A big deal! UK venture capital firm sets up $120 million quantum technology fund

London-based venture capital (VC) firm 2xN has launched a $120 million fund to support quantum computing startups [1].

The fund will focus on quantum startups and companies in the travel, collaboration, marketing and education technology sectors. Going forward, 2xN's Fund II will invest in up to 25 early-stage startups in Europe and the U.S., ranging from $3-5 million per company from seed to Series A.

01Who leads 2xN?

The founders of 2xN are Lars Fjeldsoe-Nielsen and Niels Nielsen.

Fjeldsoe-Nielsen worked at Dropbox, WhatsApp and Uber before joining London-based VC Balderton Capital; Niels Nielsen is an entrepreneur and technology venture capital firm and one of the largest private investors in the quantum space. Both founders have previously invested in Cambridge Quantum (now Quantinuum) [2].

02Who will back the new Quantum Fund?

2xN is backed by the Danish Growth Fund; as well as funding from several family businesses: including e-scooter startup Voi, and the founders of wine marketplace Vivino; and an investment from Quantinuum founder Ilyas Khan.

03How will 2xN's money be used?

2xN's main focus is on "quantum opportunities". This includes quantum startups as well as companies in the areas of travel, collaboration, marketing and education technologies, and Fjeldsoe-Nielsen says: "There is a consensus that quantum will indeed have a significant impact on these four areas."

The fund will look for founders with drive and ambition, as well as fund managers with experience in scaling up.

2xN will invest in 20-25 early-stage startups in Europe and the US, ranging from seed to Series A. Over time, the average investment will be $3-5 million per company.

Approximately 50% of the cash is saved to reinvest in later rounds of funding for the company.

04How has the fund performed?

Since January 2021, Fjeldsoe-Nielsen and Niels Nielsen have been co-investing.

2xN's first fund operated in secret, investing $50 million in 21 deals. According to Fjeldsoe-Nielsen, about half of the companies they have invested in have managed to raise more money in the past year. Companies in their portfolio include Quantinuum, QuantrolOx and Kvantify in the quantum space, as well as StudySmarter in the education technology space and Monta, a charging platform in the mobile space.

05How are venture capitalists adapting to the changing market landscape?

Looking ahead, Fjeldsoe-Nielsen believes that generalist VCs will struggle to keep up with the changing times and that the solution will be to focus on specific industries and regions.

Another key element of the 2xN strategy is a collaborative investment approach that puts the interests of startups first. "One of the questions I always ask founders is 'What would be on your dream list?' And then we share the appropriate opportunities with them." 2xN works with venture capital firms such as Sequoia Capital, Andreessen Horowitz, Kleiner Perkins and Y Combinator.

Fjeldsoe-Nielsen is the fund's single general partner (GP), and single GP funds have gained traction in the U.S. in recent years, and their success is prompting European investors to follow this model.

06Quantum funds: niche and selective

Investor interest in the quantum space has grown significantly over the past two years.

2021 saw the first successful large-scale exits of U.S. quantum startups: IonQ and Rigetti went public at valuations of $2 billion and $1.5 billion, respectively. These exits have investors salivating, driving total investment in quantum computing to more than double in 2021 compared to the previous year.

Even if the market slows, the trend is expected to continue into 2022 and beyond. With the U.S. leading the way, Europe is beginning to follow suit. 2xN Fund's launch comes on the heels of Paris-based VC, Quantonation, announcing the completion of Europe's first quantum-only fund in July.

So far, Europe's quantum space has lagged behind the U.S. in terms of investment - a problem because quantum computing offers a huge opportunity that will impact all other industries. As more money settles and invests in the region, Europe will increase its chances of catching up with the US.

07Not just a fund, but an opportunity

Left: Niels Nielsen; Right: Lars Fjeldsoe-Nielsen.

Speaking about the new fund, Lars Fjeldsoe-Nielsen, general partner and co-founder of 2xN, said: "I believe 2xN is more than just a fund, it represents a pivotal moment in the development of venture capital in Europe. Former operators and founders are increasingly becoming investors and the pace of startups is increasing. This is a huge opportunity for Niels and me to share decades of experience, strengthen our global network, and build an investment ecosystem with the next generation of founders and their innovations. This can only create more value if we get rid of the old closed system and create a culture of open, transparent and shared deals in a way that works for everyone."

Niels Nielsen, co-founder of 2xN, added: "We have witnessed the growth of the quantum computing space, which is unparalleled in its innovation and potential. This creates an opportunity for investors, entrepreneurs and operators to come together and be part of these groundbreaking things, while also bringing the knowledge needed to help our limited partners, co-investors, enter this space."

Reference links：

[1]https://tech.eu/2022/08/15/london-based-vc-2xn-unveils-120-million-fund-to-back-quantum-computing-startups-in-europe/

[2]https://sifted.eu/articles/2xn-quantum-opportunities/