Xairos is raising capital via a convertible note at a $10 million valuation. That’s a reasonably fair price, despite Xairos’ lack of revenue so far. Xairos is an extremely high-tech company that will probably require years of research and development to generate revenue. However, the company already holds two patents and is conducting pilot programs with top-tier clients like NASA, the US Navy, and the US Air Force. A $10 million valuation is a reasonable price for potentially revolutionary technology that has already generated decent traction.

It’s difficult to benchmark an exact market for Xairos’ timing technology because existing Global Positioning System (GPS) timing tech is so ubiquitous. A wide range of huge, critical industries ranging from telecommunications and power grids to financial networks and defense agencies require timing solutions. Nearly half a million timing boxes powered by GPS are sold each year for at least several thousand dollars each. It’s hard to put an exact price on the opportunity to switch to a more reliable universal timing system, but the total market size is at least several billion dollars. In fact, Xairos asserts that the market is worth $500 billion. 

The global real time location system market was worth $20.6 billion in 2021 and is expected to grow 22.7% annually over the coming years. While this market applies most directly to GPS, it provides context for just how large the GPS market is. Timing technology has a strong overlap with GPS functionality, so Xairos appears to be targeting a large and rapidly growing market.

It’s clear that timing systems are extremely important, extremely valuable, and extremely prevalent. That need combined with the pressing problem of replacing a GPS timing system that is vulnerable to any number of instabilities means that Xairos has a tremendous market opportunity.

Xairos was founded by David Mitlyng and Dr. James Troupe. Each co-founder is highly credentialled and primed to lead a high-tech company. Mitlyng holds a BS in aeronautical engineering from Cal Poly, an MS in aeronautics and astronautics from Stanford University, and an MBA from MIT’s Sloan School of Management. He has held several engineering and operations positions at various companies over the last 30 years. Most recently, he served as the COO of SpeQtral, a company working on quantum communication technologies.

Dr. Troupe is no less impressive. He holds a BS in physics from the University of New Orleans, an MS in physics from Tulane University, and a PhD in computational science from Chapman University. He is the inventor of Xairos’ quantum clock synchronization protocol and holds Xairos’ exclusive intellectual property and patents. Troupe has been a physics researcher for more than 20 years, most recently as a scientist at the quantum research laboratory at UT Austin. 

It’s difficult to imagine a pair of more qualified founders to launch a business like Xairos. Mitlyng lends an advanced scientific background as well as significant business experience. Troupe offers significant scientific expertise and contributed the key invention that propelled Xairos into existence. While the company will undoubtedly grow to require additional expertise in sales, manufacturing, and finance later on, this founding team is perfectly suited to run Xairos at this stage. 

Only a quantum physicist would be capable of fully explaining Xairos’ quantum clock synchronization (QCS) technology and the precise ways in which it differs from existing timing systems. However, it’s clear even to a layperson that Xairos could offer clear advantages over existing Global Positioning System (GPS) technology, assuming that the Xairos system is brought to life according to plan. QCS is significantly more accurate than GPS – up to 1,000x more accurate, in fact. QCS could also prove to be much cheaper than the current GPS system because it requires chip-sized clocks rather than the huge atomic clocks mounted on satellites that sustain the GPS system. While Xairos has a long way to go before fully proving the viability of its QCS system, the technology could be truly revolutionary for a wide range of critical industries across the globe. 

Xairos is only two years old and has not generated any revenue yet. As one would expect, the company is burning capital as it conducts research and development on its quantum clock synchronization (QCS) technology. Xairos posted a net loss of $615,448 in 2020, and 2021 financials are not available. 

On other measures, though, Xairos is performing well. The company has secured pilot programs with NASA, the US Navy, and the US Air Force. Each agency is testing a specific application of the QCS timing system. Xairos has also identified opportunities with other top-tier customers, such as other Department of Defense agencies, the Department of Energy, and the National Science Foundation. In the future, Xairos anticipates that corporations like AT&T, Amazon, Chase, IBM, and countless others would also benefit from QCS.

In addition, Xairos has been accepted into prestigious accelerator programs like Techstars and the Catalyst Accelerator (focused on defense and national security). Institutional investors like SpaceFund have also backed the company. Strong relationships with funders will be critical for Xairos’ success, given the capital-intensive nature of this high-tech industry.

Xairos is a highly risky investment, as are any moonshot companies. Transforming the entire global timing system is a major challenge, and success is not guaranteed. Financials are a major source of risk, given that Xairos has yet to generate any revenue and requires a good deal of cash to fund ongoing research and development. The company also faces product and time risks inherent to inventing something novel and high-tech. Xairos is in the prototype phase of product development. It could take years before Xairos is ready to launch its product, and any number of hurdles could impede adoption.

Xairos has an audacious vision for completely supplanting a global timing system with its novel technology. That mission could be game changing. It could also fall completely flat. Xairos is a classic moonshot company aiming for truly revolutionary disruption of an entrenched legacy industry. That means it will face any number of major hurdles as it struggles onward, ranging from issues with the underlying technology to regulatory challenges, slow-moving government agency customers, and more. It’s also worth noting that Xairos is solving a well-established, well-publicized problem with Global Positioning System (GPS) timing. That means that Xairos’ solution is truly needed, but it also means that any number of other inventors and companies are hustling to create alternate solutions. It might be a footrace for Xairos to win the race to replace GPS timing, and there is too little data to evaluate whether or not it can win.

It’s difficult to fully evaluate Xairos’ success potential for two main reasons. First, it requires a great deal of scientific expertise to fully grasp the nature of Xairos’ quantum computing system (QCS) technology. Second, Xairos has only been around for two years, so there’s not a lot of operating history to assess. That being said, there are signals that Xairos has competitive advantages to succeed in this high-stakes race to replace GPS timing. Xairos’ co-founders are deeply experienced and impressively credentialed. With four graduate degrees between the two of them and 50 years of experience both conducting research and operating scientific businesses, it’s hard to imagine a better-suited founding team for this type of company. In addition, Xairos has succeeded at winning early interest from top-tier customers like NASA and the US Navy. Government agencies like these are highly dependent on the Global Positioning System timing system and arguably most at risk if that system were to collapse. It’s a great sign that they have trusted Xairos to carry out a pilot of new technology. If those programs go well, Xairos could be well on the way toward implementing QCS worldwide. 

Xairos is a quantum computing company seeking to replace unreliable Global Positioning System (GPS) timing with a new global timing system. GPS timing is critical for a number of industries, ranging from emergency response to defense, telecommunications, the financial system, and more. However, the system is known to be unreliable, and experts everywhere are calling for a better solution. With a deeply experienced founding team and early success with accelerators and government pilot programs, Xairos just might be able to deliver that solution. The company’s technology could prove revolutionary. If Xairos can successfully develop its quantum computing system technology, it will likely have a huge potential market due to the many applications of timing technology. 

On the other hand, investors should recognize the risk that comes along with investing in any type of moonshot company like Xairos. Xairos is developing extremely complex technology that will likely take years to refine. Even if Xairos’ technology works, the company will require major buy-in from slow-moving bureaucratic entities to begin generating revenue. Xairos will also face a great deal of competition, and it’s difficult to determine the exact merits of its timing system versus other solutions without deep scientific understanding. Therefore, Xairos has been rated a Neutral Deal. 

For questions regarding the KingsCrowd analyst report or ratings for this company, please reach out to support@kingscrowd.com. 

Analysis written on March 23, 2022.