TORONTO — Xanadu plans to list on the public markets by merging with a blank-cheque firm, in a SPAC deal that values the quantum computer developer at US$3.6 billion.

The Toronto-based company could raise up to US$500 million in fresh funding via the deal. That includes US$275 million in private investments from the likes of AMD, the asset management arms of BMO and CIBC, and previous backers Georgian, OMERS Ventures and Bessemer Venture Partners. Xanadu could also bring in up to US$225 million from the merger with Crane Harbor Acquisition, the Philadelphia-headquartered special-purpose vehicle, depending on how many of its shareholders take back their money.

“There’s much more ease of access to significant capital in the public markets compared to the private markets,” Xanadu CEO Christian Weedbrook told The Logic. 

The firm will use the money to further develop its software, advance and manufacture its hardware and to build a quantum computer the size of a data centre by 2029. “This is a long-term plan, but with significant upside,” Weedbrook said. 

The firm had previously raised US$241 million in venture capital, according to data from PitchBook. The Crane Harbor deal represents a significant increase in Xanadu’s valuation from the US$1 billion it was worth when it raised a US$100-million Series C round in November 2022.

Weedbrook said the firm started raising a planned US$200-million Series D in earnest at the start of the year, but was motivated to list by “all the action and excitement” around quantum computing companies in the public markets. 

The share prices of quantum computing firms have see-sawed this year, driven up by breakthrough claims and big sales, and down by Nvidia CEO Jensen Huang’s skepticism that the technology will be useful in the near term. “The stock will go up and down—we can’t control that,” Weedbrook said. Still, he added that Xanadu has a good story to sell, citing the two scientific papers it published in top journal Nature, and the firm’s participation in the U.S. Defense Advanced Research Projects Agency’s (DARPA) Quantum Benchmarking Initiative.

Special-purpose acquisition deals are well suited for “deep tech and things that are really going to change the world,” Weedbrook said. The firm will trade on both the Toronto Stock Exchange and the Nasdaq.

Firms enrolled in the DARPA program must prove that their quantum computing technology can be commercially useful to be approved for up to US$316 million in funding. The U.S. is also dangling the prospect of future government contracts. Canadian policymakers have expressed concern that the U.S. could use the program to make companies move across the border.

Rafal Janik, Xanadu’s chief operating officer, said the company’s Series D fundraising was going well, but the global climate was shifting so rapidly that the company felt it needed to do something “out of the box” to have liquidity for attracting talent or M&A.

“We’re fiercely a patriotic Canadian company. We want to remain in Canada and that has been challenging for scaleups around capital events as large as ours,” Janik said at The Logic Summit in Toronto on Monday. 

“We have competitors that are public, that are quite a far bit further behind the Canadian companies that are represented here, from a technological perspective, that are raising huge, hundreds of millions of dollars in the market.”

Weedbrook noted that Canadian investors make up about half of the money in the private portion of its latest deal. The federal Strategic Innovation Fund committed $40 million to Xanadu in January 2023, and the firm is likely to be among the beneficiaries of a new program that the Liberal government has promised to keep quantum firms in Canada.

Xanadu, which currently has over 250 employees, plans to open offices abroad. Weedbrook said it will be taking the listing road show to the Middle East and Southeast Asia in the near future, to encourage investors from those regions to buy into Xanadu once it’s public.

Correction: This story has been updated to correctly reflect the value of Xanadu’s SPAC deal with Crane Harbor. Quotes from Rafal Janik, Xanadu’s chief operating officer, have also been added.