What is Deep33's Investment Strategy for Quantum Computing?

Deep33, a newly launched deep-tech venture fund, is betting on near-term quantum computing commercialization alongside AI infrastructure and energy technologies. Partner Joab Rosenberg outlined the fund's thesis in a recent podcast, emphasizing quantum applications that can generate revenue before fault-tolerant quantum computing arrives.

The fund targets three interconnected domains: quantum computing hardware and software, AI infrastructure that supports quantum development, and energy solutions that enable both technologies. Rosenberg expects quantum applications to achieve commercial viability in NISQ-era systems, particularly in optimization and simulation workloads where classical computers face fundamental limitations.

Unlike many quantum-focused investors who wait for logical qubit demonstrations, Deep33 is actively seeking portfolio companies building on today's noisy intermediate-scale quantum devices. This approach reflects growing investor confidence that quantum advantage can emerge from hybrid quantum-classical algorithms running on current hardware platforms from IBM Quantum, IonQ, and Quantinuum.

Investment Focus Areas

Hardware vs Software Opportunities

Rosenberg distinguished between hardware and software investment opportunities in quantum computing. On the hardware side, Deep33 evaluates companies developing quantum processors, control systems, and cryogenic infrastructure. The fund particularly interests itself in startups addressing quantum error correction at the hardware level, recognizing that achieving below threshold error rates remains the critical challenge.

For software investments, the fund targets quantum algorithm development, quantum software development kits, and middleware that bridges classical and quantum computing environments. Rosenberg noted that software companies often present clearer paths to near-term revenue through licensing and cloud service models.

The fund also considers quantum sensing and quantum networking companies, viewing these applications as potentially reaching commercial maturity ahead of universal quantum computing.

Fundraising Reality Check

Rosenberg provided candid insights into quantum startup fundraising realities. He observed that many quantum companies struggle with unrealistic valuations and timeline projections, particularly hardware startups that underestimate manufacturing and scaling challenges.

The fund prefers companies with demonstrated technical milestones rather than purely theoretical approaches. For hardware companies, this means showing improved gate fidelity, extended coherence times, or increased qubit connectivity. For software companies, it requires demonstrating quantum advantage on specific problem sets, even if limited in scope.

Deep33 also evaluates teams' ability to navigate the quantum talent shortage, particularly in quantum error correction and quantum algorithm development.

Market Context and Competition

Geopolitical Considerations

The podcast addressed quantum computing's geopolitical dimensions, with Rosenberg noting that national quantum initiatives influence private investment flows. Countries including the United States, China, and European Union members have committed billions in quantum research funding, creating opportunities for startups that align with national priorities.

Deep33 considers regulatory environments when evaluating quantum investments, particularly for companies developing quantum cryptography or quantum sensing technologies with potential dual-use applications.

Education and Talent Pipeline

Rosenberg emphasized quantum education's importance for industry growth. The fund considers partnerships with universities developing quantum engineering curricula and companies creating quantum programming training platforms.

He noted that quantum computing requires interdisciplinary expertise combining physics, computer science, and engineering—a skill set that remains scarce in the current job market.

Key Takeaways

• Deep33 targets near-term quantum commercialization rather than waiting for fault-tolerant systems
• The fund evaluates quantum hardware, software, sensing, and networking opportunities
• Investment decisions prioritize demonstrated technical progress over theoretical promises
• Geopolitical factors and regulatory environments influence quantum investment strategies
• Quantum talent shortage remains a critical consideration for portfolio companies
• Hybrid quantum-classical approaches present the most immediate commercial opportunities

Frequently Asked Questions

What quantum computing companies has Deep33 invested in? The podcast did not disclose specific portfolio companies, as Deep33 appears to be a newly launched fund still building its quantum investment portfolio.

How does Deep33 evaluate quantum startup valuations? Rosenberg indicated the fund focuses on technical milestones and realistic commercialization timelines rather than inflated valuations based on quantum hype.

What quantum applications does Deep33 consider most commercially viable? The fund targets optimization and simulation applications that can run on NISQ devices, along with quantum sensing and quantum networking technologies.

How important is quantum error correction for Deep33's investment thesis? While recognizing QEC's long-term importance, the fund invests in companies building commercial applications on current noisy quantum devices.

What role does AI infrastructure play in Deep33's quantum strategy? The fund views AI infrastructure as complementary to quantum computing, particularly for hybrid algorithms and quantum machine learning applications.