue just yet, but we're talking about markets that are going from pretty much nothing today. It's like a billion dollar revenue to sizable markets of um, you know, tens to hundreds of billions within the next 10 years.

Um, these numbers are kind of taken from various market reports. I'm not sure I 100% believe them. Um, but from an investor point of view, we're thinking about how do you get returns in this space? Where are the real opportunities? Um, and that's going to be um, evident on the next slide.

So many big hyperscalers are already investing heavily. Nvidia, Microsoft as we heard earlier, Google, AWS, IBM. Um, and this graph just shows like a technology road map. It shows you the kind of applications we expect to see as the technology develops. So we're still in the early stages of this, but that grows very quickly as the quantum computers improve and as the technology develops.

Okay, this graph's going a bit scary in the translation to Google, but uh mentioning hyperscalers. The point on this graph is that um in the last year there was 10 billion of capital invested privately into quantum companies. Over the entire history of quantum there's been 18 billion. So last year doubled the total amount of capital. Typically these are run fun financing two years worth of runway for a company.

So that means over the next two years we expect to see 10 billion of capital invested roughly um falling down into the supply chain and that's where the real opportunity we think lies in the short term is in the supply chain. The other thing that we like to see, so there's money that's going to be uh deployed and we think how do we harvest that money and then the next thing is how do we get an exit? How do where's the return coming from? Because it's all well and good investing in a company, but you want to know when you're going to you're going to get your money back. Um it's been a bit patchy over the years.

There's been a few transactions. You may recognize some names. INQ did a spack in 2021 at 2 billion. they were variously worth between 30 and I think about now 20 billion market cap um on a probably revenue about 100 million something like this. So the multiples are not really uh normal.

This year we've already seen announced 12 billion of transactions. There's another two billion that we missed off there in an M&A that uh INQ bought a fab um and there's going to be an IPO of Quantinium. Their last post was 10 billion. So that shows the you know public market interest and there's going to be 23 billion at least of additional capital. One company on their IQM is an audit company that's finished.

Um they actually have uh more machine sold than anybody else and and the high one of the highest revenue of any company. They will spack in June for uh 1.8 billion. Um and that was the first investment that we made as a fund just incidentally. Where is this money going? Like as I said there's you know what does the value chain look like?

We talked before about chips. We talked about the models. You know, all of this is exactly the same picture that that that Yepy showed in the original talk of just uh slightly different. Um and we segment this in terms of maturity. If you look at the bottom there, this is the enabling technology, the manufacturing, the supply chain.

This is maturing very quickly. There's an awful lot of capital going to get deployed in that area as these big companies start to mature their operations and start to think about how do I make this at scale? How do I go from a lab experiment that shows like I can do this thing to something where I can actually scale it and make real systems that I can deploy the full stack. This is the computer itself, you know, the package that everything put together the system. Um, initially this was a race to see how many cubits could you make that were and what's the number of nines you could stick after it to do a two gate fidelity if anybody's interested.

Nowadays it's about how many cubits can you put in together all together in in a system. And the interesting thing which I'll come to when I talk about Denmark is that there's been an awful lot of capital deployed. The semiconductor industry has also developed a lot in the last few years. So we're now at the level of precision where we can put atoms. We can do we can place materials with atomic resolution which is what's needed for quantum.

And we also have an a huge infrastructure in Finland. We have a fab that's been built. In Denmark, we have a foundry which is secret, but it's under the car park at the BII in the innovation district. Took me six months to get a ticket in there down the fire escape at the back. Um, and there's an awful lot of this technology which companies can now leverage.

So, if you're a fullstack company, you don't have to go out and build everything yourself. You can use the supply chain that's being built around. You can use all of this great facilities that the governments have been investing in. And that means now you can in you can make a company like a company uh in Delft that we just invested in um in with€2 million euros they've got 18 cubit chip um and within this year they'll have a 100 cubit chip. It took IQM 10 years and 150 million to get to that same stage.

This company is able to do that within a year. So the game has changed and there's going to be an awful lot of opportunity in that full stack area to do very capital efficient u investments um and build companies that require less because they can leverage all that ecosystem that's being built. Um in the top as in semiconductors the real value comes from the applications. We're a little bit early. If anybody tells you that they can calculate this, that or the other, they're probably lying because it's still a long way away from what we call quantum utility.

We're seeing early signs that you can improve uh drug discovery algorithms. You can improve things like uh sensing um and things like physical AI where you can train models using uh augmenting that with quantum data. Um but these are very early and they're very very niche. So there is revenue and there is value there but it's not the level that that you would say like an LLM does where we can get you know 10 billion revenue in two weeks or whatever it is. Um so but early stage opportunities really outside return potential and as we as in semiconductors we expect that's where the ultimately the most value will be created.

I think in semiconductors the if you if you discount what Jensen says and look at just the numbers from last year they expect to be about a trillion uh dollars in terms of revenue for the semiconductor industry. This year um the digital economy and the the internet and all the things that are built on top of it is is like you know trillion hundreds of trillions probably right so and we expect the same to be true in quantum but most of the opportunity at the minute is in that that bottom layer in the in the enabling technology. Right. But long too much data. Right.

So why Denmark? Um as I mentioned we can't make semiconductors here really. We used to be 35% market share in Europe of making semiconductors. We're now eight. There's no way we can catch up.

There's no way we can catch up with TSMC or or the US. Um we can build the software, no doubt about that. And we can deploy useful applications. 100% agree. Um but that race is gone.

So but what we can do, we don't need to build like huge fabs to make quantum. We need to build the right things, the right technology in the right way. And Denmark has been like razor focused, laser focused on this. Um, UK 15 different industrial priorities. Denmark's got like two, three.

Um, so that means the capital's being deployed very judiciously, very focused and that's led to a lot of opportunity. And this is just the history of how we evolved as a fund. So it came it started off in 2021. Um and this is a lot of the investment from the foundation building that enabling infrastructure building the talent base the technology and now we have this huge talent pipeline a lot of IP a lot of infrastructure and we were put together in order to try and leverage that ecosystem leverage that and to try and translate it into commercial value. So no pressure.

Um yeah, Denmark's got this uh you know really uh I think it's really a we get asked this question. Why Denmark? And we didn't just come here because we had the capital here. We came here because it's the right place to be. Um it's kind of neutral in Europe.

If you're in France, Germans don't like you. If you're in Germany, the French don't like you and so on. Denmark's got a really good place. And a lot of the companies we speak to in the US are very keen to put assets and manufacturing and and uh things in in in Denmark. Microsoft did that.

We have this Atom computer coming here later this year, early next year. Um with the Q program um and the government is very supportive and the foundation etc. So it's a really good community. Uh we're very happy being here and we think there's an awful lot of value we can create as well. Um, and I think with the manufacturing assets we have, there's a very strong right to play and a right to win in terms of building this ecosystem.

We're doing that very closely with our Nordic colleagues as well in Finland and obviously across Europe, from the Netherlands, etc. Um, just to kind of exemplify this with some numbers. 50% of our deal flow comes from the US. 0% of our companies um have gone through was one company that that that got through uh to an investment stage but that is a company that's bringing um their manufacturing into Denmark. Um US companies are typically very overpriced um and you know the value that we see the value creation that we see is limited and so we think there's a huge opportunity in Europe to fix that.

We do need growth capital. Um so that's my quick foray into quantum. I'm happy to dig deeper. I'm also happy to talk about AI because kind of knew a bit about that in the past. Um but I wanted to also highlight that we um managed to convince the organizers of QTB to move the flagship quantum conference from Paris uh to Copenhagen this year which is kind of a very a moment of pride for us as a fund but also I think highlights how the global community sees Denmark's position in this ecosystem.

Um it'll be a fun conference. Um, and uh, yeah, I think if anybody's interested, be great to see you there and uh, happy to teach you more in the meantime. And I can really explain what quantum computing is if anybody's actually interested, but I didn't want to bore you to death. So, thank you very much.