Quantum computing has the potential to transform entire industries, from finance to cybersecurity to healthcare and beyond. However, few people understand how quantum computers work.

Quantum computers may soon change the face of the world. Quantum computing has the potential to speed up drug discovery, allow code-breaking for spy spies around the world, and solve many of the most difficult problems that industries face. How does quantum computing work?

Table of Contents

**What is quantum computing?**

Quantum computing uses quantum mechanical phenomena, superposition, and entanglement, to process information. Quantum computers can tap into these phenomena to process information in a fundamentally new way than traditional computers such as smartphones, laptops, or today’s most powerful supercomputers.

**Quantum computing benefits**

Researchers have delved deeply into the quantum computer vs classical computer comparison and have long predicted that quantum computers could tackle certain types of problems — especially those involving a daunting number of variables and potential outcomes, like simulations or optimization questions — much faster than any other classical computer.

We are beginning to see signs of this potential becoming a reality.

Google claimed that in 2019, it had completed a quantum computer calculation in just minutes, which would have taken a classical computer 10,000 years to complete. One year later, a Chinese team claimed that it had completed a calculation in 200 seconds, which would have taken a regular computer 2.5B years. It was 100 *trillion* faster.

Though these demonstrations don’t reflect practical quantum computing use cases, they point to how quantum computers could dramatically change how we approach real-world problems like financial portfolio management, drug discovery, logistics, and much more.

Quantum computing, driven by the potential to disrupt countless industries and rapid-fire announcements about new advances, is attracting more attention from other players than the world’s quantum physics or computer science, including big tech, startups, and governments. In this explainer, we dive into how quantum computing works, funding trends in the space, players to watch, and quantum computing applications by industry.

**How did we get to this point? Quantum computing: How did it all happen?**

**Computing beyond Moore’s Law**

Gordon Moore, Intel’s co-founder, and CEO observed in 1965 that the number per square inch of transistors on microchips had increased by two every year since their invention. However, the cost of the chips was cut in half. Moore’s Law is a name for this observation. This report contains more laws that predict tech success.

Moore’s Law is important because it predicts that computers will get smaller and more powerful over time. It’s now slowing down, some even say it should stop.

Over 50 years of chip innovation have allowed transistors to get smaller and smaller. Apple’s latest computers run on 5 nm transistors, which are about 16 oxygen molecules stacked side-by-side. However, as transistors begin to impede physical limitations, Intel and other chipmakers have indicated that there may be a limit to the advancements in transistor-based computing.

If we are to continue reaping the benefits of computing’s rapid growth, we will need to find a new way to process information.

Enter qubits.

**How does quantum computing work?**

**What is a qubit?**

Qubits, or quantum bits, are the fundamental units of information used in quantum computers. A qubit is basically the quantum version or transistor of a classical bit (used in classic computing). Qubits use “superposition”, which is a quantum mechanical phenomenon in which some properties of a subatomic particle are preserved.

Once they are measured, it is impossible to know for sure what quantum properties — such as the angle of polarization of a photon — will be determined. Each possible observation of these quantum properties has a probability. This is somewhat like flipping a coin. While a coin is clearly heads or tails upon landing, it can be either while it’s in the air or both.

Quantum computers perform calculations by manipulating qubits so that they affect these superimposed probabilities. Then, they measure to get a final answer. Qubits can represent binary information by avoiding measurement until the answer is required. This is analogous to influencing the coin’s downhill path while it’s still in the air when it still has the chance of being heads or tails.

Quantum mechanics is more than just a single qubit. It is possible to create qubits such that their probabilities are affected in a delicate process called “entanglement”. A quantum computer that has 2 entangled qubits works a lot like throwing 2 coins at once. Every possible combination of heads or tails can be represented simultaneously.

The more qubits that can be entangled together, then the more information that can simultaneously be represented. There are 4 possible combinations of heads or tails by tossing 2 coins, but there are 8 options if you toss 3 coins (HHH. HHT. HT. HTH. THT. THH. TTH. and TTT).

This is why quantum computers may eventually be more powerful than their traditional counterparts. Each additional qubit doubles the power of a quantum computer.

That’s at least the theory. It’s hard to use entangled qubits in practice because their properties are so fragile. Quantum computer manufacturers also have to deal with many engineering challenges, such as correcting high error rates or keeping computers extremely cold. This can severely impact their performance.

Many companies are making progress towards making powerful quantum computers a reality.

**QUANTUM COMPUTERS RAPIDLY GET MORE POWERFUL**

Google used a 53-qubit quantum computer to defeat classical computers in solving a mathematical problem. This was the first instance of “quantum supremacy” over traditional computers. IBM plans to create a 1,000-qubit quantum computer by 2023. Meanwhile, Microsoft-backed PsiQuantum, the most well-funded startup in the space, claims it will build a 1M qubit quantum computer in just “a handful of years.”

Some believe this rapid pace may be the beginning of a quantum Moore’s Law. It could eventually reflect a *double-exponential* rise in computing power.

This can be accomplished by the exponential rise in power provided by adding one qubit to a computer and an exponential increase of the number of qubits that are being added. Hartmut Neven, director of Google Quantum Artificial Intelligence Lab, stated that it looked like nothing was happening and nothing is actually happening. Then, whoops! You’re suddenly in a completely different world.

**Different types of quantum computers**

Most discussions about quantum computers implicitly refer to what’s known as a “universal” quantum computer. These machines use qubits, quantum logic gates, and other similar devices to perform a variety of calculations.

There are many types of quantum computers. Some players, including D-Wave, have built a type of quantum computer called a “quantum annealer.” These machines can currently handle a lot more qubits than universal quantum computers, but they don’t use quantum logic gates and are mostly limited to tackling optimization problems like finding the shortest delivery route or figuring out the best allocation of resources.

**What is a UNIVERSAL QUANTUM COMPUTER?**

A wide variety of problems can be solved by universal quantum computers. You can program them to run quantum algorithms that make full use of qubits’ special properties to speed up calculations.

Researchers have been creating algorithms for universal quantum computers for years. Shor’s algorithm to factor large numbers (which can be used for breaking commonly used forms of encryption) and Grover’s algorithm to quickly search through huge sets of data are the most well-known.

There are always new quantum algorithms being developed that could expand the use of quantum computers in ways that are difficult to predict.

**What is a QUANTUM ANNEALER?**

Quantum annealing can be used to solve optimization problems. This means that the approach can quickly determine the most efficient configuration from many combinations of variables.

D-Wave provides a commercially available quantum annealer. It uses the properties of qubits to determine the lowest energy state in a system. This corresponds to the optimal solution to a problem that has been mapped against that system.

Because of the sheer number of variables and combinations involved, optimization problems can be difficult for classical computers. Quantum computers are well-suited for this type of task because they can handle multiple options at once.

D-Wave claims that Volkswagen used its quantum annealer to increase efficiency in its paint shops by finding a way to reduce the color switching on its production lines by more than a fifth. Canadian grocery store Save-On-Foods claims D-Wave’s system reduced the time it took to complete a recurring analytics task, which was previously 25 hours per week. It now takes only 2 minutes.

Although quantum annealers can solve optimization problems, they are not able to program universal quantum computers to solve all types of calculations.

**What is the quantum computing landscape?**

**Startup deals are rising**

Deals to quantum computing tech companies have climbed steadily over the last few years and set a new record in 2020 with 37 deals.

With $278.5M of total disclosed funding, PsiQuantum ranks as the best-funded startup in this space. Backed by Microsoft’s venture arm, the company claims that its optical-based approach to quantum computing could deliver a 1M qubit machine in just a few years — far beyond what other quantum technology companies say they can deliver in that timeframe.

Cambridge Quantum Computing is the most well-funded startup focused primarily on quantum computing software. The company has received $95M in disclosure funding from investors such as Honeywell and IBM. It provides a platform for enterprises to build quantum computing applications in areas such as chemistry, finance, and machine learning.

**TRACKING ALL QUANTUM TECH COMPANIES IN THE REPORT AND MANY OTHERS ON OUR PLATFORM**

Companies are working to commercialize quantum computing and quantum communication.

Companies are working to commercialize quantum computing and quantum communication.

These are the most active VCs within the space:

- Threshold Ventures (formerly Draper Fisher Jurvetson), was an early backer for D-Wave and has participated in many follow-on rounds.
- Quantisation, a France-based VC that has provided seed financing to many quantum computing startups, is
- Founders Fund has supported PsiQuantum and Rigetti as well as Zapata.

**Quantum computing is a hot topic for both big tech companies and corporates.**

Quantum computing is also a hot topic for corporates.

Google, for example, is working on its own quantum computing hardware. It has reached several milestones including the first quantum supremacy claims and simulating chemical reactions using a quantum computer. Google entities also invested in startups in this space, such as ProteinQure, IonQ, and Kumano.

Another corporation that is developing quantum computing hardware is IBM. Although it has built many quantum computers, the company plans to create a 1,000-qubit more powerful machine by 2023. The company also runs the IBM Q Network, a platform that allows participants (including Samsung and JPMorgan Chase) to access quantum computers via the cloud. It also helps them explore potential applications for their business.

Microsoft and Amazon have also teamed up with IonQ, Rigetti, and other companies to make quantum computers accessible on Azure and AWS. Both tech giants have established platforms for developers that allow enterprises to experiment with the technology.

*AWS and Azure, cloud service providers, already host quantum computers. Source: Amazon*

Several large tech companies, including Honeywell, Alibaba, and Intel, are also interested in building quantum computing hardware.

**What is the use of quantum computing across industries?**

Quantum computing will become more accessible and mature, which will lead to a rapid increase in the number of companies using it within their industries.

These implications are already being felt in different sectors

The industries listed below could be the first to adopt quantum computing, from healthcare to agriculture to artificial Intelligence.

**Quantum computing in healthcare**

Quantum computers could have a significant impact on healthcare in many ways.

Google, for example, recently announced that it used a quantum computer to simulate a chemical reaction. This is a significant milestone in the development of this technology. Although the interaction was simple, current classical computers can model it. Future quantum computers will be able to simulate complex molecular interactions with greater accuracy than traditional computers. This could speed up drug discovery in healthcare by making it easier for drug candidates to be predicted.

Protein folding is another area that quantum computing that could help with drug discovery. Startup ProteinQure, which was featured in the 2020 cohorts of the AI 100 and Digital Health 150, is already using quantum computing to predict how proteins will be folded in the body. This is an extremely difficult task for traditional computers. However, quantum computing could be used to solve the problem and make it easier to design powerful protein-based medicines.

Quantum computing may eventually lead to improved personalized medicine. It allows for faster genomic analysis, which can inform treatment plans that are specific to each patient.

Genome sequencing generates a lot of data. This means that it takes a lot of computational power to analyze a person’s genome. Companies are already working to reduce the cost and resources required to sequence the human genome. However, a quantum computer with powerful processing power could process this data faster, making genome sequencing easier and more cost-effective.

Many pharma giants are interested in quantum computing. Merck’s venture arm participated in Zapata’s $38M Series A round in September. Meanwhile, Biogen partnered with quantum computing software startup 1QBit and Accenture to build a platform for comparing molecules to help speed up the early stages of drug discovery.

CB Insights clients may check this report to learn more about how quantum technologies are changing healthcare.

**Quantum computing in finance**

Financial analysts often use computational models to predict how markets and portfolios will perform. Quantum computers can help improve these models by being faster at parsing data, running better forecasting, and weighing out conflicting options more accurately. They can also solve complex optimization problems such as portfolio risk optimization or fraud detection.

Monte Carlo simulations, a probability simulation that helps to understand the effects of uncertainty and risk in financial forecasting models, are another area where quantum computers may make a difference. IBM published research last spring on a quantum algorithm that can outcompete traditional Monte Carlo simulations in assessing financial risk.

RBS, Citigroup, and the Commonwealth Bank of Australia have all invested in quantum computing startups.

Already, some are beginning to see positive results. John Stewart, RBS’s global innovation scouting & research head, said to The Times that RBS was able to cut down the time it took to determine how much money is needed to offset bad loans from weeks to “seconds” using quantum algorithms created by 1QBit.

**Quantum computing for cybersecurity**

Quantum computing could make cybersecurity more secure

Quantum computers with powerful computing power could break encryption techniques such as RSA encryption, which are used to protect sensitive data and electronic communications.

This prospect emerges from Shor’s Algorithm, which is a quantum algorithm theorized in the 1990s by Peter Shor, a researcher at Nokia’s quantum computing hub, Bell Laboratories.

This technique shows how a suitable quantum computer, which many expect to emerge around 2030, could quickly find the prime numbers of large numbers. This is a task that classical computers have difficulty with. This is the very reason why RSA encryption was created to protect online data.

But several quantum computing companies are emerging to counter this threat by developing new encryption methods, collectively known as “post-quantum cryptography.” These methods are designed to be more resilient to quantum computers — often by creating a problem that even a powerful quantum computer wouldn’t be expected to have many advantages in trying to solve. Isara, Post Quantum, and many other companies are among those in this space. The US National Institute of Standards and Technology is backing the idea and plans to recommend a post-quantum cryptography standard by 2022.

Quantum key distribution (QKD), a new quantum information technology, could provide some relief from the code-breaking capabilities of quantum computers. QKD uses entangled qubits to transfer encryption keys. It is possible to determine if an eavesdropper intercepted a QKD communication because quantum systems can be altered by measuring. This means even quantum computer-equipped hackers wouldn’t be able to steal information if they were done correctly.