Podcast with Russ Fein, Managing Director at Corporate Fuel Partners

My guest today is Russ Fein, Managing Director at Corporate Fuel Partners, a private equity firm. Russ and I talk about vertical integration in the quantum computing space, about what gets lost in translation between business executives and engineers, and much more.

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Yuval: Hello, Russ. And thanks for joining me today.

Russ: Hey, Yuval. Thanks so much for having me.

Yuval: So who are you and what do you do?

Russ: My name is Russ Fein. I work with a company called Corporate Fuel. It's a merchant banking business, meaning it's got two areas of practice. One is a traditional investment bank providing merger and acquisition services to buyers and sellers of companies, but we also have a principal investment arm, which is the part of the business I run, where we've made a number of technology investments over the year from a pretty hands-on oriented perspective. My background is both operations and finance. So this is a good role for me and trying to leverage now my knowledge of quantum computing into both sides of our business, both the advisory practice as well as prospectively for a new investment fund.

Yuval: How long have you been in quantum or what got you into this field?

Russ: That's an interesting question, and maybe like others listening, I've always been curious about quantum. I was a young, early user of computer was way back in grade school. We had a mainframe at our high school, and I used to play around on one of the terminals. And as a hobbyist, I bought a Sinclair ZX80 back in 1980. It had all of 8K of RAM. And although I couldn't do much with it, some basic BASIC programming, it piqued my interest.

But as an investment professional, I've missed both the PC investment opportunities and the internet investment opportunities. And when I started reading more about quantum computing, probably in early COVID, I thought to myself, "I'm not going to make this mistake again. I'm going to learn about investment opportunities in quantum." And fortunately or unfortunately, I had a lot of time on my hands with the pandemic. And so I used a lot of that time to read hundreds of articles. And there's lots of great online resources. I've taken some online courses and Boston Consultant Group has some great white papers which I've read. There's interesting tutorials. Q-Ctrl has a great tutorial. Quantum Country has a great tutorial. I try to refresh my linear algebra with things like Khan Academy and 3Blue1Brown on YouTube. And so I've been on a pretty intense journey through much of the pandemic trying to learn as much as I can about quantum computing.

Yuval: And what do you find when you think about the quantum community as opposed to other type of professional communities that you've encountered over your career? What's your observation of the quantum community?

Russ: Well, a few things. There is a ton of information. The internet has this generally that there's a ton of information. Not all of it is edited. Not all of it is correct. So you somewhat have to weed through that. But on the plus side, I've been really impressed how open and engaging the community is. It's reasonably easy with just a little bit of energy to attend online seminars and engage with people in the space, to connect with people online through LinkedIn or Twitter or other mechanisms. There's a lot of great people writing content and sharing content and happy to talk about content. So I've been really excited about the openness of the community and immersing myself into it. And at the same time, on the far end of the spectrum, you've got most of the software being written for quantum computing is open source. I think the spirit of that open source sharing philosophy is really serving the industry well, especially in these early years. And it's been great for me to get up the learning curve.

Yuval: I think you also have a blog with some pieces that are quite long form. What's the angle? What do you think that needs to be covered in this blog that you didn't see elsewhere?

Russ: Yeah, thanks for that, Yuval. So the cliche of the origin of the blog was if you want to learn something, the best way to learn it is to teach it. And so I set out to write the blog for two reasons. One was to really dig in myself and make sure I understood some of the concepts really well, but also, whenever I talked to my nonscience, nonquantum friends, they would get really confused or would hear certain things about Schrödinger's cat or quantum computing being impossible to understand. And I wanted to create a resource so that people like that could appreciate and understand at least from an implication and a business perspective, how quantum computing might work and how it might impact them. So that's really the origin of it.

Yuval: And the blog covers both technical topics as well as business topics. And I think your background is unique, that you are able to speak to both audiences, and on one hand, speak to engineers or scientists, and on the other hand, speak with executives, business executives. What do you think that's getting lost in translation when these two groups speak with each other?

Russ: Yeah. That's a really good question. And I do think I'm well-positioned for it. I've got an interesting professional background that's been both on the operating side of businesses as well as on the finance side. And so from the operating perspective, I got a great appreciation for what it takes to actually take ideas and products to market. In my current situation at Corporate Fuel, I mentioned we've made a few investments. And we didn't set out to be a venture fund, but we've made a number of different venture investments.

And we've invested in things like precision lasers, where lasers were used to create features in medical devices, as small as one micron in size characteristics, which is incredibly small. And the science and the mechanics and the material handling of dealing with that was pretty nuanced. So I used to love to go to the factory and talk to the people online, talk about what their challenges were, talk about what they discovered as ways to circumvent challenges, and would then translate that or take that information to the investors, to get the investors excited about the company generally, or to invest in a subsequent round, things like that.

So I think that gives me a really unique background. And that's one of the things that I'm trying to do with my blog and with my firm is to take that ability to synthesize and understand the business challenges in a way that matter to the investment people. Not that everything is all about investments and that the investment people are the most important, but oftentimes, without the money, you can't do great science. And so it's really important, I think, to make sure the investors can appreciate what's happening, understand what the constraints are, understand what the opportunities are, so they could be as supportive as possible. 

Yuval: I think it's great background. So my question was, what does get lost in translation? When a business executive talks to an engineer, what does the engineer not hear? And conversely, the other direction.

Russ: Yeah. So yeah, thanks for refining that. So often I would find when I talk to the engineers, they usually love what they're doing. Very often, it's a field of passion for them. Sometimes, they get lost a little bit and they lose the forest for the trees. They might be so interested in solving a particular problem or challenge because it's intellectually curious to them or interesting to them, but there may not be a great business application for that. Conversely, the business people may think or summarize certain solutions or achievements that they think are maybe easier to get to, but don't understand the resources involved and maybe be in a position of under-resourcing a particular need. And so aligning those two sides is part of the challenge and I think is something that I've done well in the past and hope to continue to do in the future.

Yuval: If there was one metric that you want an executive to understand... I mean, sometimes people get caught in the number of qubits. "I have more qubits than you and therefore my machine is stronger." It's an easy number to understand, but does it really tell the whole story? How would you convey to an executive the true power of a particular model of a quantum computer?

Russ: As we're looking at the very early stages of NISQ quantum computing, there is sort of a race to come up with more and more qubits because people somewhat understand what a qubit is and they somewhat rightfully assume more qubits is good. But it's much more nuanced than that. And that's one of the biggest things. One of the challenges I see is people discuss the size of a computer or quantum computer by the number of qubits. One of the most important confusions people have are physical qubits versus logical qubits. What I mean by that is a physical qubit is the actual physical qubit, the electron or the photon that's being manipulated for quantum purposes. But it may not be a logical qubit. A logical qubit is a qubit that's actually used in an algorithm.

And most of what we're seeing now when we're talking about people expanding the number of qubits is to include error correction. And so that's why you will have a lot more physical qubits than logical qubits, because a lot of those qubits are dedicated to error correction. So that's just one common distinction that you really need to understand when someone says, "I have X numbers of qubits." Are they really logical qubits or are they just physical qubits? Both are good. More is better, but they are very different. But beyond just the qubits, there's a lot more going on in a quantum computer than just a qubit registering as a zero or one or something in between. You need to connect qubits together and they need to stay in their state for long enough time for the equations to run.

You need to connect them in various ways. And so how many can be connected at once? How long do they stay connected? So there's decoherence that happens as noise comes into a system, and these qubits run out, lose their superposition or their entanglement. So there are a lot of metrics. IBM has proposed something called quantum volume, which is one standard that's being proposed to synthesize some of these metrics together. I think that's a good one, although not everybody agrees. So there are various terms being used. And I just caution people when they hear about quantum computing to be careful when they hear a number and make sure they understand what is really underneath that number

Yuval: Because of your investment banking background, I wanted to ask you about vertical integration. Vertical integration, of course, is not a new term. I originally thought it was Andrew Carnegie and Ford that came up with vertical integration. Turns out there was a meat packer in Chicago, Mr. Swift, that invented sort of the vertical integration, and Ford actually learned from Mr. Swift. But getting back to this century, we see software companies merging with hardware companies. We saw Cambridge Quantum Computing. And in Honeywell Quantum, we now saw Pascal and Qu&Co. What do you think is the outcome here? Do you think it's a good thing for the industry that you got these hardware and software blocks, or do you think that customers should be able to choose sort of best of breed? "I'll take the best software and I'll run it on the best hardware," and so on.

Russ: Yeah, that's a good question, Yuval. As an M&A professional for my career, in fact, my thesis in college was written about mergers and acquisitions. So generally I'm a fan of the synergies, the prospective synergies that a good merger brings. And I think you've seen that in some of the mergers you announced. And then sometimes you have things that aren't formal mergers, but you have strong collaborations. Even the Cambridge and Honeywell merger to form Continuum subsequently announced the partnership with StrangeWorks. So yet more collaborations and ways to work together. So I think mergers in general in this industry are going to be important.

There's a lot of disparate players trying to attack different parts of the challenges. You've got wiring and cryogenics and optics and hardware and software. And I think it's good in the early stages that people specialize in a given area. And I think it will be good as technology matures for good mergers to happen where synergies can be evolved, and the best of both companies can be leveraged to an even better combined company. So I do think we'll see a lot more formal mergers and I do think we'll see a lot more collaborations announced.

Yuval: Is it good for the end customer? So I'm an executive, hypothetically, at a Fortune 500 company. I want to get into quantum. I see that software company A merged with hardware company B, but who knows if hardware company B hardware is going to be the best in the long-run? Maybe they're going to be someone else with different technology or more qubits or more logical qubits and so on. Wouldn't I be worried that software company A would not be working as well with other hardware companies?

Russ: That's a possible situation. I think that's probably a later day challenge and it's probably going to pertain to a small number of customers who are considering actually buying their own quantum computer. I think so many of the hardware providers today, last time I counted, there were 8 or 10 that were providing their hardware platforms on the cloud, and many or most of the software solutions are open sourced and are somewhat agnostic to which hardware is being used. So I think if you are a company just exploring quantum computing, you're not quite ready to buy a machine, but you want to start using the cloud to access quantum computing, I don't think you are going to necessarily care if a hardware company and a software company merge.

In fact, with Quantinuum, although they're using the Honeywell machines, the software that was written by Cambridge Quantum is able to run on other machines and it will continue to do so. So if they continue with that philosophy and their software remains open, then the customers get the best of both worlds. And I think that's going to be the state of affairs for the next year or two.

Yuval: So as we get closer to the end of our conversation, I want to go back to the beginning. You mentioned your Sinclair ZX80. I used to program on TRS-80s at RadioShacks on street corners. And then I had an Apple II with a four-digit serial number. Where are we in quantum relative to what you remember from the personal computing days? Are we at the Apple I moment, the Apple II? How close are we to this becoming something that's significant not just for investment bankers?

Russ: I think we're close. I think we are very early stages. I love this. I see pictures sometimes of the ENIAC machine, one of the first big computers, which weighed tons and had thousands of vacuum tubes and wires, and you see pictures of the women connecting the various wires. Well, when you look at the quantum computers today, they look very similar. When they're opened up and they take the cryogenics away, you see lots of wires and people connecting them and interconnects. So I think we're still at the very, very early stages.

Certainly, we're not at a place where you have an individual that can have a hobbyist equivalent of a Sinclair in their house they can play with. We're not quite there yet, although you can now do that on the web. And so you can download the development kit from quick Qiskit, for example, from IBM and start coding and running algorithms on an IBM machine today. So it's more than just the very, very beginnings, but I think it's still very early innings in the game. And I'm really super excited about where it's going to go from here.

Yuval: Excellent. So Russ, how can people get in touch with you to learn more about your work?

Russ: Well, if you're interested in our advisory services, if you're in a quantum company and you're considering an investor investment, you want some help, you can go to corporatefuel.com and there's lots of information about our activities there and my contact information. Or if you just want to learn more about quantum computing and want to come check out my blog, it's at quantumtech.blog. And generally post about once a week on introductory topics and about players in the industry. And stay tuned soon. I'll do one on Classiq. So your listeners can learn more about your company.

Yuval: Once a week is a commitment! Well, thank you very much, Russ, for joining me today.

Russ: Thanks for having me so much. Thanks, Yuval. Take care.

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