QWave Makes First Startup Investments, Talks Quantum Venture Strategy
Time travel. Invisibility cloaks. Quantum supercomputers?
QWave isn’t doing any of that stuff. But it’s a good way to begin a story that involves investments in quantum physics and materials science companies.
QWave, aka Quantum Wave Fund, is a young venture firm based loosely in Boston and Moscow. Started last year, it has raised nearly $40 million on its way to a targeted $100 million fund for investing in physics-based tech companies. And it’s announcing its first three investments today, totaling $7 million: in Estonian power electronics firm Clifton; optical-materials startup Nano-Meta Technologies in Indiana; and Centice, a North Carolina company that has technology for doing chemical substance recognition (of interest to both doctors and police).
The man behind QWave in Boston is a tad mysterious. His last name is Kouzmine, and his first name is either Sergey, Sergei, or Serguei, depending on whom you ask. (Sounds like a quantum superposition to me—I’m going to go with Serguei.)
Asked whether he’s based in Moscow or Boston, he says he’s based in airplanes. By the standards of the IRS or government agencies, he says, “I’m not resident of any country.” Translation: he spends a lot of time going between the U.S., Europe, and Russia.
Well, any mathematician or theorist will tell you airplanes are a pretty good place to get work done. In Kouzmine’s case, that means taking a top-down approach to identifying important trends in physics and technology; then figuring out who is doing the most commercially promising work in those areas; and then making contact with them.
In addition to the newly announced companies, he says, think of areas like materials for next-generation touchscreens and displays, solar panels, batteries, computer chips, security systems, and medical diagnostics.
Kouzmine (pictured) is a physicist by training, but he has amassed quite a bit of experience in startups and big companies, as well as in banking and investing. Plus he grew up in the Ural Mountains of Siberia, so anything is possible.
He is the managing partner of QWave, where he has three other partners. The team takes pride in understanding both the scientific and business/entrepreneurial sides of new technologies. “I love science, but we’re in the business of making money,” he says.
Of course it’s too early to say if their approach will work out financially. But their idea is to invest primarily in Series A rounds, typically putting in $3-5 million, for companies that are “capable to deliver technology and products to customers,” Kouzmine says. The companies should be able to be cash-flow positive in about three years, and be sellable in about five years, he says. The biggest value QWave brings, he adds, is to companies that are at the stage where they need to scale up production and development and do marketing.
A big challenge would seem to be that physics/materials companies need a lot more time and money than, say, software startups to potentially get big and profitable. It will be interesting to watch if Kouzmine’s firm finds a quantum path around that.
Although QWave hasn’t announced any investments in the Boston area, that might change soon. Kouzmine hints that some discussions are in the works. And he says Boston is a technical stronghold for his firm, especially with all the technologies coming out of MIT, Harvard, and other universities.
By contrast, he says Silicon Valley is “already overhyped,” at least in terms of materials science. “The East Coast is better than the West Coast” in that field, he says, especially in the Boston-DC corridor.
And thinking more globally, he says, “Americans tend to disregard European high tech” to their detriment. Meanwhile, he says Russian companies represent less than 5 percent of QWave’s pipeline, mostly because the culture of entrepreneurship is much stronger in the U.S. and Europe—and at least in the latter case, governments are very supportive of startups.
As for the more speculative, long-term quantum ideas out there, Kouzmine enjoys talking about them as much as any physicist. But he cautions that scientists don’t understand the basic nature of things like time, teleportation, or quantum computing well enough to make commercial bets yet.
“Maybe our competitors,” he says, “but not us.”