Know Who Drives Return

Is Quantum Computing the Next Big Thing? IonQ & dMY CEO Niccolo de Masi Think So.

September 20, 2021 Boardroom Alpha Season 1 Episode 4
Know Who Drives Return
Is Quantum Computing the Next Big Thing? IonQ & dMY CEO Niccolo de Masi Think So.
Show Notes Transcript

Niccolo de Masi of dMY Technology Group talks to Boardroom Alpha's David Drapkin about why quantum computing is the next big tech innovation and how investors won't want to miss out.

Discussion Topics

  • Intro 
  • IonQ and Quantum computing overview
  • IonQ's financial and strategic value
  • Competitive landscape
  • Revenue and customer pipeline
  • SPAC Redemptions
  • Final message ahead of IonQ shareholder vote

This is the second of two special episodes with Niccolo. Hear Part I on dMY Technology here.


About IonQ
IonQ, Inc. is the leader in quantum computing, with a proven track record of innovation and deployment. IonQ’s 32 qubit quantum computer is the world’s most powerful quantum computer, and IonQ has defined what it believes is the best path forward to scale. IonQ is the only company with its quantum systems available through both the Amazon Braket and Microsoft Azure clouds, as well as through direct API access. IonQ was founded in 2015 by Chris Monroe and Jungsang Kim based on 25 years of pioneering research at the University of Maryland and Duke University.

Learn more at IonQ's website: https://ionq.com/


About Niccolo de Masi (CEO of dMY Technology Group)
Niccolo de Masi is an experienced public company chief executive officer and board member with deep expertise in mobile, deep tech, and creating software and hardware ecosystems.

He serves or will serve on the Board of all three dMY Technology SPAC-IPOs post close: Rush Street Interactive, Genius Sports Group, and IonQ.

Over the course of his career, Mr. de Masi has consummated over 25 mergers and acquisitions and has raised approximately $3 billion in equity to support public and private companies he has led. He has held leadership positions in five mobile companies: Glu Mobile, Inc. (Nasdaq: GLUU) (“Glu”), Essential Products, Inc. (“Essential”), Xura, Inc. (formerly Nasdaq: MESG) (“Xura”), Hands-On Mobile and Monstermob Group PLC (formerly LSE: MOB) (“Monstermob”). Mr. de Masi became Chief Executive Officer of Glu and of Monstermob before the age of 30.

From December 2014 through its sale to Electronic Arts in 2021 for $2.4B, Mr. de Masi was Chairman of Glu Mobile, a gaming leader. Mr. de Masi was President and Chief Executive Officer from January 2010 to November 2016 and was instrumental in creating many of the app ecosystem’s “firsts,” including developing mobile “freemium” gaming (of which Glu has published approximately one hundred titles), evolving the Android and iOS rewarded advertising ecosystems, and developing some of the world’s first mobile virtual reality (“VR”) and augmented reality (“AR”) experiences. Mr. de Masi additionally helped to create the entire category of celebrity games, launching Kim Kardashian: Hollywood in June 2014—a unique partnership with Kim Kardashian.

Between October 2018 and January 2020 Niccolo served on the Board of Directors of Resideo Technologies, Inc. (NYSE: REZI). He also served as President, Products and Solutions and Chief Innovation Officer. Resideo, which was spun-off from Honeywell International, Inc. in October 2018, is a leading global provider of critical comfort, residential thermal solutions and security solutions primarily in residential environments that operate in the IoT space. Resideo reported approximately $5 billion in net revenue in 2020 with approximately 13,000 employees.

Mr. de Masi serves on the Leadership Council of the UCLA Grand Challenges.

Mr. de Masi received first class B.A. and M.Sci degrees in physics from Cambridge University.

For more on dMY Technology group visit their website at: https://www.dmytechnology.com/

David Drapkin (Boardroom Alpha):

Welcome back everyone to boredom alpha podcast. We're lucky to be greeted again with Niccolo de Masi, who's from dMY Technology, today we are going to talk about IonQ, who's going public, the merger with dMY Technology III, and a $1.4 billion deal announced last March. Niccolo, thanks again for joining us today.

Niccolo de Masi (CEO dMY Technology):

Great pleasure to be here again.

David Drapkin (Boardroom Alpha):

So, for the newbies out there, including myself, can you talk to me a little bit about IonQ ? And what exactly it means to be a pure play quantum computing company? And why it's such a compelling business that you guys targeted?

Niccolo de Masi (CEO dMY Technology):

Yeah, so I'm actually a physicist, originally, believe it or not, my undergrad and graduate degrees are both from Cambridge University in physics. And though I, you know, I'm not still in the field, I've been following quantum computing for over 20 years, almost 25 years, believe it or not. And I'd say that, you know, in the mid 90s, this was sort of a quasi theoretical postulation. And when I, you know, left the field, as a full time physicist, I was, you know, I was a little short on how long it was going to take for quantum computing to actually solve real world problems and make the splash that Richard Fineman had postulated, you know, as far back as the 70s, it could be possible. And I was right, by the way for for kind of all of the 2000s. What happened about six years ago, is that a lot of venture capital flowed into the space, and a fair amount of competition started to create them. And so University started spinning off companies. There are businesses like IonQ, where the founders you know, Dr. Chris Monroe and dr. john Kim, have been have been leaders in the space since the mid 90s. Chrisman row has probably written more papers, anyone in the space, he's shown the empirical underpinnings of quantum computing for decades has been thinking about commercializing and for long anybody else. So when I, you know, when I started double clicking as a spec sponsor a few years ago, on what the status of quantum computing is, I was really delighted to see that there were businesses, you know, at Honeywell at IBM. And there were a number of, you know, third party startups that also had been able to raise money successfully and shown some really promising technological milestones. I've said for years that I wanted to get back involved, you know, and kind of my roots in the physics space, when quantum computing was kind of ready for primetime, because it's such a tremendously powerful technological leap, that it is not an exaggeration to say that the 21st century will be, you know, largely dominated by what happens in quantum computing. And the reason for this is that there isn't, there really isn't an aspect of applied science that is not impacted by quantum computing, whether or not you're trying to design better airplanes, whether or not you're trying to figure out you know, logistical optimization, trying to build, you know, drug discovery and supply chain more effectively, whether or not you're thinking about cryptography, and, you know, cracking and making new codes, whether you think about, you know, financial services, proprietary trading, options, pricing, machine learning, all of this is aided by quantum computing. And it is so exponential once it gets going, that I believe the old adage that, you know, people overestimate change in the next, you know, 10 months, but they underestimate in 10 years, this one will be the greatest proof point of that sentence the world's ever seen, you know, 10 years from today, you know, 2031, we will have cracked Shor's algorithm, the traveling salesperson problem, and almost every aspect of physical science that involves a quantum mechanism, like solar cells, through biology can be better modeled by a quantum computer because it is a quantum process. What people don't tend to realize yet, or some do, and they are buying our stock is they work this out is quantum computers don't obey Moore's Law, when you improve them. They're exponentially faster in their power improvements. And the reason for that is, you're you're effectively taking two to the power of the number of logical qubits, you have to understand how powerful a quantum computer is. So a two to the 16 computer is twice as good if it's two to the 17th. And we can move forward and IonQ a roadmap, where you're adding a lot more than one cubit every year, right, well, we're trying to add, you know, dozens of cubits in some cases per year. And so what's going to happen You know, when we when as soon as we get to 30, 40, logical cubits, and right now we're, you know, in the low 10s, you know, 10 to 20, somewhere in that zone, once we get 30 to 40, we will be able to solve all sorts of financial services algorithms for things like options pricing, for portfolio theory, you know, machine learning, hybrid, classical and quantum machine learning will be applicable across the digital ecosystem, from things like optimizing advertising through to, of course, prop trading, and, you know, the CEOs and businesses that have taken a bet in the pipe on IonQ, realized, or this year, that when you have long lead time development cycles, you know, fighter jets can take 10 years, 15 years, 20 years. Or when you have a business, that solving something like the traveling salesperson problem for FedEx, UPS, Amazon Walmart, will give you a call a million dollar a day, even dot vanish, you can't afford to be the company that got left in the dust by a year. Because if you run on last year's machine, and the newest machine is two to the power, whatever 10 or 20, more powerful, like it's as if you don't exist, as I was to put it, if you're that prop trading bank, you will make no money that year, right? Because the other guys will crush you like a bug with two to the 10 more computing power. And that's true across the ecosystem, right. And so this will be upon us in 2021, or 2022. But in 2024, and 2025 and 2026, I think people will, will be pretty, some of them will be panicking, right? And all of a sudden, you know, just like you have companies that are asking what your renewable energy strategy is, what is your Eevee strategy? I mean, that wasn't in the car, like you're a car manufacturer five years ago, that wasn't really a thing. Yeah. And now Tesla is a $700 billion market cap company. And like it's a thing, right? Like you're not the CEO of any car company without answer that question. Five years from today, mark my words, every fortune 100 company will be asked that question, what is your quantum strategy? Right, no matter who you are.

David Drapkin (Boardroom Alpha):

I mean, your enthusiasm for the space almost answers his next question on its own. But just as an investor, right, so 1.4 billion valuation? Obviously, there's doesn't seem to be a direct comp out there. How can I think about that valuation in context as a as a shareholder here?

Niccolo de Masi (CEO dMY Technology):

Well, let me start with the strategic value. So there are a number of trillion dollar or near trillion dollar, or even just 100 billion dollar market cap companies, right, who I think are going to realize soon if they haven't already, that the future of the cloud, and the future of their business relies upon not being a laggard, in the quantum computing space, right. And the strategic value if you support, and there's a number of companies that have 500 billion, I would argue to $1.5 trillion of value, and their market cap supported by cloud computing. it you know, 1% of that market cap, or the supported right is is a $10 billion number. And so it's hard for me not to believe that Inq is worth those sorts of amounts, and just purely strategic takeout value to make sure that you don't either get shut out, or to make sure that you can threaten to shut out other people. That's my first point. And so you're immediately in the ballpark of businesses like arm that SoftBank is owned, and now and but he's gonna own I mean, these are businesses that are worth $40 billion. But you know, when I sold the first time might have been 20 billion, whatever. I mean, but I think, you know, it's not it doesn't take much of a leap to see that, by the way, that's an IP licensing company. arm is an IP licensing company for chip design. Our business has even more pricing power, because what people don't seem to realize is, the cloud has changed everything. And I on cue is the first company that is connected to the Amazon, Google and Microsoft Cloud. So they've done their diligence, and they've thought about who the winner might be. And we announced this and you know, some people have worked this out and simple hammered this out. But like, that's a really big endorsement. Right? When $3 trillion companies are like, yeah, they Oh, by the way, they all have their own quantum initiatives, internally, but they just know that it's five or 10 years behind. Right, right. And so we've turned on access to the last generation of IonQ hardware through the cloud. We're gonna debate how we throttle pricing for the next generation next generation because at the end of the day, we have the hardware we have the PHP, the technology, and our ability to rent that hardware to what I call High Value low utilization tasks is how we're going to make sure that we you know, outperform our revenue forecasts every year. And we've just done that for the first year. But our goal is the same thing every year. So if I can run a problem solve for you, like the traveling salesperson problem, which is a few years away, but it might be late 2020s, not mid 2020s because it takes 1000 cubits cubits. But if I can run that every day for you in 30 minutes, right and save you half a million a million dollars a day of you know, routing logistics money. It's pretty valuable, right? You're gonna give me a carry on the money I can save you. If I can optimize your ad placements, optimize your amazon prime, signups optimize your whatever it is in digital shopping, ecommerce, or even gaming. You know, what is that worth? would you would you give me 10% or 20% of those gains? Some people will, right, well get that, right, because it's an optimization you won't have otherwise. And so when you're a price giver, and you need to have access to our new hardware every year, otherwise, you get shut out and you lose a bunch of EBIT da, you know, it makes for a really strategically interesting business. Right? And so, when I walked back from that I go, like, we have strategic value at all times. We have pricing power at all times, we're kind of like the ultimate SAS company. Like if you don't subscribe, we're not gonna prioritize your tasks next year. If you don't subscribe, we may not run you're problem solving, we may run a competitors, right? Right. It's really powerful. And the landscape of quantum computing competitors just by by way, you know, the only serious competition out there is focused on the 2030 battle, not the 2025 battle. And so there are companies out there that I won't name who tell us that they're going to be amazing in 2020 2030. And this is what I say to them. As a student of history, and history and technology markets, I don't know really any competitors that that lose for 10 years. And don't squander the opportunity for somebody else to run a roll up and consolidation play, to buy that technology when I have all the customers all the credit, middle all to go to market margin. And by the way, everyone who doesn't have an ion trap technology of quantum computing tends to agree that ion traps are commercializing first. I don't know. Nobody knows who's gonna win the 100,000, let alone the million algorithmic cubic battle. But I entraps, you're probably going to be winning up to 50,000, and probably even 500,000. But I'll just sort of say this for boardroom alpha sake. Nobody knows on this earth at the moment, what you do with more than 5000 algorithmic cubits? Because that cracks, right that lets you run Shor's algorithm, and crack things like RSA, which is a fundamental underpinning of banking, online banking, only e commerce, financial markets, you name it, they all run on factoring two big prime numbers, and RSA running with 5000 out of the qubits like you can unwind. Factoring prime numbers quickly, like 30 minutes kind of thing. Because it has more permutations, two to the power 5000 per clock tick than like, all of the molecules in the universe or something nice like that. Right? So it's kind of silly to me for someone to say like, you know, what, I have 50,000 or 5000 or a million cubits, I'll be better because like, we don't know what to do with more than 5000 there's no algorithm and postulated the needs more than 5000 or 10,000 cubits, we will need quantum computers to figure out what to what to do with more cubits. Right. And so humanity will take a massive leap forward in the next, you know, in a decade in next five to 10 years, because our quantum computing power will enable breakthroughs in drug discovery, and how we look at things like photovoltaic cells, and the efficiency of solar cells, right? The world is totally different. When you know, things like these COVID vaccines happen, not in six or 1218 months, but six days or six weeks. You know, it's like commercial trials will be the slow down it won't be the drug discovery. You know, when solar cells are 4050 6070 80% efficient, I mean, photosynthesis is like a 70, 80% efficient process and the most powerful solar cells are 20. Right? It changes the world in a stroke if solar cells are three times more efficient carbon sequestration, batteries for electronic vehicles, what if you can run 2000 miles without charging? Right. What if you can outperform other things and we can and we can solve this.

David Drapkin (Boardroom Alpha):

It's hard to fathom but it's phenomenal.

Niccolo de Masi (CEO dMY Technology):

Hyundai is an investor in the pipe for IonQ and you can imagine these the kinds of things they might be thinking about for their EV strategy.

Unknown:

Right. And I was gonna say on on your future bookings your first congratulations on on on the awesome numbers today. Sort of what does that pipeline look like in the next few years? And and you do mention, you know, yet you're on Microsoft and Amazon cloud. What is your customer pipeline look like in the next few years?

Niccolo de Masi (CEO dMY Technology):

Well, I don't want to steal anybody's thunder, right? Our company is hard at work putting announcements up, and they've put a number of announcements up. You know, it's safe to probably assume they're working on more, right. I mean, they've only we've only been announced since you know, March and September. So we've had about six months. And so, I would be, you know, unsurprised, if in the next six months, they were next six weeks or even next six days, they have, you know, more to say, because, you know, they've been prolifically able to gain traction, as being, you know, not only a credible company that has capital behind them, and public market credibility, but it's an outside validation of their technical leadership, right? It's tangible, we can do stuff now. I think people recognize that, you know, quantum computing is so broadly applicable, that it's so hard to find any companies in the fortune 500 that don't need to have this. Right. And so, you know, it's like, if you can take a million dollars off of the average fortune 500 company a year, we're pretty, pretty big business. Right? And you know, on our pipe forecast is like half that number in five years. Yeah. But it's not to say it's undemanding. But we've shown the first year is on demand, and we hope to show that every year is equally undemanding.

David Drapkin (Boardroom Alpha):

Right. Which brings me to my last question just given, you know, the technical dynamics of, you know, where stocks currently at and you know, what has been happening? Back merger votes. So, given the rising redemption levels across other stock deals that we've seen, you know, in the event that that that you recognize a higher than anticipated redemption scenario, how are you guys thinking about, you know, the performer capitalization of the company? in those scenarios?

Niccolo de Masi (CEO dMY Technology):

Well, we we have business plans that are fully underwritten by the pipe to start with. So that's pretty helpful, right? Secondly, you know, I think if you look at people on that leadership page, where I said, you know, look at the top 10, 12, even 15 firms that have driven post performance postback IPO listing performance, none of those people have had crazy redemptions. I mean, sure, double digits. But, you know, there there are people out there with full redemption. So I think it's safe to say that, you know, all of our companies have business plans that the pipe capital allows them to deliver on, if they get more than the pipe capital, it's kind of gravy. I also would like to believe, and I do, that the investors in our transactions, have seen the returns, we've put up, they've seen the fundamental performance. And they want to see this company, each one of our coming to perform in the in the earnings calls post close. And I think that ultimately, you know, that they have every reason every right to believe that based on our track record in the first three. You know, I do think as people cycle out of each other's backs, the flight to quality means that they're going to increasingly differentiate, and they're going to increasingly look for, you know, hold periods and returns that are in lockstep, right? So by all means, holding them why for 12, 18, 24 months, if you do that, look at the returns, you've gotten 50%, not 5% or 100% some cases, right. And so, you know, we expect some redemptions on tobacco three, and four, we have zero on one and two, I expect to have some, but, you know, we're cautiously optimistic that it will be highly moderated. Right, it will be only people whose funds have been so injured by other investments that they, you know, been told there's no choice because they're over levered or somebody, it's not going to be people that have a choice.

David Drapkin (Boardroom Alpha):

Right. Right. Interesting, very, very helpful. Cool. Any anything, any last, parting words that you'd like shareholders to know ahead of the vote for

Niccolo de Masi (CEO dMY Technology):

My parting words are if you ever want to make an investment in close your eyes on? Right, and come back and leave for your children? grandchildren? It's probably quantum computing. Right? You know, it's kind of a no, it's a no lose investment. It's also the time horizon, right? People before this morning, I think people, you know, could sit on the side sidelines and say, well, might be too early. But if you can be guidance by 200%, you know, maybe we can keep doing that. Right. And the reality is, I think that's the kind of performance in the public markets that people sit up and take note of, and it's a big answer to the question, is it too early? We've just answered that, like, No, we can deliver revenue and outperform, you know, guidance, and we intend to continue to do that. All of our companies, by the way, you know, I think pass the Warren Buffett test of like, close your eyes and come back 357 10 years later, where will the business be? They'll have great moats. The great secular growers, regardless of what's going on the macro environment, and I feel that strongly about all of our companies, but this one has, you know, probably the most explosive upside because even if the share price is 10 times where it is, it's not that expensive. From a strategic perspective. You know, companies with trillion dollar market caps can spend 10, 20, 30 $40 billion buying a company that's this important to their future and to everyone's future.

David Drapkin (Boardroom Alpha):

Right, almost cheap for them. Right.

Niccolo de Masi (CEO dMY Technology):

Exaclty. And look, I mean in you know, don't take my word for like governments notice by administration is putting a lot of money to work in quantum computing and machine learning and so are the Chinese so is China and so there's anyone that you know that can invest in this because it's it's critical the nation's obviously

David Drapkin (Boardroom Alpha):

great

Unknown:

critical to our competitiveness

David Drapkin (Boardroom Alpha):

Right, right. Well, Niccolo, I really appreciate you taking the time. Go check out IonQ super exciting. Votes at the end of the month, I think September 28. Niccolo really appreciate it and hope to talk to you again soon and keep watching dMY and all your success.

Niccolo de Masi (CEO dMY Technology):

My pleasure to meet more sir. Have a great day.

David Drapkin (Boardroom Alpha):

You as well.