D-Wave is SPAC’s third quantum startup in less than a year

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D-Wave on Monday completed a planned merger with DPCM Capital (the latter already listed on the New York Stock Exchange), making the Canada-based company the third quantum player to go public via a SPAC, i.e. say a special-purpose acquisition company — over the past year. (The other companies? Rigetti and IonQ.)

It’s an interesting, but perhaps unsurprising trend: According to D-Wave CEO Alan Baratz, the until recently obscure financial quirk is giving his company, which is in a still budding industry, more access fast to capital.

“In a way, SPACs are ideal for a business that has huge potential but will take time to mature,” he said. fast business. “With a SPAC, you can tap into public procurement funding sources to accelerate your growth and do so based on future potential.”

A traditional IPO, on the other hand, is “all about today,” he adds.

SPACs can also save companies money (although this point is debatable). “I don’t think all SPACs should be ignored,” says Patrick Moorhead of Moor Insights & Strategy, a consulting firm. “It’s a much cheaper way to go public and it takes less time and effort.”

So far, D-Wave’s post-SPAC stock is holding up. It opened at $9.98 on Monday and closed at $11.86 on Thursday. But Rigetti and IonQ didn’t fare so well. Rigetti has seen its stock value drop by about half since its NASDAQ IPO in March. IonQ shares have lost around 40% of their value since listing in October 2021.

How companies are using quantum services

In the young field of quantum computing, D-Wave has established itself as a major figure. In 2011, the company became the first to sell a quantum computer; it now counts NASA, Google and Lockheed Martin among its clients.

Building and operating a quantum computer is an extraordinary feat of science and engineering. Instead of the bits used in traditional computers (which can be set to zero or one), quantum computers use subatomic particles called qubits, which can represent many values ​​between zero and one, as well as zero and one. at a time (an “overlay”). Qubits can also intertwine to represent values ​​in extremely complex problems. In order to take advantage of these properties, the computer must control the state of qubits, whose erratic behavior is governed by quantum physics, not regular physics. This is very difficult and usually involves supercooling the qubits to slow their constant rotation and then using lasers or electricity to control their state.

D-Wave was able to come to market with a quantum computer because it took a unique approach to working with qubits, one that requires far less of them. “What they are looking for is the minimum energy level in a qubit, and by finding the minimum energy level they are then able to find the most optimized solution to a problem,” says Heather West. , head of research at IDC. “And that’s why D-Wave is able to say it has 5,000 to 7,000 qubits in its system compared to an IBM, which is still down about 127.”

Although this approach, called “quantum annealing”, does not try to exert much control over the states of the qubits, it is still very useful for solving optimization problems, that is, problems whose goal is to find the best solution. among a multitude of possibilities. An optimization problem might be finding the optimal routes and loads for a large fleet of delivery trucks, or finding the optimal number of employees to schedule on a given day. This is a common type of business puzzle, and annealers are particularly good at solving them.

“Some of these industries have really turned to D-Wave because of these optimization issues, and being able to pull all kinds of data to find these optimized solutions and fix issues faster was really appealing,” West says.

This app is a good example of how businesses today use quantum services like D-Wave. They are looking for the kinds of problems where classical computers struggle and where quantum computers excel.

“They [D-Wave] are really more of an accelerator,” says Ashish Nadkarni, group vice president and general manager at IDC. “We’re not at the point where you can completely run all kinds of work on a quantum computer.”

But D-Wave annealing can possibly be seen as a precursor to a more robust type of quantum computing, called the “gate model,” in which the quantum computer takes full advantage of the quantum properties of qubits — their many states. possible, their capacity for “superposition” and the computing power made possible by the entanglement of several qubits with each other.

Controlling and exploiting these properties opens up the possibility of solving problems far beyond the scope of classical supercomputers (and annealers). These are large “probabilistic” problems where qubits are asked to model huge and complex data sets. It could be modeling all the receptors in the brain to explore their reaction to a drug, or a wide range of market conditions to predict their effect on the price of a certain product.

Realizing that much of the benefit and excitement around quantum computing comes from the ability to solve such problems, D-Wave announced last year that it had begun building model quantum computers. more similar to those built by Google, IBM and IonQ. D-Wave will need years to develop its gate-model quantum computing, but Baratz believes offering both annealing and gate-model quantum computing will ultimately put his company to an advantage.

“By doing both and being the only company to do both, we are the only company in the world that can address the entire quantum market and the full set of use cases,” he said. declared. D-Wave customers typically operate these IT services through a dedicated cloud service.

“We are really commercial”

Since quantum is considered a nascent technology, many potential customers (such as financial services companies and pharmaceutical industries) are experimenting with running certain types of algorithms on quantum systems to seek an advantage over classical computing. But they are not necessarily paying clients.

Baratz says it’s quantum gate-pattern services that are “nascent” technology, not D-Wave anneals, which he believes are poised to deliver real value today. He thinks gate-model quantum computers are still seven years away from being able to run general business applications in a way that beats classical computers.

Baratz thinks D-Wave is now challenged to ensure customers differentiate between gate model computing – which he says could be up to seven years ahead of running business applications. – and D-Wave’s quantum annealing service, which is mature and ready to deliver value today. While its door model competitors are telling customers it’s okay to “dip their toes in the water” and experiment, D-Wave needs to counter this narrative in the market with the message that customers can do real optimization work using quantum annealing now.

“We’re really commercial, so when our competitors talk about revenue, they talk about government research grants as revenue, and they talk about national labs and academic institutions as customers,” Baratz says. “When we talk about our customers, we talk about our recently announced agreement with MasterCard, or Deloitte or Johnson & Johnson or Volkswagen.”

Baratz says more than 65% of D-Wave’s quantum cloud revenue last year came from more than 50 commercial customers, which include more than two dozen members of the Forbes World 2000.

Baratz says D-Wave is now entering a phase where it can leverage its anneals to start customer relationships.

“We have a significant head start, but we think now is the time to really invest in growing that loyal customer base and getting the market share,” Baratz says. “And then as we bring new generations of annealing to market, it’s just an upsell to more complex applications because we’re bringing gate [model] at the market.”

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