Nardo Manaloto: Qbits Ventures

Summary

Podcast Title: The Investor With Joel Palathinkal
Episode: Nardo Manaloto: Qbits Ventures
Release Date: August 9, 2025

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Introduction

In this illuminating episode of The Investor With Joel Palathinkal, host Dr. Joel Palathinkal engages in a deep and enriching conversation with Nardo Manaloto, the founder of Qbits Ventures. As a seasoned professional with over 25 years in the healthcare deep tech space and a former head of innovation at Kaiser Permanente, Nardo brings a wealth of knowledge and experience to the discussion, particularly in the burgeoning field of quantum computing and quantum technologies.

Guest Background: Nardo Manaloto

Nardo opens up about his diverse upbringing, having been born in the Philippines and having lived in countries like Vietnam, Papua New Guinea, Australia, and the United States. His academic foundation in computer science laid the groundwork for a prolific career in healthcare innovation. At Kaiser Permanente, Nardo spearheaded numerous AI projects and established Catalyze First, a healthcare innovation ecosystem aiming to bridge investors, technology companies, and corporations for mutual success.

Transitioning from his corporate role, Nardo’s fascination with emerging technologies, especially quantum computing, led him to establish Qbits Ventures three years prior. He states:

“My natural curiosity in emerging technology extended to quantum. So three years ago I started looking into the quantum space, studying that and basically said, okay, well, you know, I need to look at all the different signals within the industry...” (04:14)

Understanding the Quantum Ecosystem

Joel prompts Nardo to demystify the quantum ecosystem for listeners. Nardo clarifies that quantum technologies encompass much more than just quantum computing, emphasizing areas such as optimization, cryptography, AI and machine learning applications, simulation (e.g., protein folding for drug discovery), quantum hardware and software, and quantum sensors.

“Quantum technologies, the first thing they ask is like, oh, when is quantum technology going to be real? Right. So, but exactly, you know, that question really meant when is quantum computing going to be real? Quantum technologies is a much broader subject.” (05:34)

He categorizes investment opportunities into low-hanging fruit areas like quantum applications in optimization and cryptography, and near-term technologies such as quantum sensors for medical imaging and GPS enhancements.

The Technical Edge: Quantum Sensors Explained

Delving into the technical specifics, Nardo elucidates the superiority of quantum sensors over classical sensors. Quantum sensors leverage the properties of atoms, photons, and electrons to achieve unprecedented accuracy and functionality. For instance, quantum-based GPS can determine positions by sensing the Earth's magnetism, enabling offline capabilities—a significant advancement over traditional satellite-dependent systems.

“With quantum sensors, it's looking at the magnetism within the earth itself to actually locate your position. So you can have an offline GPS type of sensor as well.” (08:31)

Additionally, quantum photonics is highlighted as a transformative technology, enabling data transfer speeds a thousand times faster than current methods, which holds immense potential for applications like medical imaging and large data transfers.

Launching Qbits Ventures: From Corporate Innovation to Venture Capital

Joel inquires about the catalyst behind Nardo’s transition from a corporate innovation role to founding his own venture fund. Nardo attributes his decision to the exponential complexity of modern problems and the insufficiency of classical technologies to address them effectively.

“The only way we could get ahead of that is, you have to look at a more exponential technology called quantum technologies.” (04:29)

He underscores the pivotal role of AI and the massive data accumulation across industries as significant drivers for investing in quantum technologies.

Advice for Aspiring Venture Capitalists

When prompted for guidance for individuals aiming to start their own funds, Nardo emphasizes a multifaceted approach:

1. Inventory of Skills and Experience: Assessing one’s background to identify strengths and gaps.
2. Training and Education: Engaging in programs like VC Labs to gain necessary venture capital insights.
3. Building a Community: Creating a network with quantum scientists, engineers, and academic partners to aid in deal sourcing and due diligence.

“You need to make sure that in terms of what you're doing, you can do an inventory of what you've done and what you're currently doing and to see how much of that aligns towards becoming a VC.” (12:22)

Nardo also suggests practical steps such as advising startups, making seed or angel investments, and partnering with individuals managing Special Purpose Vehicles (SPVs) to build a track record.

Sourcing and Evaluating Deals in Quantum Tech

Given the complexity of deep tech and quantum sectors, Nardo details his strategies for sourcing high-potential deals:

• Community Building: Maintaining a team of 21 quantum scientists and engineers who act as scouts within the industry.
• Academic Partnerships: Collaborating with universities and quantum foundries to identify promising startups.
• Exclusive IP Rights: Ensuring startups have exclusive rights to their intellectual property to prevent replication and protect their innovations.

“The criteria I use is definitely the team aspect of it is very important. But I also look at the IP… and the people behind the IP and also in terms of if it's Academia, how much exclusive rights do they have.” (18:02)

Navigating Challenges in Quantum Ventures

Nardo candidly discusses the hurdles faced by quantum startups, primarily focusing on:

• Due Diligence Complexity: The intricate nature of quantum technologies makes thorough evaluation challenging for investors.
• High Valuations: Quantum companies often command steep valuations, especially at pre-seed and seed stages, posing investment risks.

Despite these challenges, Nardo points to successful exits in the quantum space, including cybersecurity firms and quantum computing companies achieving substantial valuations through mechanisms like SPACs.

“There are three quantum computers that did exits… one did a cybersecurity company worth a couple of billion dollars.” (40:20)

Future Outlook: Quantum Technologies and Beyond

Looking ahead, Nardo envisions the integration of quantum technologies with other frontiers such as quantum biology and artificial general intelligence (AGI). He anticipates the emergence of embedded quantum chips, potentially transforming human interactions with technology—hinting at cyborg-like enhancements.

“It will be all of that. There's definitely a lot of work happening with putting everything down to quantum chip level. So it's going to come to that. It's going to get embedded.” (43:16)

He also addresses the impending impact of quantum advancements on cybersecurity, highlighting the necessity for post-quantum cryptography to safeguard data against the formidable capabilities of quantum computing.

Impact on Cryptography and Security

Responding to a listener’s query, Nardo emphasizes the critical need for post-quantum cryptography to counteract the vulnerabilities introduced by quantum computing in existing security protocols. He underscores the urgency of transitioning to quantum-resistant encryption methods to prevent potential data breaches and cyber threats.

“It's definitely a big area of interest of mine. One of my earlier portfolio companies is in the post quantum cybersecurity space.” (22:33)

Integrating AI in Healthcare: Insights from Kaiser Permanente

Addressing questions about AI applications in healthcare, Nardo shares innovative projects, including virtual avatars for patient interaction and disease monitoring. He discusses the stringent data security measures employed to protect patient information, citing advanced encryption standards like AES 256-bit and adherence to government standards such as FIPS.

“They're also doing things like process automation with the aid of AI and RPA type system… they're using AES 256 bit encryption… and they can go up, all the way up to FIPS.” (24:05)

Adding Value to Deep Tech Startups

Joel probes into the ways venture capitalists can assist complex deep tech startups beyond mere funding. Nardo highlights the importance of supporting the business aspects of these startups, which are often the weak link due to their deep scientific focus. By providing fractional executives, VCs can help manage operations, finance, and IT infrastructure, enabling the technologists to concentrate on innovation.

“The business side of things, the operations, the finance, the accounting and setting up the IT infrastructure, those are the things that they don't really like, but must do.” (29:59)

Patterns in Successful Teams

Nardo outlines the hallmarks of effective teams in the quantum sector:

• Highly Qualified Personnel: Teams typically comprise individuals with PhDs, often with dual doctorates.
• Academic Affiliation: Founders or key team members who are professors or have strong ties to academic research institutions.
• Intellectual Property Focus: A robust portfolio of patents and publications demonstrating thought leadership and innovation capability.

“The other one is like the number of patents and publications that they write on these because you can see their thought leadership.” (29:59)

Exits and Success Metrics

Reflecting on successful exits, Nardo cites examples of quantum companies that achieved significant valuations through strategic exits. These include cybersecurity firms and quantum computing companies that, despite being pre-revenue, secured substantial market valuations via methods like SPACs.

“Quantum computers… doing an SPAC… worth $1.2 billion… another quantum computer that's worth more than $3 billion.” (40:20)

Building a Venture Fund: Learnings and Strategies

Reflecting on his journey, Nardo shares pivotal learnings:

1. Authentic Relationships: Building genuine, supportive relationships within the VC ecosystem is crucial.
2. Community Engagement: Actively participating in VC groups and creating support networks enhances knowledge sharing and deal sourcing.
3. Coachable Attitude: Remaining open to feedback and continuously iterating on investment theses is essential for growth.

“The biggest thing for me is relationship. Make sure that you're authentic about this stuff. Right. So you're authentic, you truly care about what you're doing.” (35:24)

He advocates for creating and participating in support groups with fellow VCs to share insights and assistance, fostering a collaborative environment.

Final Thoughts and Life Advice

Concluding the episode, Nardo imparts life advice centered around ethical considerations and the positive impact of technology on humanity. He stresses the importance of surrounding oneself with like-minded individuals who prioritize moral values and the greater good.

“When you work with exponential technology, I need to make sure that I surround myself with people that think about the good that technology can do… all about humanity, all about good, all about ethics.” (48:32)

He encourages aspiring fund managers to remain genuine, helpful, and focused on leveraging their roles to drive meaningful advancements in society.

Conclusion

This episode of The Investor With Joel Palathinkal offers a comprehensive exploration into the quantum technology landscape through the lens of experienced investor Nardo Manaloto. From understanding the multifaceted quantum ecosystem to navigating the challenges of deep tech investments, Nardo provides invaluable insights and actionable advice for both seasoned investors and newcomers aiming to make impactful ventures in the realm of quantum technologies.

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Notable Quotes:

• Nardo on Quantum Technologies vs. Quantum Computing:
  “Quantum technologies is a much broader subject.” (05:34)

• On the Complexity of Quantum Sensors:
  “If you have an electron or an atom as a sensor… you can measure what that atom is getting into.” (08:31)

• Advice for Starting a Fund:
  “You need to make sure that in terms of what you're doing, you can do an inventory of what you've done and what you're currently doing.” (12:22)

• Importance of Exclusive IP:
  “I also look at the exclusivity of the IP and the people coming out of academia as well.” (18:02)

• Future Integration of Quantum and AI:
  “Think of the nirvana of an AI system because it's quantum exponential technology.” (20:19)

• Relationship-Driven VC World:
  “The biggest thing for me is relationship. Make sure that you're authentic about this stuff.” (35:24)

• Ethical Impact of Technology:
  “When you work with exponential technology, I need to make sure that I surround myself with people that think about the good that technology can do.” (48:32)

Transcript

[Nardo]

Yeah, it comes in many different things. Right. So, for example, in the case of quantum. Quantum, you know, human beings are actually quantum beings. Right. So with quantum, the whole thing with quantum is, you know, the definition of quantum is really it's about an energy source, right. At the smallest minute particle, right? So if you decompose that, you're looking at atoms, photons, electrons. So these kind of elements are actually could be used as sensors. So if you have, let's say, an electron or an atom as a sensor, then basically that kind of a small size of a sensor can go inside your body and you can measure what that atom is getting into. Right. So that's one example. Another example is in terms of gps. Right.

[Joel Palo Thinkle]

Welcome to the Investor, a podcast where I, Joel Palo Thinkle, your host, dives deep into the minds of the world's most influential institutional investors. In each episode, we sit down with an investor to hear about their journeys and how global markets are driving capital allocation. So join us on this journey as we explore these insights. Okay, cool. Yeah. So why don't we kick off?

[Nardo]

Can you hear me okay, Nardo? Yeah, loud and clear. Great.

[Joel Palo Thinkle]

Well, hey, Nardo, thanks for making time for me. There'll probably be people popping in slowly, but, you know, it's been great to get to know you the last couple months and, you know, really understand the sector focus that you're going after. It's a massive market size opportunity. So really excited about your investment thesis and your. Your background and also just your interest to really grow the market size for this space by investing in it. So maybe you can tell us a little bit about your background, where you grew up, where you're from, and a bit about your career and education and then how you got into starting your own fund focusing on quantum computing.

[Nardo]

Okay, yeah, sure. Thanks, Joel. Glad to be here. So, background wise, I grew up in the Philippines, actually born in the Philippines, but lived in many different countries, so lived in Vietnam, lived in Papua New guinea, lived in Australia, lived here in the US So traveled quite a bit. And education wise, I'm a computer science graduate, 25 plus years in the healthcare deep tech space, Former head of innovation for Kaiser Permanente. And along that line, I love my work at Kaiser so much that I created my own healthcare innovation ecosystem, a company called Catalyze First. And the whole premise of Catalyze is really to work with investors, technology companies and corporations to bring them together for some level of transactions for their success. And then since I dealt so much with technological innovation, part of what I do is I Did a lot of AI work, did a lot of six AI products. And so my natural curiosity in emerging technology extended to quantum. So three years ago I started looking into the quantum space, studying that and basically said, okay, well, you know, I need to look at all the different signals within the industry, the quantum industry. And then this year and last year, all the signals I was looking for basically came to fruition and I said, okay, it's time to start that fund. So I started the Qubit Ventures.

[Joel Palo Thinkle]

And what was your thought process when you decided to start the fund? So you're working in corporate and what was going on in your head? What was the trigger that made you realize that you should go ahead and start the fund?

[Nardo]

Yeah, I think one thing is, one is definitely the AI. AI was a big proponent of a big part of the decision. And then the amount of data that we have that's being accumulated within the healthcare setting, not just healthcare, I guess across industry. And then if you take a look at the world we have right now, everything is getting way complex. The problems are more complex, we have a lot more data, we have a lot more systems. They're all cloud versus internal. It's just very complex. And the only way we could get ahead of that is, you know, you have to look at a more exponential technology called quantum technologies. Yeah.

[Joel Palo Thinkle]

And tell me a little bit about the quantum ecosystem. So I think maybe for the audience, what would be really helpful, and you've gone through this with me before, but just unpacking the whole ecosystem of quantum and where you think it's heading. So what are the different, you know, verticals that are great applications right now for quantum.

[Nardo]

Yeah, so that's a great question, Joel. So let's take a look at quantum. So a lot of people equate quantum, quantum technologies to just quantum computing, which is actually, you know, whenever I, whenever I talk to people and okay, quantum, you're into quantum technology. Quantum technologies, the first thing they ask is like, oh, when it, when is quantum technology going to be real? Right. So, so, but exactly, you know, that question really meant when is quantum computing going to be real? Quantum technologies is a much broader subject. Right. So there are many different areas in quantum technologies that are, I consider more short term as opposed to longer term, which quantum computing could be. So the areas and the core investment pieces that I have, at least for my fund, are what I consider low hanging fruit. Right. So one would be quantum applications that are in the optimization space, cryptography, AI and machine learning applications related to that. And then in the area of simulation. So things like protein folding, molecular designs and stuff like that for drug discovery. And then the other category is when you have hardware, quantum hardware, you also need the software aspect, right? So quantum software, system software, things like operating systems, programming editors, programming platforms, data platforms, data and analytics platform for quantum computing. The other area is what we call devices. So things like components of devices, quantum sensors. That's actually more of a near term technology that will have immediate impact. So things like a quantum sensor for cell vibration inside of a body, that is already happening. Quantum sensors for medical imaging to improve medical images, that's already happening.

[Joel Palo Thinkle]

And then from a technical standpoint, when you think about quantum sensors, what are they doing that is different than a typical sensor? Because fundamental concepts of quantum is being able to calculate everything pretty much at the same time or in real time versus the classical computing. You have zeros and ones, so you got to run those models. And it's much more of a tedious process with classical computing versus quantum. So how from what are the sensors doing to be, Is it more accuracy, is it more velocity of the calculations? Are they using models to predict.

[Nardo]

How.

[Joel Palo Thinkle]

Accurate the touch points could be?

[Nardo]

Yeah, it comes in many different things, right? So for example, in the case quantum. Quantum, you know, human beings are actually quantum beings, right? So with quantum, the whole thing with quantum is, you know, the definition of quantum is really, it's, it's, it's about an energy source, right? At the smallest minute particle, right? So if you decompose that, you're looking at atoms, photons, electrons. So the, those, these kind of elements are actually could be used as sensors. So if you look, if you have, let's say a, an electron or an atom as a sensor, then basically that kind of a small size of a sensor can go inside your body and you can measure what that atom is getting into, right? So that's one example. Another example is in terms of gps, right? So right now when we have a gps, we're looking at triangulating positions by X, Y and z using satellite technologies. With quantum sensors, it's looking at the magnet, the what I call the magnetism within the earth itself to actually locate your position. So you can have an offline GPS type of sensor as well. So those are the kind of areas that are being built. Another area is, you know, in the device space is called quantum photonics, the use of light to basically create devices. Right. So I know of a startup that's using quantum photonics to just do data transfer. So there. But because it's quantum and it's light sources. It is a thousand percent, a thousand times better than the current technology. So if you look at that, it's like, gosh, you know, that's the kind of exponential level of technology we need. Because think about, you know, a use case for medical imaging. If you're transferring a large, you know, CAT scan over, you know, the Internet, I'm sure you could use some, some level of assistant and assistance in that kind of a device. Yeah.

[Joel Palo Thinkle]

And how did you, you know, obviously there's a lot of people that you know because your role at the, at Kaiser Permanente, it wasn't an investing role. Right. It was more of a, was it more of like a research and development role?

[Nardo]

It's actually both. It's an investing from a technology innovation perspective.

[Joel Palo Thinkle]

So we kind of like corporate VC.

[Nardo]

A little bit more on the pilots. Right. And then if everything goes well on the pilot side of things, then basically what happens is it gets promoted up into a larger scale and then corporate ventures get involved because they want to make sure that the company survives.

[Joel Palo Thinkle]

Yeah, sure. Yeah, that makes sense.

[Nardo]

Yeah.

[Joel Palo Thinkle]

Because I'm wondering, you know, there's a lot of people like this that just jump into either venture from, you know, joining a firm or they just start their own fund. So what did you do to develop that skill set to start the firm? Was it a lot of self training? And I think the good thing now is there's so many communities for emerging managers. There's so many blogs and people that you can follow on Twitter. But you know, and I'm asking because there's a few people in here that are interested in starting their own fund. So what, what advice would you give when you kind of said, hey, you know what, I had some good experience, been working at large corporates for some time. I think I'm just going to go off and start my own fund. So what, what would be the first few things that you would recommend these people to maybe read or think about or, or research before they start a fund?

[Nardo]

Yeah. I think you need to make sure that in terms of what you're doing, you can do an inventory of what you've done and what you're currently doing and to see how much of that aligns towards becoming a vc. Because if you don't even know what you know and what you have, it's hard for you to kind of target where you need to go. Right. So I've done quite a bit of work in. I ran a virtual accelerator. I've accelerated 36 companies, two unicorns coming out of that, I've exited two startups in the past as well. So I did an inventory of everything that I've done and haven't done. Right. So the biggest thing that I haven't done is really, okay, I didn't really do investing, seed investments. Right. I didn't know the financial landscape of what happens within a VC firm, but I've supported investors from a due diligence perspective, so that became part of my competency. And then after that I said, okay, well you know, who can give me this kind of training? Right. So and then basically I got referred to VC labs and that's where I got trained. Sure.

[Joel Palo Thinkle]

And then what are some ways that people who are not in venture could build those skills? You know, if they don't get accepted into a program or, or they don't, you don't develop those skills organically, would you recommend them to possibly just try to actively source deals, possibly join an accelerator, start a company? I guess. What are, what are some of the pathways that you've seen? You know, because you went through a couple of these accelerator programs. So. But what were like the journeys of some of the other fund managers that started out?

[Nardo]

Yeah, I think the journey definitely varied. Right. So one is you need to take a look at maybe advising startup companies. Right. So build your advisory capability there because it's going to help you create value add as a fund. Right. So building that second is see if you can become a seed investor. Right. So, or an angel investor. I mean, yeah, you can do some small angel investment, direct investment in companies. That would be great. Right. The other is in order for you to build your track record, a good way to do it is to partner with somebody who does SPVs. Right. So that would be a good way so you could learn the ropes. And while you're learning the ropes, you're actually, you know, you're, you're actually, you know, acting like a VC because you're looking for LPs, you're sending out emails, you're going through the entire process of, you know, what typically a VC does except for one, one particular startup. Right. Or a company. You build your track record that way, create your markups and then you know, and then you, you step into, okay, maybe it's time for me to do, to do a full blown VC for sure.

[Joel Palo Thinkle]

And we spoke about this too. So Quantum could be quite unique as far as sourcing deals. So not only limited to Quantum, but just very complex deep tech. How do you recommend people to source great opportunities? Is it academia is it other tier one funds, all of the above, I guess. What's been working for you and what would you advise people to do if they're trying to focus on a lot of these complex deep tech opportunities?

[Nardo]

Yeah, I think it's definitely to definitely be out there. Right. So one is one of the big things that I did for my fund is, you know, Quantum is such a very, such a complex space. I needed to make sure that I created my own community. Right. So one is part of my fund. I have 21 quantum scientists and engineers that's helping me with due diligence, but they are also acting like scouts. Right. So they're, when they, when they hear about a startup, they tell me about it. The other area is I've also created what we call acceleration partners. So I partnered with major academia companies and service providers, quantum foundries that can create prototypes. And all of these are basically good sources for startups because these startups are looking for these kind of services. So besides just a typical accelerator, incubator, venture studio, research organization, academia, a lot of people will basically source that way. But I think the best for me, the biggest, the biggest and better source is not necessarily, you know, just looking at the list coming from, you know, an accelerator in their list of cohort. If it's recommended to you, then you know that there's a good potential for that.

[Joel Palo Thinkle]

And when you're sourcing and screening deals, what are some things that you look for, what's your process? And again, just thinking through how to educate the people in the room as far as, you know, just new emerging fund managers, what are some of the criteria that you look for? And I think it'd be really interesting to understand obviously the difference with Quantum. I'm assuming most of these are like a typical deep tech startup where there's no revenue, right. So it's probably just more based on the science and the market size and the tech. Is that accurate? Or if not, feel free to correct me if I'm wrong.

[Nardo]

For the most part it's accurate, especially in this space. But there are some key areas, especially in the low hanging fruit. For example in quantum photonics where things are, there seems to be a lot more quantum companies in that space that is closer to a production level type scenario. So I've seen those kind of things. So you know, the typical criteria I use is definitely the, definitely the team aspect of it is very important. But I also look at the ip, right because the IP and the people behind the IP and also in terms of if it's Academia, how much exclusive rights do they have? Right. So because one thing that you don't want to have happen is, you know, you spin off, there's a spin off company that doesn't have exclusive rights on the IP and then it gets copied and then basically that startup skilled. Right. So I do look at the exclusivity of the IP and the people coming out of academia as well. And then the other part to it is, you know, I also wanted to see what makes them unique and differentiated compared to the other. You know, even though it's a nascent area, there's competitors as well. A good example is in the quantum computing space. Right. So there are quantum computers that are like superconducting, you know, qubits type quantum computer that are trapped ion ions using cryogenics and stuff like that. Then comes along, here's a quantum computer that is room temperature, that's using quantum photonics. So who would you rather bet on? The one that does the. Requires a big refrigerator to basically run that computer or the. You want the one that doesn't require the refrigerator.

[Joel Palo Thinkle]

And what's next after quantum, Is there another evolution after quantum or I guess where do you think things are going to go? Is it going to be some type of cell based computer or atom based computer? I guess where, you know, well, quantum.

[Nardo]

It is, it's atom based computing, right? Yeah, so, so it's atom, protons, neutrons, electrons and anything of that, of that, of that sort. And so what's going to happen is I, I can see there's also an emerging area called quantum biology.

[Joel Palo Thinkle]

Oh well, how that sound? Cool.

[Nardo]

There's also an emerging area called quantum biology. So now think of that, it's like, okay, well what can you do with that? So think of like you having an embedded quantum chip that basically, you know, either enhances you and does things for you. Think of the nirvana of an AI system because it's quantum exponential technology. Right. So think of like AGI, artificial general intelligence, because that could be a possibility. Because quantum technology, you know, when it comes to real fruition is definitely a possibility.

[Joel Palo Thinkle]

So two things, you know, how do you think it's going to impact or complement neuralink? And then number two is crypto.

[Nardo]

Yeah. So you know, quantum. So crypto from a perspective of definitely security would be a good one because quantum. One of the biggest benefit with quantum is in what we call random number generation. So our existing classical computer actually doesn't generate random numbers. That's why we could easily hack computers. Right. So with quantum cryptography Here, you know, and when we're looking at quantum factorization, then basically this technology creates truly random numbers. Truly random numbers. So it's really hard to crack or it's almost close to impossible to crack. So we have to see when things happen, like quantum to quantum type scenario. Let's see what happens there. Sure.

[Joel Palo Thinkle]

So, Farooq, you had a question? You want to rattle off your question?

[Nardo]

Sure, I think.

[Farooq]

Thanks, Nardo. So I was wondering about how these continued leaps in quantum computing will affect cryptography. Because the secured hashes they stock for banking being in jeopardy because of the leaps in quantum computing, and everything needs to be redone. How do you see that landscape?

[Nardo]

Yeah, so that's a big area of interest of mine. One of my earlier portfolio companies is in the post quantum cybersecurity space for. Right. So one is, you know, it's just a matter of time that quantum quantum technology can actually break existing RSA technology. So I think we have to kind of watch out for that. So there's also this concept of steal now, decrypt later. Right. So a lot. So that concept is more of like, they're stealing our data. They can't decrypt it right now, but once they have quantum cryptography and, you know, encryption decryption technology, they could actually crack that easily. Right. So the other is you have to protect the entire system. It's not just about, okay, protecting the data at rest and all of that stuff. You have to also protect. You also have to protect the networks. You have to protect the communications and the devices and all of that, similar to what we're doing with existing technology now with cybersecurity technology. But what needs to happen is, especially in crypto, the entire crypto system needs to also become quantum persistent, quantum protected.

[Farooq]

Just to follow up. So are you investing or looking into startups in that post quantum cybersecurity space as well?

[Nardo]

Yeah, I am. Okay, thanks.

[Joel Palo Thinkle]

Michael, you've got a question here.

[Michael]

Thank you, Nardo, for speaking with us. A pleasure and an honor. You've done a lot. I just wanted to ask, what are some of the projects people are doing at Kaiser involving AI and healthcare? And if they're using patient or de identified patient data, how are they able to secure it? So it's maybe not attacked by ransomware, or it's not able to get out. That's somewhat challenging.

[Nardo]

Yeah, it is definitely challenging. It's definitely not just a Kaiser issue. The entire healthcare industry, if you took a look at the. There's a recent report related to by industry in Terms of data breaches, healthcare is number one. So that is the number one spot you don't want to be in. Right. So healthcare is definitely number one in data breaches, which includes ransomware. So the healthcare organization, what they tend to do with these. A lot of the healthcare organization, when it comes to AI, a lot of them are doing things like predictive analytics, population care and things like that. That's primarily a lot of the stuff that they do. They're also doing things like process automation with the aid of AI and RPA type system. There's a lot of that stuff happening as well in terms of how they secure it. The typical encryption methodology that we have now at the very least an AES 256 bit encryption, but they can go up, all the way up to FIPS. So the FIPS, which is the government standard, FIPS 140, 140 and stuff like that. But from a government standpoint in nist, they're already looking at all the different post quantum cryptography type algorithms actually. So they're starting to get into what standards in the industry can actually adopt. And one thing that they found is they're interested more in post quantum cryptography and that kind of category of solution compared to what we call quantum key distribution, that space of it. So there are two areas in, there are two approaches in terms of how you do security. One is QKD and the other is post quantum. So the post quantum one seems to be winning out.

[Michael]

Thank you. Yeah. And I just have another question. That's okay. I'm actually also in healthcare and I know trying to go through some of the unstructured data can be challenging and I wanted to ask if anyone is using natural language processing to try to build models for.

[Nardo]

Yeah, it's quite popular. So healthcare is. One is an early adopter actually of NLP. Right. Because of the whole dictation process. So Dr. Dictation, that's all NLP based ever since in the very beginning. Yeah, there's definitely a lot of work. Right. So things like nuance. Right. So what they do ambience, listening in terms of patient provider conversation. And based on that, they could do auto documentation. They could do auto. You know, those are some of the key pain points, nlp to look into unstructured notes to codify them, to see if they, if there, if it has any correlation towards care and care and stuff like that. So there's definitely a lot of work on the NLP side. Some of the products I built for AI and healthcare, I have built three Virtual avatars. Think of them as like virtual nurses and doctors. Right. So one is related to Parkinson's disease where it's an avatar that can do a Q and A on you, that can do a daily assessment on you, can record your voice and can record your voice and listen to your voice. And whenever it listens, the AI listens to the voice, it listens for some voice biomarkers and determine, okay, is the tonality the sound or the cadence of that voice or is the speech changing in itself? And then from there you see, could figure out a score related to whether the Parkinson's disease is getting better or actually getting worse.

[Michael]

That's phenomenal. Wow, thank you. Yeah, that's great technology.

[Nardo]

Thanks.

[Joel Palo Thinkle]

Switching gears on the tactical side of investing, you talked about the team earlier. What are some patterns that you've seen with teams that have gotten you excited and have given you some insights into them being an investable company? Are there some common patterns? Is it, you know, with Quantum, is it more the scientific background? Is it, you know, and then one thing I'm seeing now is a lot of these deep tech companies, they're starting to have B2B SaaS, type of revenue multiples, which is really exciting to see. That means that some of these products that are pre revenue, that are more research and development for like three years until they raise tons of money, they're thinking to monetize much quicker and come up with components or products that they can sell and go out and, and generate revenue to possibly, you know, justify these massive valuations. So can you go deeper on what you look for in a team and what's, what excites you as you're sourcing and screening?

[Nardo]

Yeah, definitely. Because this is a very complicated, the science is so complicated. It's believably complicated. I thought AI was complicated. It compares nothing to it. Right. So one is definitely, you know, in this space, if you have a, if you have a, you can expect at the very least a PhD, right? PhD level. So, you know, typically the kind of teams I see are like a good founding team, you know, let's say of three to five people, all of them will have a PhD. So if you have a single PhD, you're good. But you know, some of them even have the dual PhDs. So that's the level of complexity. So that's one. The other pattern I saw are definitely, if they are professors inside of academia that is coming out, that's definitely a big plus because they've been around for a while and they also have access and potentially have exclusive rights to the IP because they have a lab in the university. Right. So, and they could use a lot of university resources to basically continue a lot of their R and D using students. So I see quite a bit of that. The pattern that I see with these quantum companies are they're good at the science and the technology. But you know, the typical issue with deep tech is, you know, how about the business side of things, right? So the business side of things, the operations, the finance, the accounting and setting up the IT infrastructure, those are the things that they don't really like, but must do. So part of what I do with my fund is I created a group of fractional executives to basically help them go through that process so they can concentrate on the things that they are really good at and then get some help and get some structure related to the things that they normally wouldn't really feel comfortable until, until they've gotten some guidance. So that's the approach that I took. So from a team standpoint, I think the other one is like the number of patents and publications that they write on these because you can see their thought leadership. So if they have a lot of things there, it's great. They have a lot of potential ip, they have a list of all the things that they filed, all the things that they want to file. I'm always looking at that. And then second is. And then the other are definitely, I'd like to see some level of proof, right? So if somebody says, hey, you know, I'm creating this really fantastic technology, it has some level of quantum physics algorithm in there and it's changing the entire world of energy, for example, right. Then I need to see, okay, well, you know, can you can let me see your process for validation, Let me see some proof of whether that technology works. And once I've seen some level of technology working, proof of technology, then I know the team in itself can really execute from that level. And I just need to surround them from a business perspective.

[Joel Palo Thinkle]

What are some of the biggest challenges that you're seeing with quantum companies? I'm assuming it's, I'm assuming it's access to be able to fundraise really quickly, but I'm not, you know, I love your insights on that.

[Nardo]

Yeah. So, so, so this is, this is a hot area, right? So, so a lot of deep tech funds actually want to invest in these areas, but have a hard time investing because they can't do the due diligence. Right. So it's hard to do diligence these companies without the right kind of resources. So that's one thing I think the other is the level of valuations they start off with are very high. So the stuff that I normally would see, I'm doing pre seed level. Pre seed level, PC plus. Right. Yeah, normally I would see, you know, the kind of valuation at the level that I'm doing, I normally would see it in seed, but it's come down to precede. Okay, that's a little better than I.

[Joel Palo Thinkle]

Thought because, you know, when you think about like space companies that are Cedar precede, those are like, those numbers are like series F type evaluations. So I would have thought it would have been the same thing with quantum.

[Nardo]

Quantum computers. Yes. So quantum computers, yes. But keep in mind there are, you know, this is an entire. The technology sector includes, you know, if you take. Think of like the front, you know, from front end to back end. Right. So you have the software pieces, the system utility pieces, the embedded software pieces, the hardware pieces. Right. The components pieces. So there's a whole bunch of them and each one of them could, you know, can actually become its own startup. And those have different valuations as well.

[Joel Palo Thinkle]

Yeah, no, that's interesting. Switching gears to your emerging manager journey, can you share a couple learnings that you've gained in the last. Because you've been at this for about a year. Yeah, I'm thinking a couple of years. Yeah.

[Nardo]

So.

[Joel Palo Thinkle]

So what are some big learnings that stand out in the last year? Maybe from building the thesis to building a pipeline. What are some takeaways that we can take back with us?

[Nardo]

Yeah, I think one thing the VC world, I would say it's definitely very relationship driven. Right. So you don't get better at this unless your relationship are really good. So keep that in mind. So the biggest thing for me is relationship. Make sure that you're authentic about this stuff. Right. So you're authentic, you truly care about what you're doing. And the other is you need to be helpful. Right. So to me, you know, the whole thing about VCs is like you're not the only. If you look at startup, they're asking for a lot of money. Right. So the whole thing with VCs is like sometimes we get, we have a tendency to be competitive. I think what you want to do is don't be competitive. See if you can share, share things and help out. I help out a lot. What is it going to cost me to do an introduction here and there? I'm in healthcare, I get a lot of decks for healthcare and I give it out to the folks. I give out introductions for other VCs because I'm not looking for LPs in healthcare. I give out the kind of introduction so I think I'm being helpful from that standpoint point. Sharing deals relationship and make sure that you're definitely authentic and you're doing this for the right reason, not because you want to be on top of the stage and sharing the limelight there. And because hey, I'm a vc. That's not the point. The point is hopefully you use the vehicle that's given to you to make some impact in humanity and don't world.

[Joel Palo Thinkle]

Yeah, no, that's, that's really good advice. I think that's, that's super true. It's super relationship basis. It's a CRM business. So you're you know, trying to add value to your, you have multiple customers. Right. You've got your LPs, you got other VCs that you're CO investing with, you've got founders that you're supporting as well. You know, with the, with the technology being so complex, I doubt you're going to roll up your sleeves and help these people build the technology. So what, what are some ways that we could add value to these very complex deep tech startups? And, and what are you seeing that they need the most help with? Is it product market fit? Is it their deck? Is it fundraising? Is it all of the above? I guess what, you know, with, with the startups that you're working with, what do they need help with and what are they struggling with the most?

[Nardo]

Yeah, yeah. I think what they normally struggle with is definitely the business mindset. Mindset. Right. Because you know, the majority of these folks are coming from academia.

[Joel Palo Thinkle]

Yeah.

[Nardo]

Research institution and they're good at what they do. Right. So people even asked me and said Nardo, you know, can you co found our company with us? You do the business aspect of it and we do the technology aspect of it. I said I'm not sure whether I can do that from a VC standpoint, but there is a lot of, I get a lot of requests like that. Right. So you do the business side, we do this piece of it. So I think there is, there's definitely an opportunity for something like that. I don't know what that looks like yet. Is that really an accelerator? It doesn't seem like so because accelerators are you know, pretty much like program cohort based and you know, expires after a certain number of months and so on. They want some, some business entity to, to Work with them throughout the life of their company. Yeah.

[Joel Palo Thinkle]

What's blown me away a few times is I've seen CEOs of companies who are professors and they want to recruit out the CEO. So that for me is a really red flag because that just means that, look, if you found the company, you should be able to run it. And I don't think that's going to be that easy to just farm out to somebody that would come in and just run the company. Obviously that happened. A lot of these big companies, people do bring in outside corporate professionals if the company is not working out. But I think in general, even when you're founding the company, it's. And you're doing some tech transfer, you're getting some grant money or you're building it even with some venture money, just trying to delegate out being CEO because you want to be a scientist. Sometimes that's, that's a huge red flag. I would say not even sometimes. I'd say all the time.

[Nardo]

Yeah. And that is, you know, definitely causing a bit of a difficulty. Right. So it's along the lines because these are, you know, really embedded academics. You know, what do you do? They're professors coming out, for example. Right. So they're, you know, chief science officer in a large research institution. So that's the core area that they're useful in. But the business side of it is definitely an area that needs to get improved. And that's why, you know, the whole fractional executive stuff came about, trying to address some of these gaps. Yeah.

[Joel Palo Thinkle]

And what do you think the exits will be or what types of exits do you think they will be for? And obviously that's a loaded question. And you know, nobody can predict the future, but you know, do you see them being similar to space companies, cloud computing companies, you know, what are, what would be the closest computer to quantum computing?

[Nardo]

I would say they're probably more similar towards more of like the space tech type. You know, these are large. You know, for example, we have three that I could name of three quantum computers that basically did exits. One did a cybersecurity company. Did an exit. It's a cybersecurity company worth a couple of billion of dollars, I think. The other is a quantum computer company worth 1.2 billion doing a SPAC. And so company worth 1.2 billion. And the quantum computer is still in research. Right. So it hasn't really made it into production. They're Pre revenue at 1.2 billion from a IPO standpoint. And then there's another quantum computer that's worth more than 3 billion. And, you know, they've been pretty stealth about, you know, what they have. So figured that one out. Yeah.

[Joel Palo Thinkle]

And what area, out of all of the verticals that you mentioned is the most exciting to you? Is it the sensors? Is it more of the picks and shovels? I guess.

[Nardo]

Is there.

[Joel Palo Thinkle]

Is there one subset that you think is going to provide bigger opportunities and outsized returns?

[Nardo]

Yeah. So I think the areas I like are basically what I call transitional tech or bridge tech. Joel. Because in order for us to get towards the realization of quantum, we need to make sure that we could bridge whatever we have now with that kind of technology. Right. So it's not all of a sudden, you know, you sleep today, the following day you wake up and say, oh, quantum computer is here. Quantum nirvana is here. It doesn't happen that way. Right. Normally it's like a lengthy transition from an industry standpoint. So what you want to do is like, who are the company that can actually transit, not only bridge and transition you towards classical and quantum, but can not only walk you through that, but also become a pure quantum company as that journey comes about. Right. So I think those kind of companies that are able to do that transitional bridging aspect of things as, you know, as they grow their startup up, I think those would be good winners.

[Joel Palo Thinkle]

How many years till you think Quantum will be mainstream? How many years do you think they will be personal computers? And what will they look like?

[Nardo]

Oh, wow. So, you know, believe it or not, I did talk to one startup that's already thinking about doing a quantum desktop.

[Joel Palo Thinkle]

Yeah. Will it be a desktop or will it be implanted in. Will it be implanted in neural link, where you can kind of tap the neural link and see a screen, I guess.

[Nardo]

Guess.

[Joel Palo Thinkle]

Where do you think it could head that could be maybe out of this world?

[Nardo]

Yeah, it will be all of that. Right. So there's definitely a lot of work happening with putting everything down to quantum chip level. So similar to like an AI chip. Right. There's a lot of work there similar to the sensors that we have now. Right. So it's going to come to that. It's going to get embedded. So we're going to even become more cyborg than we want. So. So it's really all of that, Joel. It's going to come to. It's just a matter of now you have technology that's more exponential. What can it do to you? What can it do for us?

[Joel Palo Thinkle]

Yeah, that's really helpful, Farooq. It looks like you Had a question.

[Farooq]

Yeah, I mean, I'm really learning a lot here. And I was sort of thinking, hey, I had seen AWS Market, a quantum computing service. And then I just googled this and this is a copy paste one liner from their platform. So what's the story here? Like, because they talk about, I was sort of reading it more in depth here. So they talk about simulation for different types of quantum computers. So do they actually have something or.

[Nardo]

This is sort of, you know, some.

[Farooq]

Sort of a simulation test to test out.

[Nardo]

Yeah, good, good question there. So, so Amazon bracket, what they do is they partner with different quantum hardware, right? So they offer that as quantum computing as a service. And so, so they're also, there are things that you can run within the quantum computer itself if you're able to do quantum programming and stuff like that. Right, so you're able to do that. But there's also things that you could do what we call quantum inspired applications. So basically these are quantum algorithms that you run in a classical computing simulation software. Okay. So that is what we call quantum inspired because the algorithm itself is quantum, right? Quantum algorithm, the mode in which it runs, it runs in a classical computer, a high performance classical computer inside of a simulation software. Although it's not as fast compared to, you know, what a quantum computer would do, it still works, right? So that's a quantum inspired. So it's a good way for us to, you know, a good way for companies to test out quantum without necessarily having quantum hardware. So that, that's, that's another approach. So, you know, if, if I give you, you know, a comparison for classical versus quantum in terms of these applications. So think of, let's say Amazon, right? So Amazon, they have a, a store, e commerce store. So let's say you have a matrix of 100 million products versus 100 million users, right? So in that matrix, and you do a recommendation engine. If it runs on a classical computer, it will take 1 trillion steps to get a recommendation. If it runs in a quantum computer, it'll take a thousand steps. So if you look at the disparity between the number of steps versus you know, and classical versus quantum, it's definitely a huge gap. Right? So, and we're just talking about nascent technology. So this is a test that's been done by one of the, one of the quantum development platform companies out there. So look at the power of that kind of, the scale of that kind of power. Yeah, that's really helpful.

[Joel Palo Thinkle]

Any other questions, guys? Get around like seven minutes.

[Nardo]

I'll sort.

[Farooq]

Of Start getting towards the conclusion. I guess I'll ask about is there a. Or have you seen, or maybe you have put together something like a market map or sector map or a white paper on this sort of, you know, beyond just the very basic one on one like, slightly deeper level where we sort of. We could read it and understand it and figure out, okay, what's sort of happening beyond the surface.

[Nardo]

Oh, there's. There's definitely a lot of really good reports coming out from McKinsey and BCG. I'd be happy to share that with you guys. If you guys are interested. BCG has a great report. McKinsey just came out with a new report in December and tells you definitely all the quantum landscape, what kind of use cases, what are all the different components of the quantum industry. So anywhere from components to software to hardware to things like that that you're looking so you can see the entire view. Awesome.

[Farooq]

Thank you very much.

[Nardo]

Sure.

[Joel Palo Thinkle]

So we'll open it up for questions, but one thing I always ask Nardo is a piece of life advice that maybe a mentor or a family friend gave you that you'd like to share with us.

[Nardo]

Yeah, I think if you're surrounded with really exponential technology, you have to make sure you surround yourself with people that think about the good that technology can do. Right. So because, you know, typically we get lost in the shiny object type scenarios. So I, what, what I tend to do is I want to make sure that when. When I work this world and I work the exponential side of. Of technology, I need to make sure that I surround myself with people that are, you know, all about humanity, all about good, all about ethics, all about, you know, make sure that it's morality as well and things like that to ensure that when I'm making a bet, it's not just about a bet towards the technology, it's a bit towards, you know, humanity winning.

[Joel Palo Thinkle]

Yeah, that's really good advice. What would you recommend for people who want to start their own fund? What are maybe the top three steps that they should do?

[Nardo]

I would say that that inventory of what they have, that, that would be a good step. Second, definitely join a group. Right. Sutton is a great one. VC Labs is a great one. Definitely join that. And then you have to find your tribe. Right. So, you know, when I, when I joined VC Labs, you know, one of my cohort members pretty much said, nadu, you have to join Sutton too. So I joined Sutton's Slack channel. All of a sudden, oh, my gosh, here's an extension of the bigger tribe here so that's what you need to do because there's a lot to learn. And I think that the other one is just be coachable, listen and don't let your ego get in the way.

[Joel Palo Thinkle]

And it's a small ecosystem. So, you know, one of the cohorts that I'm going to be launching soon, it's funny because everyone knows everybody and everybody's been to all the same programs, right? So people, like when I'm messaging people in Psych, they're like, oh my God, it's great to see, see these five people because they're all my friends, you know, so it's, it's really, I think friendships first and, and it is a small ecosystem. So I, I guess in my experience just try to be nice to everybody and be generous and I think it comes together. But yeah, it's too small of a industry to, to not be able to build relationships with everybody. So I think, and I think you can also get feedback on your thesis. So I think one thing that I've also seen is peer reviewing. So a lot of times if you're, if you're thinking about something, it's very similar to software, right? So you want to start a fund. This is minimum, you know, they, I've heard the term minimum viable fund, right? You have, you're thinking of this concept of a, you know, $10 million health care fund, a digital health fund. You know, bounce that off of five or six people and get feedback, maybe even non vc and see what they say. And I think just. And then from there you get a bunch of feedback and then you, and then you iterate off of that. So it's, so it's definitely an iterative process. And then I would say, I think the other value of being part of a community is everybody's sharing notes and thoughts on the different vendors and the tools and the platforms and the lawyers. So that collective thought sharing, knowledge sharing is really helpful too. That's what I would say.

[Nardo]

You know, one of the things I have is, you know, create, create. So, you know, when, when you start working, you know, with other funds and stuff, create a support group, right? So I have a weekly support group of all different types of VCs because all of us are, you know, in different stages, right? And what you do is you, you want to kind of learn from each other and share and, and all of that stuff and, and see how you can help out. And don't be shy in sharing. Share what you know, share what you have, share what you found out that that's the only way you grow. And the more you do that, the more it comes back to you.

[Joel Palo Thinkle]

Yeah, no, that's. That's really helpful advice. I'll just really give one more opening here. If anybody else wants to ask any questions, feel free to. To shout it out. Any final questions? Guys?

[Nardo]

Guys.

[Joel Palo Thinkle]

Okay. All right, well, Nardo, thanks so much for your time. Really appreciate you coming out. And it was really great learning, going deep on Quantum, so thanks for sharing all the. The. The thought leadership around that.

[Nardo]

Okay? Thanks, Joe. Thanks for Sam.