Recently, on September 17, a new tech startup was added to InterValley’s portfolio. It is Quintessence Labs (QLab), a developer of quantum encryption technology. The Canberra-based company has more than enough experience to be considered a startup, and we feel fortunate to have synchronized the timing of our funding with QLab’s funding opportunity.

Our encounter with the company dates back to 2014, when the InterValley fund was not even in existence. Back then, Yasu was (and still is) a member of the Expert Network, the Australian government’s official start-up support staff (probably the only Japanese member), which led to our encounter, but even with or without the fund, the current situation is very different in two ways.

One is the global technological evolution. Two years have already passed since Google announced that it had demonstrated quantum supremacy, which is said to have dramatically raised the development stage of quantum computers. Although it is still expected to take some time before full-fledged practical application, examples of applications in encryption are already taking shape.

The other point is that the need for more advanced cyber security is growing in relation to the rise of China, which is fighting for technological leadership, and the worsening relationship between the U.S. and China. Cyber-attacks at the national level have led to military tensions and are changing the way networks, including satellite communications, are managed. There is a sense of crisis that we are on the verge of a time when conventional encryption will be rendered meaningless by the dramatic advances in computing power. I believe that these two changes in the situation have provided a clear answer to the question “Why now?”

It took almost five years to realize the investment due to the fact that it took a longer time to establish this fund, but in the end, I think we were able to make the investment at the most necessary time. It is always difficult to determine the right time to invest in deep tech startups with high technological challenges, and I have in fact had a difficult experience in the past. However, Australian startups have been around for a relatively longer time (QLab was founded in 2008), and I feel that they have the advantage of taking their time to determine the right time to take off. This is definitely an advantage over the US and Japan in the startup scene.

From the perspective of national security, countries in Europe, the U.S., and China are all competing to develop Quantum Key Distribution (QKD), and in Japan, too, with NICT leading the way, major companies such as Toshiba, NEC, NTT, and Mitsubishi Electric are in the race to develop it. Since breakthroughs are required in both hardware and software, the hurdles for startups to succeed in this field are very high, even from a global perspective. The fact that Australia is home to a valuable company such as QLab that is at the forefront of such technology is one of the points that has attracted my curiosity as an investor most.