US startups usually fare better than European companies when it comes to raising big rounds — but one sector has bucked that trend in 2023.
Quantum startups in EMEA (Europe, Middle East and Africa) last year raised $781m — more than three times the amount raised in the sector in North America ($240m), according to a new report.
The study, conducted by Finnish startup IQM Quantum Computers together with deeptech VCs OpenOcean and Lakestar, found that EMEA was the only region globally to see growth in quantum funding in the past 12 months.
In North America, investments in quantum startups dropped by a bruising 80% compared to 2022, and by 17% in Asia-Pacific (APAC). But in EMEA, VC funding for quantum increased by 3%.
It means EMEA quantum startups cashed in almost two-thirds of the $1.2bn invested globally in the sector in 2023.
A few factors explain the numbers. In 2022, North America saw some significant fundraising rounds that helped boost total investment in the region to just under $1.4bn. Fundraises in that year — like AI and quantum computing company SandboxAQ’s $500m round or Canadian startup Xanadu’s $100m Series C — meant that 2023, in comparison, was quiet.
European quantum startups, on the other hand, had a busy year. French quantum computing company PASQAL raised €100m in January; a month later, UK startup Quantum Motion closed a £42m round. Wrapping up the year, Oxford Quantum Circuits raised a $100m Series B and Paris-based Quandela a €50m Series B.
"This is a reflection of Europe’s strategic approach to fostering innovation ecosystems, but also of the large, rapid swings in funding cycles to which the US is prone,” says Ekaterina Almasque, general partner at OpenOcean.
“Europe is steadily growing its investment in strategic areas, supported by many customers in the aerospace, pharmaceutical and automotive industries — among others — which drives continued interest from private investors.”
A cooler year for quantum
Although Europe is holding strong, the global VC funding outlook for quantum remains challenging.
With $1.2bn raised globally in 2023, quantum startups saw investments halve compared to 2022 — which was a peak year for the sector with over $2bn funding across all regions.
Quantum remains a niche sector, accounting for less than 1% of total VC funding. Many investors are still put off by the technology’s high cost and long development cycles.
But private investments don’t paint a complete picture. The report estimates that across all countries, government commitments (both historical and forward-looking) to quantum technologies amount to over $40bn.
Here too, startups in EMEA have nothing to envy from their American counterparts. The US government has committed at least $4bn for quantum funding; but European governments have also pledged big sums to the sector.
The UK, through its National Quantum Strategy, has committed a total $4.3bn to quantum technologies, while Germany has pledged over $3.7bn. These come on top of EU-wide initiatives such as the Quantum Technologies Flagship, which has a €1bn budget funded by the bloc.
And Europe boasts a number of national quantum hubs that bring together startups, researchers and hardware providers to foster innovation in the field, such as the QuantumBasel campus in Switzerland, the UK’s National Quantum Computing Centre or House of Quantum in Delft in the Netherlands.
Real-world applications
The number of enterprises exploring quantum use cases has doubled to 300 last year compared to 2022, according to the report.
Key applications include fast-tracking drug discovery, building more cyber-secure systems and improving portfolio optimisation, risk management and fraud prevention in the financial services.
Many startups in Europe have partnered with large corporations to test how quantum technologies could boost their businesses in the future. Swiss startup Terra Quantum is working with banking giant HSBC to optimise asset allocation; PASQAL has partnered with South Korean steel company POSCO to improve the sustainability of the steelmaking process; and the UK’s Quantinuum is collaborating with BMW to develop fuel cells, a key component of hydrogen-powered mobility.
Practical use cases for quantum could still be up to 20 years away, according to the report. Given the high cost of the technology, its current unreliability and the lack of qualified talent in the field, sustaining investor interest in young, risky quantum companies through that time could be a challenge.
“We have a chance to establish trillion-dollar quantum software leaders, but only by ensuring hardware, algorithms and interfaces serve particular real world use cases,” says Almasque.
“As macro conditions evolve, pragmatic innovation focused on quantum-business fit will be key.”
