The age of quantum computing is upon us, or at least private investors seem to think so. The nascent industry has seen record-high venture capital investment, reaching at least USD 1.1 billion so far this year. That’s more than the last six years of fundraising combined. 

The quantum gamble is now starting to move beyond private investments as leading pure-plays turn to public markets. Earlier this month, IonQ was listed on the NYSE via SPAC, becoming the first quantum computing startup to go public. A few days later, Rigetti Computing announced plans to go public early next year. Cambridge Quantum Computing, which is in the midst of a joint venture transaction with Honeywell Quantum Solutions, is also reportedly in discussions to make its Wall Street debut by the end of this year.

So now is the right time for the first public quantum computing startup, IonQ (ticker: IONQ), to go under the microscope. We take a deeper look at the company’s business, technology, competitive position, strategies, performance, future plans, and more. 

Quantum computers use qubits as the basic unit of information, in place of bits. Qubits can store multiple states of numbers at once (beyond the binary 0 and 1 that classical computers are based on) and process them simultaneously. This is why quantum computers are expected to be millions of times faster than classical computers and instrumental for solving complex problems ranging from supply chain optimization to identifying new drug targets to tackling climate change.

There’s one big challenge: Designing qubits that are stable enough to keep their information content for a somewhat prolonged period to ensure accurate processing. This fragility means that computational errors increase exponentially as the number of qubits increases.

Quantum hardware developers like IonQ are finding ways to overcome these challenges through different qubit technologies for building full-scale quantum computers. They are currently experimenting with computers with fewer than 100 qubits, which are useful on a small scale. However, at least 1,000+ qubits are required for a quantum computer with an error rate low enough to be commercially viable.

IonQ primarily focuses on the development of core quantum computing hardware, but it also operates a cloud computing platform to give other companies access to its quantum computer. It competes directly with startups like PsiQuantum, Rigetti Computing, and Xanadu as well as tech incumbents like Google, IBM, and Intel—all of which are building quantum hardware systems.

IonQ has received the second-highest venture capital funding in the quantum computing space, totaling USD 432 million, behind only PsiQuantum (USD 665 million). Interestingly, both companies only recently (after 2020) reached these levels, pushing aside long-standing leaders like D-Wave and Rigetti Computing. After going public, IonQ’s market capitalization settled around USD 2 billion, making it the second most valuable quantum pure-play after PsiQuantum, which is valued at an estimated USD 3.15 billion.

IonQ was formed in 2015, around the time several startups were emerging in the quantum computing space in College Park, Maryland. It was born out of the academic research done by its co-founders Dr. Christopher Monroe and Dr. Junsang Kim, professors at the University of Maryland and Duke University, respectively, who have more than 25 years of experience in quantum computing. Dr. Monroe is known for producing the first controllable qubits and quantum logic gate in 1995. 

Through its co-founders, IonQ has strong ties to the University of Maryland and Duke University from where the company licenses its proprietary and other technologies to build quantum computers on an exclusive, royalty-free basis. The company operates an R&D facility near the University of Maryland that employs more than 60 staff. 

IonQ is now led by Peter Chapman, the former engineering director for Amazon Prime, who replaced Dr. Monroe as CEO in 2019. Meanwhile, Dr. Monroe took the role of chief scientist. Thomas Kramer, the former chief financial officer of Opower Inc. (a customer engagement platform for utilities owned by Oracle Corporation), serves as the chief financial officer. In October 2020, the company hired David Bacon as vice president of software. Bacon previously led Google’s quantum software team. 

The company has attracted some big names as corporate investors through venture capital funds and private investments in public equity (PIPE). This includes GV (formerly Google Ventures) and Amazon, which have their own quantum computer development initiatives, along with Samsung.

Industry players are following different technological approaches to building qubits and each has its advantages and disadvantages. IonQ follows the “trapped ions” technology, building on the pioneering work of its co-founder Dr. Monroe. Currently, it is one of the most established technologies and much of IonQ’s advantage can be credited to this. 

The trapped ions technology uses natural atoms that are identical to each other and can offer long coherence times and high fidelities, so the error rate is relatively low. Additionally, quantum computers built using this approach do not need to be stored in ultra-cold temperatures unlike those of Google, IBM, and Rigetti Computing, which follow the “superconducting” qubits approach.

There are some cons too. Critics say trapped ions technology operations are slow and will be difficult to scale, but, IonQ’s CEO and the chief scientist disagree. They say their computers can be scaled and the gate times (operation speed) can be easily increased. 

While some of these advantages have helped IonQ garner attention from investors, new technologies are also emerging which may contain more promise, at least theoretically. One such qubit designing technology is the “photonic approach”, followed by PsiQuantum, which offers various advantages (see table). This may be one reason why PsiQuantum has emerged as the most funded startup. However, the photonic approach’s theoretical advantages have not yet been fully proven.

We compared the number of qubits on the latest quantum computers of leading hardware developers to find out where IonQ stands. Typically, a higher number means higher performance, but there are several other measures that are not taken into account, such as the error rates, fidelities, the number of fully interconnected qubits, etc. But, this can be the most basic measure to evaluate quantum computers. 

IonQ ties with Rigetti Computing for the startup with the highest number of qubits. With 32 qubits in its latest hardware, the company leads the trapped ions technology segment. However, it falls behind some of its incumbent competitors like Google and IBM, which follow the superconducting approach. PsiQuantum does not have a working quantum computer yet, and is planning to launch a 1-million-qubit computer by 2025.

IonQ and other quantum hardware developers currently make limited revenue through a business model called Quantum Computer as a Service (QCaaS) through which they offer access to their hardware systems via the cloud. Even though they are experimental devices, a few large enterprises and universities are willing to pay to test these systems in their businesses or for academic purposes. 

IonQ sells access to its 11-qubit computer through its own cloud-computing platform and third-party cloud service providers. IonQ is currently the only company to have its hardware available on all major cloud services including Amazon Web Services (AWS), Amazon Braket, Microsoft’s Azure Quantum, and Google Cloud. 

To operate the quantum computing hardware via the cloud, software and programming languages are essential. IonQ currently does not develop these in-house and relies on third parties. It has made its hardware compatible with all major open-source quantum software development kits (SDKs), including IBM’s Qiskit, Google’s Cirq, Microsoft’s Q#, Xanadu’s PennyLane, and OpenQASM. This ensures smooth integration between programs from other platforms and IonQ’s hardware without any major modifications to code.

IonQ reported USD 218,000 revenue for the six months ended June 2021 and did not record any revenue the previous year (2020). But for the year ended 2019, it made USD 200,000. Comparatively, this is just a fraction of the USD 5.5 million revenue reported by Rigetti Computing for the year ended January 2021 (FY2021). None of the other companies have disclosed revenue, but clearly, IonQ has a lot of catching up to do, at least in comparison to Rigetti. IonQ attributes this to a late focus on customer acquisition compared to Rigetti. 

However, the company is quite optimistic about future revenue, which is indicated in its projected estimates of contract bookings. Contract bookings are not revenue; they include prepayments and signed contracts for future performance, which will be recognized over a period of a few years (IonQ says three years). In September 2021, the company revised its forecasted contract bookings for the year 2021 to USD 15 million—three times its previous estimate. It expects similar contract revenue the following year and estimates 4x growth by 2024.

With no meaningful revenue, IonQ is in the red and it does not expect to turn profitable in the foreseeable future, which is likely to be true for all quantum computing startups. This is because the company spends more than 50% of operating expenses on R&D activities. IonQ’s operating loss for H1 2021 was USD 17 million, more than double that of H1 2020, and in line with what was reported for 2020 (USD 16 million). Meanwhile, Rigetti incurred an operating loss of USD 35 million for FY2021 (ended January).

IonQ currently has customer partnerships with two financial institutions, Goldman Sachs and Fidelity Investments, as well as two academic users, Sungkyunkwan University (South Korea) and the University of Maryland. In comparison, Rigetti boasts a more robust clientele that includes some government agencies such as the US Department of Defense, the Department of Energy, NASA, the US Airforce, the UK Research and Innovation, and an unnamed global bank. 

IonQ is now focusing on expanding to a wide range of industries through strategic partnerships. It has collaborated with Accenture (September 2021) and Softbank Investment Advisers (June 2021), aiming to accelerate quantum computing business applications to industrial clients of Accenture and portfolio companies of Softbank across all industries.

Here are the details of IonQ’s clients and partners:

IonQ has released a roadmap for the next few years. It uses a metric called algorithmic qubits that the company defines as the number of useful qubits taking error correction into account. 

The key milestones include: 

1) 2023: Offering rack-mounted quantum systems that are small enough to enable networking in a data center (an industry-first).

2) 2025: Delivering broad quantum advantage, where quantum computers will outperform supercomputers across a broad range of applications.

3) 2028: Offering 1,000-plus-algorithmic-qubit computers, which are large-scale quantum computers potentially delivering breakthroughs across various industries. 

Other companies have also announced future plans, but they cannot be compared directly as IonQ is the only player that uses algorithmic qubits. The company argues that the number of physical qubits is not important; what counts is the actual number of qubits that can be used without errors. Given that we do not get algorithmic qubits from other companies, we used physical qubits to find out where IonQ stands.

IonQ’s plan of launching a 32,000-physical-qubit computer by 2028 is relatively less ambitious. Companies that use the photonic approach have the most ambitious targets to deliver—PsiQuantum (one-million-qubit computer by 2025) and Xanadu (one-million-qubit computer by 2026). Google intends to introduce a one-million-qubit computer by 2029.

IonQ is probably right—it is the number of useful qubits that matters. IBM and Rigetti may introduce a 1,000-qubit computer before IonQ, or PsiQuantum could make a breakthrough with a one-million-qubit computer by 2025, but that does not mean they can win the quantum race without tackling errors. IonQ’s plan seems to be a more practical one, but how it fares against the technological advancements of others, in particular error correction techniques, is yet to be seen. Until then, the field of quantum computing will continue to remain a gamble.