Xanadu receives $40-million from Ottawa to advance quantum computer development

Prime Minister Justin Trudeau announced a $40-million contribution Monday to a Toronto startup that has vaulted to the lead in the global race to develop superpowerful quantum computers.

The government provided the funding to Xanadu Quantum Technologies , one of many companies around the world that is trying to build computers in a new way, by harnessing the ephemeral properties of subatomic particles to perform calculations that would take current supercomputers millennia to run.

“I get really excited about quantum computing,” Mr. Trudeau told reporters at Xanadu’s Toronto headquarters. “What’s happening here is cutting edge not just in Canada, but around the world.”

The funding, through the government’s Strategic Innovation Fund, was announced days after the Liberal government unveiled spending plans for its $360-million, seven-year national quantum strategy. The initiative is one of myriad efforts by the Trudeau government to try driving improvements to Canada’s chronic lagging economic performance by investing in innovation.

Under the quantum strategy, Ottawa is committing $141-million for basic and applied research, $45-million to develop and retain expertise in the quantum sector, and $169-million for a range of efforts to support commercialization through funding from agencies including the National Research Council, Global Innovation Clusters and Innovative Solutions Canada.

The government also made a $40-million contribution through the innovation fund to struggling quantum computing pioneer D-Wave Quantum  of Burnaby, B.C., in 2021. Business Development Bank of Canada’s $200-million Deep Tech Venture Fund has also invested in the domestic quantum sector.

Industry players believe quantum computers could some day help with drug discovery, materials science, financial risk modelling and complex optimization exercises, such as traffic management across large cities.

There are several approaches to developing quantum computers. Xanadu’s method is to use a process known as “squeezing light” that involves firing lasers, enabling light particles to generate quantum effects on thumbnail-sized chips.

As light pulses travel through Xanadu’s system, known as Borealis, they become entangled with one another, which allows them to hold a mixture of values that collectively solve the task. A key advantage for Xanadu is that its process can operate at room temperature, whereas systems being developed by others including IBM and D-Wave require their chips to be operate in temperatures colder than those found in deep space.

Xanadu has already proven it can solve a specific mathematical operation in 36 millionths of a second that would take the world’s most powerful computer more than 9,000 years to match. The feat, known as achieving “quantum advantage,” was revealed last June. Google was the first to demonstrate quantum advantage with its own computer in 2019.

But Xanadu and other quantum players have years and many technological breakthroughs to go until they can get their machines to the power and scale where they are broadly useful and commercially successful. One challenge is developing enough “qubits” – entangled pulses analogous to 1s and 0s in conventional computing, but more versatile because they hold a mix of values – to correct for errors that creep into a quantum system. The magic number, Xanadu chief executive officer Christian Weedbrook has said, is one million qubits. Xanadu’s latest computer is a 216-qubit device.

But its advances to date have won over investors. In November, Xanadu announced it had raised US$100-million from investors including Canadian private capital firm Georgian and Porsche Automobil Holding SE on the heels of its quantum advantage achievement. Other Xanadu backers include Bessemer Venture Partners, Jeff Skoll’s Capricorn Investment , Dubai’s Forward Ventures and BDC.

The funding increased Xanadu’s valuation threefold to US$900-million (excluding funds received) from a previous US$100-million financing a year earlier. By contrast, several quantum companies that went public in the past two years through reverse takeovers with special purpose acquisition companies, including D-Wave, have seen their valuations tumble.

The government money adds to Xanadu’s considerable cash pile, which was already enough to fund operations through 2026. Industry Minister François-Philippe Champagne, also on-hand Monday for the announcement, called Xanadu “a company we’re quite proud of,” adding the funding “is about jobs, this is about creating opportunities, and this is about growth.”