Diligence Beyond the Qubits
As an investor in deep technology, how do you diligence a quantum venture's commercial potential? The technical roadmap is often opaque, the path to profitability is measured in years, if not decades, and true product-market fit is a distant dream. In this pre-revenue, pre-advantage world, traditional diligence metrics fall short.
We argue that one of the most powerful and overlooked leading indicators of a venture's future success is its early-stage monetization strategy. More than just a financial forecast, a startup's approach to pricing is a clear window into its founding team's commercial discipline, focus, and long-term vision. Here are the four signals we look for.
1. The Signal of Intent: The Courage to Charge
The first and most binary signal is the simplest: for their QaaS platform, do they charge money or do they give access away for free?
- What it Reveals: A team that defaults to "free access for exposure" often signals a lack of confidence in the inherent value of their platform. They are prioritizing vanity metrics (user count) over validated learning. A team that institutes a fee—even a nominal one—from day one makes a powerful statement: "Our work is valuable, our platform is not a toy, and we are building a real business." It is the first and most fundamental signal of commercial intent.
2. The Signal of Focus: The Strategic JDA
Nearly every quantum startup will list "partnerships" on their pitch deck. The key is to look at the quality and focus of these partnerships, specifically their Joint Development Agreements (JDAs).
- What it Reveals: A team pursuing a scattergun of unfocused or unpaid R&D projects signals desperation or a lack of strategic direction. In contrast, a team that has secured a paid JDA with a recognized leader within a specific, declared beachhead market (e.g., a top-tier pharmaceutical company for a drug discovery problem) signals immense focus. It demonstrates they have identified their highest-value application, convinced a sophisticated customer to pay for it, and are avoiding the distraction of non-core projects.
3. The Signal of Pragmatism: The Revenue Bridge
The path to a fault-tolerant quantum computer is long and fraught with peril. A "pure quantum or nothing" mentality can be a sign of rigid academic dogma.
- What it Reveals: Does the team have a pragmatic strategy to generate revenue before quantum advantage is achieved? Offering quantum-inspired classical software or hybrid quantum-classical solvers is a powerful signal of commercial pragmatism. It shows the team understands the critical need to build a revenue bridge to their long-term future. It allows them to engage customers, solve real problems today, and build sticky relationships that can be leveraged when their full quantum hardware comes online.
4. The Signal of Vision: Outcome-Based Thinking
This is the most sophisticated signal, separating the true visionaries from the technology vendors. Listen carefully to how the founding team talks about their long-term pricing model.
- What it Reveals: Are they stuck on technical, cost-plus metrics like "we'll charge per qubit" or "per gate"? Or have they already made the mental leap to the customer's perspective? A team that talks in terms of outcome-based value—"Our models will accelerate drug discovery, and we will capture a percentage of the billions in R&D value we create for our pharma partners"—is signaling true market leadership. They see their technology not as a raw commodity to be sold, but as a transformative engine for their customers' businesses. This is the mindset that builds market-defining companies.
Pricing as a Window into the Soul
In the absence of revenue and profit, a startup's early monetization strategy is the closest thing an investor has to a commercial track record. It is a proxy for discipline, a signal of strategic focus, and a test of the team's ability to translate profound science into tangible economic value.
At DM & Associates, this analysis is a core part of our own diligence process and the strategic guidance we provide to our portfolio. We believe, and our experience shows, that the teams who master the strategy of pricing before they even have a product are the ones most likely to deliver the long-term, paradigm-shifting returns you seek.
