Nardo Manoloto, managing partner of Qubits Ventures, is interviewed by Yuval Boger. They discuss the firm’s investments in quantum and future computing technologies, his belief that quantum AI is an imminent reality, insights on global quantum economies, the role of venture studios in de-risking investments, and much more.
Full Transcript
Yuval Boger: Hello, Nardo, and thank you for joining me today.
Nardo Manaloto: Thanks, Yuval. Glad to be here. Looking forward to our conversation.
Yuval: As am I. So who are you and what do you do?
Nardo: I’m Nardo Manaloto. I’m the managing partner for Qubits Ventures. Qubits Ventures is a venture capital firm investing in quantum and future computing technology companies across the globe.
Yuval: Quantum and future computing technologies. Is there a future computing technology that’s not quantum that you invest in?
Nardo: Apparently, as I was looking at quantum, I started to get pitch decks from other companies that are building other types of computers. So I’ve gotten pitched at by people doing thermodynamic computing, people doing neuromorphic computing, photonic and optical computing, and then most recently, a startup out of Sweden doing something in the biocomputing space, if you can believe that.
Yuval: Do you think quantum computing has something to worry about from these alternative computing methods or more general, how do you see the future of computing?
Nardo: I don’t think quantum has anything to worry about, but I think what the view should be for quantum should be more of how do you progress not only with the science for making quantum advantage real, that’s one. Second is how do you actually harmonize quantum computing in the view of enterprises to create more of a hybrid approach towards their computing capabilities? And it’s not going to be all quantum. It’s going to be a combination of classical and quantum and many other modalities. Some of the recent things I’ve heard from our big national labs are creating hybrid computing that includes high performance computing, quantum and neuromorphic all working together. So that’s the world we’re going to be living in.
Yuval: I believe that by now the fund has invested in a couple of companies. Could you tell us a little bit about a few of them or what did you like when you invested?
Nardo: Sure. So far we’ve invested in seven companies. So let me tell you a few of them. One company is called QC82. They’re really a photonics-based quantum computing company. What I like about them are the founders. They have four professors that are founders. And then the person that is the CEO of the company is the postdoc that they graduated out of their own respective programs. And this is a group that I like mainly because of the scientific capability, but not only that, they seem to have a good common sense related to how they’re addressing their product roadmap. So they’re coming out with dual photon detectors first, then eventually a quantum chip, and then eventually a quantum computer. So they have a good common sense way of approaching their product roadmap.
A company that’s in what I call the quantum energy storage space, think of them as like quantum batteries where they’re trying to increase battery capacity and performance using physics-based methods. So I like that the founder of that company has 15 years working in the whole trying to integrate quantum physics into battery and energy innovation.
A couple more, more recent ones, a company called SavantX. They are a, think of them as a quantum AGI company. They are well known for being the first quantum machine learning company that were able to create a quantum machine learning application to solve logistics issues for the Port of LA. So they’re now working on what I call quantum AGI, where they are trying to make AI LLMs, be quantum-enhanced and quantum-enabled.
And then the last one is a company called Aliro Security, and they are doing quantum secure communication and networks.
Yuval: You are a seed stage investor, right? So that means that you usually have missing pieces or significant missing pieces in the company. What do you think is the most common thing that people are missing when they come to you?
Nardo: I think that the most common things that are missing is really the team makeup. So normally in the early stages, the team that is already there are normally on the scientific and technical side of things. What’s commonly missing are the people that can help them address, okay, where do they need to go for investments? How do they need to address operations? How do they need to eventually prepare for a product and roadmap? So one key one is usually a product person, a person that is in between the customer, in between the technical folks, in between the science aspect of it, and basically that glue that holds a company together. What you normally see is you would find a chief technology officer, chief science officer, CEO, but never a product person.
Yuval: And in your perspective, is the CEO usually a professor or an academic, or is it more common that they come from CEO background in other industries?
Nardo: For this kind of startup, it’s primarily an academic. So the company is born out of their research and their experience, long-term experience of doing something related to their area of expertise, and something that they’re progressing their research by creating a new company and a new product out there for commercialization. So that’s usually the norm. I do get to see people that are serial entrepreneurs that will say, “Okay, I would get someone who’s seasoned in building the business, but can put together the right kind of people from a science and technology engineering standpoint to make the business viable.”
Yuval: You mentioned computing and also networking. How about quantum sensing? Is that on your radar as well?
Nardo: Oh yes, very much so. Actually looking at a couple of ones that are interested in investing, coming out of the Economist Commercializing Quantum event, there are a couple of quantum sensing companies I’m interested in investing. So I’m progressing with my conversations with them and hopefully they say yes to a long-term partnership on the investment side.
Yuval: I noticed that you have a lot of technical and other advisors on your website. What do they do for you? How do they help the portfolio companies?
Nardo: So good question there, Yuval. Quantum I figured was really hard. And then the other piece to it is I never knew it was so broad. So when I started learning about quantum technologies, I looked at it from a computer science perspective just because I’m a computer scientist, my main area of expertise is AI. And then when I started learning about quantum it was through quantum machine learning. And as I broadened the view and research, what I found was quantum is in sensing, it’s in applications, it’s in devices, it’s in components, it’s in so many different things. And I need to make sure that when I’m doing due diligence in these startup companies, I do it correctly. And the only way to do that is to bring in the experts. My head of due diligence person is a Caltech physicist, so he definitely knows what he’s doing there. And then I have all of the other expert advisors to help out on an as-needed basis to help me with the due diligence. But even after the fact that they are allowed to help these startups, whether I invest in them or not.
Yuval: What is your background before doing Qubits Ventures?
Nardo: My background is, as I mentioned earlier, I’m a computer scientist, did a lot of AI work, I’ve actually created three AI companies and have exited a couple of companies in that space. I also run a virtual venture studio where I’ve helped 36 companies so far. Well, not all of them succeeded, I helped 36 of them to date. I’ve helped raise about $400 million in funds and then two unicorns coming out of that. I also was part of Kaiser Permanente’s Innovation where I helped in the investment of many tech companies.
Yuval: You mentioned venture studios and that’s something that sometimes comes up in national quantum programs where beyond computers, countries or regions want to build a venture studio. How do you feel about these models where, okay, we have access to a couple of computers and then we bring several companies together and try to help them all at the same time?
Nardo: I like the models of venture studios because I see them as a de-risking engine for investments. So what they normally do is they would work on a limited amount of projects. So let’s say three to five projects on a yearly basis. They give them really a lot of attention and try to address all of the company building aspects and the product building aspects. So I see venture studios as a de-risking engine. The issue with venture studios is that you can only do maybe five to seven maximum per year in helping these kinds of companies. It’s hard to scale. It’s hard to scale and sometimes can operationally get expensive as well. So you need to make sure that when you’re building something, you’re building something that has an operational budget for the venture studio to run properly and then an investment budget to invest in the companies that are being spun off out of these venture studios. So it’s a slightly different model. The equity model is different. Cap tables are different, but I see it overall as a good de-risking engine.
Yuval: There’s a lot of talk these days about quantum AI. And some people say, “Well, it’s like dot-com of 25 years ago. If you didn’t have a dot-com after your name, you didn’t count.” Do you think quantum AI is more of a buzzword or is it more of an imminent reality?
Nardo: I think it’s an imminent reality. And the reason I say that is because just think of what AI is all about. AI is really solving for probabilistic problems. And we have existing computers that are just deterministic in nature, so it just doesn’t fit. Now, I always say it’s like a kid playing with this board that has a round hole and there’s somebody smashing a square peg into it. So that’s classical and AI.
I think quantum is more probabilistic in nature, so I think it’s a lot better. I think it’s not just one way. It’s not just quantum AI. I think there is also… We often forget the AI for quantum component of it. So I think AI for quantum will help accelerate quantum, but I think we need more people working in that space.
Yuval: But looking at the quantum helping AI, do you expect to run a large language model on a quantum computer or where does quantum come in to assist the AI?
Nardo: I think it has to do with more of simulation and enhancing these models. So for example, in large language models, they could probably help create a neural network or a deep learning network that is smaller in terms of a graph. So the amount of processing is also interesting there. I think if you recently saw the Stanford AI report, each of these AI LLM models, every time they’re trained in the classical system, it generates about 500 tons of carbon emission. And the energy consumption is also quite large. So there’s a lot of stuff that’s happening within the AI space that I think will benefit because of quantum. So we have to look at everything that we’re doing with AI and what quantum brings as a benefit just because it’s a newer kind of paradigm. And I think with that, we’ll probably accelerate a lot of innovation.
Yuval: I think you travel a lot. I saw you last week in London and I think in a few weeks we’ll meet in Tokyo. So how do you compare the quantum economies of different countries or different regions?
Nardo: I think each country definitely are different. They’re definitely very interested in looking at quantum as a critical technology for not only advancing their economic growth, but advancing their security. And I see each country, a lot of the countries are vying for the quantum supply chain business. And I mentioned that that’s also part of security. So they’re all intermingled. Security, economic development growth has a lot to do with the quantum supply chain. Countries are creating redundancies in supply chain and manufacturing to make sure that they’re able to progress with what they need to progress when it comes to these critical technologies.
Yuval: In your estimate, how soon before a substantial number of companies can augment business processes with quantum and see a real benefit?
Nardo: I think that that’s always a longer road. And the way I see it is it’s never like one of those, okay, here’s similar to like a chat GPT moment. In my perspective with this kind of level of technology, it’s always transitional. There are enterprises that are what I considered early adopters of innovation. So they’ve probably done POCs on this stuff. And then there are enterprises that are much more in the mid-level. They wanted to see some level of success first before they try it. And then there are some that are just, okay, they want the technology a little bit more mature before they even go in. So a good example with that would be like healthcare would be a good example of a more conservative type of industry. So I see it more of a transitional component. Yes, the technology itself and the science itself has something to do with it, but a lot of it has to do with the risk view and perspective of the enterprises.
Yuval: As we move from the technology to the marketing side, do you have a piece of advice for your portfolio companies or others how to talk about quantum, how not to talk about quantum?
Nardo: I think don’t focus on the technology, focus on solving the problem and talk about it and just saying you’re solving the problem using quantum technology and this is what quantum technology brings you. Quantum, based on my experience, the moment you mention the word quantum to a lot of people in the business world, it becomes a mental block. It becomes a mental block and then all of a sudden, oh, this is going to be hard. This is not something we can support. And it basically creates a negative perception of the company, that this is something that is hard to implement. So I think the way you need to talk about it is it’s just the next level that is going to disrupt solving their problems in many different ways because quantum does things differently.
Yuval: You’ve been doing this for quite some time. What have you learned in the past, say, six or 12 months that you didn’t know before?
Nardo: Well, the big revelation to me was really this future of computing, Yuval. So in the very beginning when I put the fund together, I was really looking at quantum technologies and I said, “Okay, cool. I’ll specialize on that.” And I started to see a lot more deal flow in that space. And then the more I come to think about it, all of a sudden we have Gen AI coming in. We have a lot of data. The data explosion is exponential. We have climate issues and energy issues. And then all of a sudden I’m getting startups talking to me about more of the future of computing space. Things like, “Oh, here’s a new way of doing things in the AI acceleration. Here’s a new kind of memory that is going to increase performance by a thousand times.” Then I said, “Oh my gosh, I think quantum is not the only game in town.” And that to me is the biggest revelation in the six to 12 months.
And then the other part to it is I do wish that post-quantum cryptography or any of the security side of it is more implemented in many enterprises. I think it’s one of those where big companies don’t want to be surprised. The last thing you want to do is be surprised. All of a sudden you’re not ready. So I was hoping that PQC was more embedded in what we’re doing already.
Yuval: If there’s an entrepreneur or a scientist that’s listening to this podcast and is thinking about starting a company, what are you interested in? When should they approach you?
Nardo: I’m always happy to have conversations with people. Because I have started companies before and sometimes not having anyone to talk to is hard. So I invest in early stage and to me they could talk to me anytime. And mainly because when it comes to investing, it’s all about building a relationship with people. Because the people are the founders and I’d be happy to help them have a conversation with them and then point them to the right resources. But at the very least, they should come to me with at least an idea in mind or at least some level of technology that they’re working on or patent that they’ve already secured that can become a company. And then the other one is maybe just a little bit more education on if something could be a product versus just the feature. I get a lot of people that talk to me about their technology and it’s not a product. It’s more of a feature. So just getting to know the difference between what the product is and what the feature is can actually help start the conversation whether you can build a company or not.
Yuval: And last hypothetical, if you could have dinner with one of the quantum greats dead or alive, who would that person be?
Nardo: Definitely Einstein. Einstein is one of those people that basically he did things that he never knew would have this level of impact. So I want to see what that kind that looks like and kind of say, okay, maybe there’s something I could learn from that. I would do something that hopefully would have a great societal impact without me knowing it. So I definitely would love to have dinner with a person like that.
Yuval: Wonderful. Nardo, thank you so much for joining me today.
Nardo: Oh, you’re welcome, Yuval. Thanks for having me.