The Saturday Paper - Exclusive: Husic made venture capital appointments ahead of quantum contract

Federal Industry Minister Ed Husic appointed two senior executives from Australian venture capital giant Blackbird, a major investor in United States-based company PsiQuantum, to key departmental advisory committees in the lead-up to the government’s controversial decision to invest in PsiQuantum.

Blackbird is understood to have informally lobbied Husic’s office on behalf of PsiQuantum as part of the US technology company’s efforts to win support for a $1 billion investment from Australian taxpayers – although it is understood the venture capital firm did not facilitate or attend meetings between Husic and PsiQuantum.

In a joint statement in April, Prime Minister Anthony Albanese, Queensland Premier Steven Miles, Chief Scientist Dr Cathy Foley and Husic announced that the Australian and Queensland governments would invest almost $1 billion into PsiQuantum to build the world’s first fault-tolerant quantum computer in Brisbane, creating 400 highly skilled jobs.

The computer is a cornerstone of the government’s Future Made in Australia policy and is intended to drive tech manufacturing as well as key developments in new medicines, artificial intelligence and the net zero transition. Some in the Australian industry complain that a central feature of the Future Made in Australia promise is now being made by Americans.

About 18 months before the PsiQuantum announcement, in September 2022, Husic appointed Blackbird senior associate Clare Birch to sit on the government’s 15-person National Quantum Advisory Committee.

The committee helped shape Australia’s inaugural National Quantum Strategy, released last May, which first outlined the government’s desire to see the world’s first fault-tolerant quantum computer built in Australia.

The National Quantum Advisory Committee was not consulted on the government’s decision to invest in PsiQuantum.

In December last year, Husic appointed Blackbird’s head of impact and operating principal Kate Glazebrook to the seven-member Industry Innovation and Science Australia board, which advises the government on science, innovation and research matters and is responsible for the promotion of investment in industry.

The Saturday Paper is not suggesting anything inappropriate in these appointments, nor is it suggesting either the board, committee or any member of the board or committee had a role in the government’s decision to invest in PsiQuantum. That decision was made by cabinet.

In 2021, Blackbird took a major stake in PsiQuantum, whose co-founders include Australian quantum-computing professors Jeremy O’Brien and Terry Rudolph, as part of its US$450 million “series D” funding round that valued PsiQuantum at US$3.15 billion ($4.25 billion).

Following the Australian and Queensland governments’ announcement that they would invest almost $1 billion in PsiQuantum, Blackbird partner Michael Tolo praised the decision as a “stunning nation-building milestone that entrenches” Australia’s “position as the global leader in quantum computing”.

“This project creates a path for Australia to capture the economic benefit of research and talent that it has helped to nurture,” Tolo said, “and for our country to build unfair advantage in the many applications that utility-scale quantum computing will enable across materials science, physics and drug development.”

Husic began meeting with a range of quantum-computing advocates in the second half of 2022, which then led to meetings with PsiQuantum representatives towards the end of 2022. In late January 2023, he travelled to the US, visiting PsiQuantum’s headquarters in Palo Alto.

Soon after Husic’s return to Australia in February 2023, the Department of Industry, Science and Resources began work on the first phase of due diligence surrounding a possible taxpayer-funded investment in PsiQuantum.

In May last year, in order to help secure the Australian government’s support, PsiQuantum engaged Labor-aligned lobbyists Brookline Advisory, which is headed by Lidija Ivanovski, a former chief of staff to Defence Minister Richard Marles, and Gerard Richardson, who ran Labor’s communications team for the 2019 election campaign.

PsiQuantum also commissioned Labor-linked economics and policy consultancy Mandala to prepare a report on the benefits of building a quantum computer in Australia. Mandala’s managing partner, Amit Singh, was senior economic adviser to Kevin Rudd and Julia Gillard between 2010 and 2013 and was a director of policy for then Labor opposition leader Bill Shorten from 2014 to 2016.

Following initial government approval in June 2023 of the proposal to make a strategic investment in PsiQuantum, the Department of Industry, Science and Resources established a special technology taskforce within its science and technology group to undertake intensive due diligence surrounding the proposal and to manage the process.

In August 2023, the Department of Industry opened an expression-of-interest process to test the capabilities of both domestic and international quantum companies as well as their preparedness to offer similar outcomes to those being offered by PsiQuantum.

The EoI went to 21 companies – which were all required to sign strict confidentiality agreements and whose names also remain confidential – and the process was closed a month later in September.

Soon afterwards, the government decided to proceed with its plan to make a significant investment in PsiQuantum.

“The fact that Export Finance Australia started engaging with PsiQuantum the same month other quantum companies responded to the EoI suggest the process was possibly a sham,” teal independent Monique Ryan told industry publication InnovationAus earlier this month.

“The minister should tell us when exactly he decided the money would go to PsiQuantum: if he did so before even opening EoI, then this has been a process without integrity and due diligence.”

The Saturday Paper understands some senior figures in the department were critical of the PsiQuantum deal but there were others who were enthusiastic about it.

One Department of Industry source said the prevailing view within the department was Husic was particularly excited about PsiQuantum’s capacity to build the quantum computer.

“This is a minister who is a conviction politician, who gets very excited and very enthusiastic about big ideas that can potentially change the nation, and that’s a huge positive,” the source said. “But the downside is that when this same minister is presented with advice that goes against one of those big ideas, he really loses his shit.”

One Australian quantum industry source, who spoke on condition of anonymity for fear they could be denied access to further Australian government funding, said the PsiQuantum investment was a major vote of no-confidence in Australia.

“How can we go out to the world to try to raise money when our own government passed us over and decided to bet an unprecedented amount of taxpayers’ money on an American company that no one is even sure can deliver what it says it can deliver?” the source said. “It is fair to say that most people I know were initially stunned at the announcement – and are now quite angry.”

Another industry source acknowledged that while there was no doubt PsiQuantum was an outstanding company and that its fundraising efforts over the past decade were equally impressive, there was little to show how the investment in PsiQuantum was in the national interest.

“Spreading the money around to give more Australian companies a chance would have been a smarter way of stimulating innovation and advancing Australian expertise,” the source said. “We are a very advanced country when it comes to quantum computing, but this government – and they are not the first – is blind to that.”

Paul Fletcher, the opposition’s science spokesman, expressed concern that the investment in PsiQuantum could jeopardise the local quantum industry.

“Australia is home to world-leading quantum-computing researchers and companies,” he told The Saturday Paper. “It would be a tragedy if this funding decision ends up making it more difficult for local quantum companies to compete for global investment because of a perception that their own government doesn’t believe in them.

“This controversial deal could cause considerable reputational damage for our quantum-computing sector thanks to Labor turning its back on them, which is unfair, bizarre and makes no sense.”

In a statement to The Saturday Paper, a spokesperson for Husic said: “From the outset, the government’s motivation has been uplifting and providing opportunities to scale-up Australia’s domestic quantum sector.

“Australia has been a world leader in quantum-related research for decades. We want to crowd in investment in Australia. That’s why we launched Australia’s first National Quantum Strategy, created the Australian Centre for Quantum Growth and earmarked funding for quantum through critical technologies challenges and the NRF – as well as renewing investment in Silicon Quantum Computing.

“Since the PsiQuantum investment announcement, there has already been an uptick in quantum activity in Australia – more interest in investment from overseas and more interest in collaborations with local universities and industry.

“We’re now in the global race to build the first fault-tolerant quantum computer, a technology that has the potential to help drive advances in areas like new medicines, AI and the net zero transition.

“The investment was subject to rigorous and comprehensive due diligence across several areas, including legal, technical and national security. It involved consultation across portfolios including Prime Minister and Cabinet, Treasury, Department of Finance, the Department of Defence and the Department of Home Affairs.”

Author: Jason Koutsoukis

This article was first published in the print edition of The Saturday Paper on June 29, 2024