D-Wave on Monday completed a proposed merger with DPCM Capital (the latter was already listed on the New York Stock Exchange), making the Canada-based company the third quantum player to go public via a SPAC — meaning a special purpose acquisition company – within the last year. (The other companies? Rigetti and IonQ.)
It’s an interesting trend, but perhaps not surprising: According to Alan Baratz, CEO of D-Wave, its until recently obscure financial quirk offers his company — a company that’s in a still emerging sector — quicker access to capital.
“In a way, SPACs are ideal for a company that has tremendous potential but needs some time to mature,” he tells Fast Company. “With a SPAC, you can tap the sources of funding in the public markets to accelerate your growth based on future potential.”
A traditional IPO, on the other hand, is “about today,” he adds.
SPACs can also save companies money (although this point has been the subject of some debate). “I don’t think all SPACs should be discounted,” says Patrick Moorhead of Moor Insights & Strategy, a consulting firm. “It’s a much cheaper way to go public and requires less time and effort.”
So far, D-Wave’s post-SPAC stock has held up well. It opened at $9.98 on Monday and closed at $11.86 on Thursday. But Rigetti and IonQ haven’t fared as well. Rigetti has seen its shares fall in value by about half since listing on the NASDAQ in March. IonQ’s shares have lost about 40% of their value since listing in October 2021.
How companies use quantum services
In the fledgling field of quantum computing, D-Wave has emerged as a major figure. As early as 2011, the company was the first company to actually sell a quantum computer; it now counts NASA, Google and Lockheed Martin among its customers.
The construction and operation of a quantum computer is an extraordinary feat of science and technology. 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 and zero and one at once (a “superposition”). Qubits can also entangle to represent values in extremely complex problems. To take advantage of these properties, the computer must control the state of the qubits, whose unpredictable 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 bring a quantum computer to market because it took a unique approach to working with the qubits – one that requires far less of them. “What they are looking for is the minimum energy level within a qubit, and by finding the minimum energy level they are able to find the most optimized solution to a problem,” says Heather West, research manager at research firm IDC. “And that’s why D-Wave can say they have 5,000 to 7,000 qubits in their system compared to an IBM which is still around 127.”
Although this approach, dubbed “quantum annealing,” doesn’t attempt to exercise much control over the states of the qubits, it’s still very useful for solving optimization problems – problems where the 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 for a given day. It’s a common type of business puzzle, and annealers are particularly good at solving it.
“Some of these industries got really interested in D-Wave because of these optimization problems, and the ability to pull in all kinds of data to find these optimized solutions and solve problems faster was really appealing,” says West.
This application is a good example of how companies are using quantum services like D-Wave today. They look for problem types where classical computers struggle and quantum computers excel.
“She [D-Wave] are more of an accelerator,” said Ashish Nadkarni, Group VP and General Manager at IDC. “We’re not at the point where you can run all sorts of jobs entirely on a quantum computer.”
But D-Wave’s annealer could eventually be seen as a precursor to a more robust type of quantum computer, dubbed the “gate model,” in which the quantum computer takes full advantage of the qubits’ quantum properties — their many possible states, their capacity for “superposition ‘ and the computing power enabled by the entanglement of multiple qubits.
Controlling and exploiting these properties opens up the possibility of solving problems that are far beyond the reach of classical supercomputers (and annealers). These are big “probabilistic” problems that ask the qubits to model huge and complex data sets. It could be modeling all of the receptors in the brain to study how they respond to a drug, or a variety of stock market conditions to predict their impact on the price of a particular commodity.
Recognizing that much of the advantage and excitement for quantum computing comes from the possibility of solving such problems, D-Wave announced last year that it had begun building gate-model quantum computers that are more akin to those of Google, IBM and IonQ are similar. D-Wave will take years to develop its gate model quantum, but Baratz believes offering both annealers and gate model quantum computers will ultimately give his company an edge.
“By doing both and being the only company doing both, we are the only company in the world that will be able to address the entire quantum market and all use cases,” he says. D-Wave’s customers typically access these computing services through a dedicated cloud service.
“We are really commercial”
With quantum technology considered to be a nascent technology, many potential customers (e.g., companies in the financial services and pharmaceutical industries) are experimenting with running certain types of algorithms on quantum systems to look for advantages over classical computing. But they are not necessarily paying customers.
Baratz says it’s the gate-model quantum services that are “nascent” technology, not the annealers of D-Wave, which he says are poised to deliver real value today. He believes that gate-model quantum computers are seven years away from running general business applications in a way that outperforms classical computers.
Baratz believes D-Wave is now challenged to ensure customers are moving between gate-model computing – which he says could be up to seven years away from running real business applications – and D-Wave’s quantum annealing service differentiate that is mature and ready to deliver value today. While its competitors with the Gate model tell customers it’s okay to “dip their toes in water” and experiment, D-Wave must counter this narrative in the market with the message that customers are now doing real optimization work with quantum annealing can afford.
“We’re really commercial, so when our competitors talk about revenue, they’re talking about government research grants as revenue, and national labs and academic institutions as customers,” says Baratz. “When we talk about our customers, we talk about our recently announced deal with MasterCard or Deloitte or Johnson & Johnson or Volkswagen.”
Baratz says that over 65% of D-Wave’s quantum cloud revenue over the past year came from more than 50 commercial clients, including over two dozen members of the Forbes Global 2000.
According to Baratz, D-Wave is now entering a phase where it can use its annealers to build customer relationships.
“We have a significant lead, but we believe now is the time to really invest to grow that loyal customer base and gain market share,” says Baratz. “And then when we bring new generations of anneals to market, if we bring Gate it’s just an upsell for more complex applications [model] to the market.”
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