On the detail so far presented, the Australian nation has been taken to the cleaners in the $1bn PsiQuantum computing deal — and even the main beneficiary, Queensland, could have done a lot better.
Let us put to one side the issues of whether the Australian government should be investing in “Made in Australia” projects. Most of the projects submitted so far involved investments using known technology aiming to secure as much of the value chain as possible.
The Quantum project is different. In combination with the Queensland government, Australian Prime Minister Anthony Albanese and his Treasurer Jim Chalmers were doing their first $1bn deal with venture capitalists. This requires skills not found in political ranks.
Part of the deal involved enhancing the value of the global technology owned by the venture capitalists — technology which will greatly enhance the power of groups like Amazon and Google. Details of the deal have been strangely withheld.
When inexperienced commercial players like prime ministers, treasurers and top scientists negotiate with some of the world’s best deal negotiators, inexperience can quickly minimise opportunities.
On the basis of public announcements, this is what appears to have happened in the Quantum computing deal. Worse, an Australian rival to the venture capitalists may now be greatly downgraded.
The two venture capital funds to be named — Blackbird and Playground — have strong connections with Australia and both are good operators.
When they got wind it was possible there was almost a billion dollars in capital available to invest in their high risk quantum computer system, their feverish excitement would have been moderated by three clear objectives:
1) To access an incredibly valuable $1bn at a time when venture capital markets are becoming tougher.
2) To keep control of their global intellectual property, with particular emphasis on the US. In Playground’s published future vision, cloud-computing giants like Amazon, Google and others will be made much more efficient with access to Quantum’s technology.
3) To access Australia’s quantum computing skills.
Australia came good with the cash. The joint Commonwealth-Queensland investment includes approximately $470m in “equity and loans” and possibly grants from each government. Equity in what?
With that sort of money, Australia and Queensland needed to emerge as major stakeholders in the global intellectual property being developed.
At least on the basis of what was announced, venture capitalists would be overjoyed at the outcome of the deal.
Below, I will quote the main announced features of the deal, with my comment in brackets:
— “Asia-Pacific Headquarters in Brisbane”. (No problem here, but the big market is not Asia-Pacific, but the US. No mention of US access as of yet.)
— “Build and operate successive generations of its ‘Fault Tolerant Quantum Computer’ (FTQC) in Brisbane”. (Happy to do this, but the big Quantum computer capacity will be installed the US.)
— “Create up to 400 highly skilled local jobs”. (One of the venture capitalists’ main rivals is a technology development outfit in Sydney and Canberra. Their people will be offered jobs in Brisbane, not only providing globally-short skills, but reducing the threat of a potential rival Down Under.)
— “Establish partnerships with the local quantum industry and advanced manufacturing clusters”. (Good for Australia, but particularly good for the US to have a satellite skills base to enhance the US base down the track.)
— “Create a dedicated climate research centre.” (Great, because Quantum computing will help develop carbon dioxide reduction technology. But it may make obsolete the current Australian installations being filtered by the government.)
Australia can obviously benefit from these arrangements.
What we should also have done is make sure we were buying substantial equity in the global footprint given there were local operations which would have offered equity the government needed to have a proper tender process.
This is not only fair to Australian technology, but experienced Australian negotiators could have used the competitive tension created by such a process — and the lure of the billion dollars — to make sure local aims be achieved and see us have a stake in the total enterprise.
Instead what appears to have happened is Australian technology was given an indication of an opportunity but not the full details. The Commonwealth then allowed Queensland to swamp NSW and Canberra, hopefully not for political reasons.
The Australian government concluded the venture capitalists’ project was further ahead than the local one.
This may be true, but only by fair and open tender would we discover the truth.
What we appear to have done is jump at the chance for a major investment to fall in the “Made in Australia” basket, rather than capitalise on a chance to expand our domestic technology sector while also seeing the nation become part of a global movement.
The best we can now hope for is the base business becoming a series of quantum communities which will benefit the nation.
It looks like a repeat of Wi-Fi, where we didn’t take advantage of our opportunity.
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