Yuval Boger interviews Joab Rosenberg, partner at Deep33, a new deep-tech venture fund focused on the future of compute. They discuss the fund’s investment thesis across quantum computing, AI infrastructure, and energy, and why Joab expects near-term commercial quantum applications. The conversation also covers hardware vs. software opportunities, fundraising realities, geopolitics, education in quantum, and Joab’s favorite quantum dinner guests.
Transcript
Yuval: Hello Joab, and thank you for joining me today.
Joab: Hi Yuval, how are you? Thanks for having me on the show, the famous show.
Yuval: Of course. So who are you and what do you do?
Joab: I’m a partner at a venture fund called Deep33. I’m a physicist by training and by heart, and I do investments in quantum technologies.
Yuval: And I think you have a new fund, so congratulations on that. How large is the fund and what are you planning to invest in?
Joab: Yeah, it’s a big week for us. We just announced the fund, Deep33. We closed, we announced the first closing of a hundred million dollars and we’re going up to 150 on the second closing. And we invest to put it simply in the future of compute, which means our thesis is that now it’s the time for actually breaking the bottlenecks of compute to get to the next generation of software and applications. So we invest in quantum computing and technologies, we invest in AI infrastructure, and we invest in energy and robotics when we find interesting things over there.
Yuval: You’ve been following quantum computing for a while and I think you have been teaching quantum computing courses for the uninitiated. What is your view of the quantum computing market? Where are we today? Are we at the Wright Brothers just flying a couple of meters or are we at the 777, you can go anywhere in the world?
Joab: Yeah, I think the fact that I joined as a partner to an investment firm means that we’re quite, I think that we’re quite advanced. And I do believe in our thesis is that the next year in 2027, we’ll start seeing commercial applications, which I think is not still a common view. So many people, the uninitiated, tend to think it’s very long from now. And I think they’re mistaken. And therefore, there’s a good opportunity to invest before the others are coming in.
Yuval: Because for those that believe that quantum is 10 years away, isn’t that sometimes beyond the scope or beyond the time zone of the timeline of a venture fund? You’re probably supposed to give some money back to the investors after, I don’t know, five years or 10 years?
Joab: Yeah, the investment firms, the VC funds, are working on a hypothesis that you will bring money at the maximum after 10 years. So clearly our thesis should be that we can bring money before that, although we must understand it doesn’t necessarily mean that the company should be fully built and all of the computers are fully present. You can make money before that, right?
So some energy companies building nuclear reactors, going to a different field, may go public and may bring money and liquidation to the investors, to the early stage investors, before the reactor is there. But in any case, as I said, I do believe that there will be commercial applications much before the end of this fund.
Yuval: Where do you see the value? Is it in creating the underlying components like a vacuum chamber or a cryogenic cooler? Is it in building computers? Is it in middleware, compilers, applications? Where in the stack do you see the biggest opportunity for value?
Joab: I think at the moment our focus should be on hardware. So there are the companies that are building the different modalities and actually focusing on a full-stack quantum computer. Although when you look deeply into the companies not all of them are really full-stack even though they’re announcing a full stack.
But there’s also a lot of opportunities in sensing and in components, hardware components. I think the best example is Quantum Machines in Israel. So they should have it by now, you know, dozens if not hundreds of customers. And you can sell these boxes and there are many, many more boxes that we need to invent and to bring to production that are part of the stack of what the new quantum computer is.
Yuval: If so, what makes you think that there will be valuable applications next year?
Joab: Just the extrapolation that I’m doing on all the different modalities and hardware and what they already fulfilled and what they promise and just the sheer fact that there are many different paths being pursued. So I assume there’s enough of that span to allow us to get to the right point that we want to get to, which is, you know, getting to the several thousands qubits, physical qubits, getting to the point of 60, 70, 80 logical qubits.
Again, by now, since we’re getting closer, we need to be more precise in saying what we mean by logical qubits. Like the fact that companies like Quantinuum declare a 2 to 1 ratio, we need to say like, what kind of error do you expect with this error correction? Are you getting to 10 to the minus 4? Are you getting to 10 to the minus 6?
Yuval: Some say that there are only two quantum algorithms right now, Shor’s and Grover’s. Do you think that’s an area that you will see a lot of growth? Will you be investing in companies that create quantum algorithms or quantum applications?
Joab: Yeah, we’re looking into it at the moment, mainly because we believe next year we can start seeing commercial applications. But I must say, first of all, we need to be cautious because these quantum software companies are not really dependent only on themselves, which is quite dangerous when you’re waiting for IBM, Google, Quantinuum, or QuEra to build the right hardware.
But I think the general question that you just asked about, we need to understand first, there are these mathematical proofs that we have since the 1990s, which were enough to drive the business and the investments forward, because we know what will arrive when we get to the 1 million qubits and more.
But there are also a lot of tinkering when people develop algorithms. And I think many times, when you do put the hardware in the hands of the computer scientists, they will be very inventive in what they achieve. And it’s just too early to do that. You do see new algorithms coming. And again, it’s not Grover or Shor. It’s just like this kind of different optimization ways to do things.
It could be, there should be a lot of innovation, let’s say a year or two from now, when we have more computer scientists who know how to run this software and we have enough of the hardware. At the moment, it’s more of a toy models as we know.
Yuval: You mentioned value in a year. What’s your take on what is the application there? Is it chemistry and material science? Is it optimization? Is it machine learning? Something else?
Joab: Yeah, I think initially most probably something around chemistry, molecules, drug discovery, material science, small molecules. But also maybe more and more of the optimization problems that we see running today on the annealers may shift and be run on the digital computers. And again, there’s a lot of space for innovation there and therefore we need more and more people to work on the algorithm side.
Yuval: Speaking of people, who else is running the fund?
Joab: Yeah. So we have great partners. I think, very much enjoy working with this team. So Leo Prosor is the senior partner. He’s coming from a very good background of over like almost 15 years, I think, in venture capital firms, and he’s coming from a financial background.
We have Mikey Bruchem, who’s coming from LA. He was a very successful entrepreneur and decided that by now he wants to help with the Israeli ecosystem and specifically with deep tech. So he’s coming from the West Coast side, very well connected there, and helps us to push forward and help companies go into the American market. Leo is also living in New York.
And then we have Yael Persheshet and Ori Amsalem, who are leading the AI vertical and the energy vertical respectively. And we do have Yarden Golan also, who’s coming from the government service, and we want him to be responsible for all the government contacts and the grants, since, as we know, there’s a lot of non-dilutive money in these fields coming from governments. So we really want all the companies to tap into this pool of money and be able to do early stage investments and then get a lot of non-dilutive dollars into the companies before we do the next round.
Yuval: And if I were an entrepreneur looking for money, what should I expect from you in terms of check size, stage, geographic focus, anything that would help me clarify whether I should approach you?
Joab: Yeah, so we already done five investments, two in quantum, and our check size on average is about five million, and sometimes we can add more by our LPs. The geography, of course, naturally our access is more in Israel, but we’re able to invest globally. So also the US and Europe, in some cases, I just came back from a visit in Switzerland, where I’ve seen some very interesting companies.
So in general, I would say I don’t like the notions of, you know, seed round and A round, because the check sizes are very different if you do a quantum software or quantum hardware. If you do quantum computer and you raise 20 to 30 million, usually it will be a syndicate of several funds and maybe a strategic fund, at least in Israel. So check size from our fund, I would say at around 5 million for the initial investment. And of course, if it’s a successful company, there will be follow on money coming later.
Yuval: My sense is that to build a quantum computer, you actually need a lot of money. So much more, maybe two orders of magnitude more than $5 million. Do you see it the same way or are there more efficient ways to do so?
Joab: No, no, I agree. If you want to go all the way, and you don’t necessarily need to go all the way. We’ve seen companies this year already acquired middle way and also early stage. But if you want to go all the way, you will need a lot of capital and we’re aware of that. And therefore, we are well connected already to some of the biggest deep tech funds in the US.
And as I said, we want to start with early stage and then tap into the grants. And then I assume, like we’ve seen, it’s kind of a playbook by now. The next round would be between 100 to 250. So you and QuEra had a big second round. In Israel, we’ve seen several companies now doing 100, 150.
And therefore, the next round, which could either be a SPAC, an acquisition, or tapping into a very, very big American fund that can put a billion dollars if you’re really advanced and you show some meaningful innovation in how you build the computer. I think it’s about like success-oriented. It could be the usual three stages before we get the money back to our LPs, but it will be bigger checks than the usual cyber, SaaS, and other software companies.
Yuval: What are the trends that you see in the geopolitics of quantum? Can a company in any country sell to any other country? Do you see that changing?
Joab: Yeah, I think the more mature the market will be, the more we will see these walls being built, the Chinese wall, if you’d like. So I think it’s very clear at the moment in terms of geopolitics that the Chinese and probably the Russians will be out of the world. So Israeli, US, European companies will probably not collaborate and not buy from the Chinese.
I think it’s a very, very important question for the Israeli market to be inside the community that is collaborating with the US market. And here it’s a bit delicate and we need to make sure both on the G2G relationship, but also, you know, with the people driving the market and the ecosystem to be sure that Israeli companies on quantum computing can and should be part of the American and European market because otherwise we’re in a big trouble. But I think at the moment it does happen and you see the collaboration happening and things are progressing in the right way.
Yuval: We touched upon it earlier that you were teaching, or maybe are teaching, quantum courses for the uninitiated. What are you teaching and what have you learned from this process?
Joab: Yeah, so that’s an interesting story. It started back in COVID, much before I thought of being a partner in a deep tech fund. And to be honest, it started from friends who are philosophers, who wanted to know more about physics. Started actually with people who were interested in the notion of time in physics. So we started with special relativity.
And I actually borrowed completely from Professor Leonard Susskind, who’s doing these lectures that are available online on YouTube, amazing lectures that he called the theoretical minimum. And therefore, I think I am able to teach it to people who did not have any background in mathematics or physics. So we do a little bit of mathematics, only the necessary part. And then Susskind had shown us the way how to teach in a meaningful way.
So not just like a collection of general lectures about the Schrödinger cat, we actually teach two-dimensional linear algebra and then what a qubit is, proving Bell theorem and proving a Deutsch Oracle and so on. It takes about 20 hours. We do it in the desert in Israel. Maybe we’ll start doing something in New York and in Europe.
And I think you find different kinds of audiences, the people who are just interested in the knowledge. And more and more I see people coming from the industry, from the high tech industry, electrical engineers, computer scientists, sometimes physicists who just studied 25 years ago when there was no course on the topic and are interested.
And I think there’s a lot about C-level people that I can take and we should take into the companies because I think now as an investor, the combination of physicists and academics together with experienced entrepreneurs is the crucial point to make a successful company.
Yuval: Was it difficult to raise money? Are investors hot about quantum these days or something else? Do investors feel that there are not enough or too many quantum funds?
Joab: It’s never easy to raise a fund and this time in the market is even less easy than usual. I think the track record of my partners was crucially important. And the combination of their track record with the fact that we bring real expertise in quantum and in other deep tech verticals was very important for the LPs to get convinced.
I’m not sure, like, we’re not strictly only quantum technologies. So I’m not sure if investors, how many investors would invest in us if we were only quantum at this moment, maybe in two years time it will be easier.
But I think there’s a huge appetite for deep tech at the moment because SaaS companies had went down, much of the model of big growth, accelerated growth on the money of the VCs is feeling like out of date. So people do understand that there are huge opportunities in the future of compute, and they want to be part of it as much maybe as they are part of other funds.
But my partner Leo, for example, used to be for many years a generalist, and from his point of view, he came to the conclusion that the future is in deep tech and not in general companies and software companies, mainly as it was in the last 15 years or so.
Yuval: You mentioned that you already invested in two quantum companies. Can you tell me a little bit about them?
Joab: Yeah, yeah, for sure. So one of them is CyberEdge. They’re doing post-quantum encryption, but in a different way than the usual. So usually we think of post-quantum encryption as kind of agile software solutions on the one hand, or QKD and other quantum kind of solutions.
And CyberEdge are doing encryption on the physical layer. It’s not quantum encryption in that sense, but it’s also not just a bunch of software ideas that, you know, quantum computers may decrypt in the future. So I think it’s a very innovative approach, not usual, kind of contrarian, but very interesting and surely adding a lot to the protection layer coming the post-quantum era.
The other one is called Quamcore. It’s an Israeli company that is doing superconducting qubits. And the idea is to bring the control system into the cryostat. We’ve seen several of these companies now emerging, Atlantic that was acquired by Google, SQC, D-Wave just announced something similar, and we believe Quamcore has a really innovative new idea to design these control systems within the cryostat based on work coming out of the Weizmann Institute and the Technion. So we’re very positive about this course of this company.
Yuval: You know that I ask many of my guests about a hypothetical dinner with a quantum great dead or alive, and when you were coming online, you suggested that I leave a lot of time for this answer. So here you go.
Joab: Yeah, I’m a big fan of biographies of physicists from very young age. So I think I read many of the heroes of Los Alamos when I was in my early twenties. So I really like the people as people, and I think I know quite a lot about their lives.
So you know, the usual answer should be Einstein, but I would combine Einstein with John Bell. I want to dinner with both of them to see how Einstein actually responds to Bell proving that God does play dice. So that would be an interesting conversation with the dead.
In terms of the living ones, of course, because I’m teaching Susskind for so long, and I’m really amazed by his capability to explain physics in a simple way, unlike what we’ve seen mostly in our undergrad studies, when you hide the physics behind a lot of integrals and derivatives. So Susskind would be a very good participant.
I think also Zeilinger, because I’m very interested in my master degree in information and physics, not in the sense of quantum information and quantum computing, but more from the foundations of physics and what information can mean for physicists, being kind of an abstract notion that suddenly comes into physics in a very meaningful way.
So four of them. I’ll do one after the other. We’ll do speed dating.
Yuval: And you know, you mentioned that Einstein is sort of the trivial answer. I must tell you that I did over 200 episodes of Quantum Podcast and it was nearly 100 before Einstein came up the first time. By the time Einstein came up, there were 50 Feynman’s, I’m sure.
Joab: So you know, I’m right. So much I must say, like I read him and I think he’s kind of the opposite of Einstein in terms of Einstein was very interested in God’s thoughts and Feynman represents a very practical side.
Yuval: Very good, Joab. Thank you so much for joining me today.
Joab: Thanks, Yuval. A pleasure. I waited for long to be able to get in your podcast just because I was in a stealth mode, but I really like your podcast. Thank you very much.
Yuval: Thank you and good luck.
Yuval Boger is the Chief Commercial Officer of QuEra Computing.