Two Israeli quantum computing software startups are merging into a SPAC at a combined valuation north of $10 billion. For context, that’s more than the market cap of every DeFi token except Uniswap. Yet these companies generate practically zero revenue. The code doesn’t lie, but the narrative does. I’ve spent years debugging smart contracts and tracking on-chain flows. When I see a SPAC merger built on a story rather than a product, my forensic skepticism kicks in. This is not a technology breakthrough; it’s a capital event dressed in quantum jargon.
Gold rushes leave ghosts in the ledger. The 2017 ICO boom buried hundreds of projects that promised the moon and delivered only whitepapers. The 2021 NFT frenzy left a graveyard of profile pictures. Now, the quantum computing narrative is being sold to public markets through SPACs—a vehicle that historically rewards promoters more than investors. Quantum Art and Classiq are merging into a blank-check company at a valuation that implies they are already winners in a race still stuck on the starting line.
Let me step back. Quantum Art focuses on quantum image processing—a niche application that may one day revolutionize medical imaging or satellite analytics. Classiq offers a platform for designing quantum algorithms, essentially an EDA tool for the quantum era. Both are software-first, capital-light, and headquartered in Israel, a country with a vibrant tech ecosystem and deep ties to U.S. capital markets. On paper, the thesis is seductive: ride the quantum wave as it breaks over the next decade. But the SPAC route signals desperation, not strength. Traditional IPOs require revenue, a track record, and institutional confidence. SPACs are the backdoor for companies that cannot meet those standards.
The core of my analysis rests on three pillars: technology readiness, financial credibility, and the structural flaws of the SPAC itself. Let’s start with technology.
The technology: software scaffolding on an unfinished building.
Quantum computing hardware today is where smartphones were in 1992. IBM’s Condor processor has 1,121 qubits, but they are physical qubits—noisy, error-prone, and incapable of sustained logical operations. A single logical qubit requires dozens or hundreds of physical qubits for error correction. The industry is years, possibly decades, from achieving “quantum advantage” on commercially relevant problems. Classiq and Quantum Art do not build hardware. They build middleware—layers of software that translate algorithmic intent into machine-level instructions for various quantum processors. Think of them as the Android of quantum, except Android had a working phone to run on. Here, the phone is still a prototype.
I debugged bots; now I debug bias. In 2021, I wrote a Python script to snipe NFT mints. It failed due to race conditions and network congestion. That experience taught me to scrutinize claims about “hardware agnostic” platforms. Being agnostic is easy when there’s no dominant hardware standard. The moment IBM or Google optimizes their own compilers for their own chips, independent platforms become obsolete. Classiq’s value depends on being the best compiler across all hardware—a tall order when your biggest competitors (IBM, Google, Amazon) control the machines themselves. Static analysis misses the human variable. No compiler can fix the fundamental physics problem: qubits decohere faster than algorithms can run.
Quantum Art’s image processing algorithms are even more speculative. Applying quantum algorithms to image data requires massive qubit counts and low error rates. Today’s hardware cannot even factor 15 without errors. The idea of processing high-resolution images is a fantasy unless a hardware breakthrough occurs. The code might compile, but the output is noise.
The financials: burning cash with no revenue visibility.
Quantum software startups burn cash at rates similar to early-stage biotech, but without the FDA milestones. Salaries for quantum PhDs can exceed $300,000 per year. Cloud computing costs for simulating quantum circuits on classical machines add millions. A single SPAC trust of, say, $500 million would fund operations for 5-7 years at current burn rates. That might sound like a runway, but the dilution inherent in SPAC structures is brutal.
Liquidity is just trust with a timeout. When a SPAC merges, the trust is invested in Treasuries. If shareholders redeem their shares before the merger, the cash vanishes. If the stock price collapses post-merger, the company cannot raise additional capital without catastrophic dilution. The IonQ SPAC (ticker: IONQ) raised $300 million in 2021 but saw its stock drop 60% within a year. Its market cap today hovers around $2 billion—far below the $5 billion valuation these Israeli firms are targeting. The comparison is stark.
Classiq and Quantum Art have disclosed no revenue figures. For the SPAC to justify a $5 billion valuation each, the combined entity would need to grow into that number over 10 years at a 10x multiple on mature revenue—meaning they need $500 million in annual revenue by 2035. Today, the entire quantum computing industry (including hardware) generates less than $1 billion in revenue. The math does not work unless you believe in a hockey-stick adoption curve that contradicts every technology adoption cycle in history.
The SPAC mechanics: a devil’s bargain.
SPACs are not IPOs. They are shell companies that raise money from investors who trust the sponsor to find a target. The sponsor typically gets 20% of the equity for almost no capital. If the merger fails, the sponsor loses only time. If the merger succeeds, the sponsor makes billions regardless of the underlying business performance. The structure incentivizes closing a deal over closing a good deal. When you read that “two quantum startups are merging into a SPAC,” you are seeing the endpoint of a months-long process driven by bankers and sponsors, not by product-market fit.
Efficiency is the only honest emotion. A traditional IPO would force these companies to disclose detailed financials, customer contracts, and competitive risks. A SPAC merges through a proxy statement (Form S-4) that is typically light on forward-looking detail and heavy on boilerplate risk factors. Retail investors who buy the stock after the merger are buying at a price set by the SPAC’s trust plus momentum—not by fundamentals. The smart money (hedge funds, PIPE investors) often redeems before the merger, leaving retail holding the bag.
Geopolitics: the hidden subsidy.
Israel’s quantum ecosystem benefits from government funding and military R&D spillovers. The U.S. considers Israel a trusted ally, so export controls are less restrictive than for Chinese rivals. This geopolitical tailwind is real. Quantum Art and Classiq may enjoy faster access to U.S. government contracts and research partnerships. But this is a strategic advantage, not a commercial one. Contracts from the Department of Energy or NSA are typically small, competitive, and require security clearances that limit the addressable market.
The same geopolitical alignment makes these companies unlikely targets for Chinese investment or partnerships. In a worst-case scenario where quantum hardware becomes a national security asset, these software platforms might be confined to a Western bloc—limiting their total addressable market to about half the global economy. That is bullish for survival but bearish for moonshot valuations.
Competition: giants with unlimited resources.
IBM’s Qiskit, Google’s Cirq, Amazon’s Braket, Microsoft’s Q#—all are free, open-source, or integrated into their cloud platforms. Classiq is trying to sell a premium tool to an ecosystem that already has good-enough options. History shows that middleware startups rarely beat platform incumbents. Can you name the independent EDA company that defeated Synopsys in the 1990s? No, because Synopsys won by integrating with foundries and acquiring competitors. Classiq’s best exit is an acquisition by IBM or Google. The SPAC structure makes that less likely—public companies are harder to acquire, and the valuation expectations are locked in.
The contrarian angle: what if they are right?
I am a trader. I have to consider both sides. Suppose quantum computing achieves a breakthrough within five years—a fault-tolerant, 100-logical-qubit system that can run Shor’s algorithm or simulate protein folding. In that scenario, middleware platforms become essential. Classiq could be the “Windows for quantum,” capturing a significant share of the software stack. The addressable market would be tens of billions annually. A $10 billion valuation would look cheap in hindsight.
But the timeline is critical. SPAC investors expect returns within 12-24 months. Public markets do not price 10-year options efficiently. The volatility of a pre-revenue stock will crush patient capital. I have seen this pattern in crypto—projects with promising tech but no revenue trade at massive discounts after the initial hype dies. If you believe in quantum, buy IonQ (hardware) or Google (HQ). Those give you exposure without the SPAC structure risk.
Smart contracts are cold, but margins are warm. The only way to win in a SPAC is to get in before the merger and exit before the lockup expiry. The data from past SPACs shows that 70% of de-SPACed stocks underperform the market in the first year. Retail traders who buy the merger hype are the exit liquidity for early sponsors and PIPE investors.
Takeaway: watch the cash burn, ignore the narrative.
The Quantum Art and Classiq SPAC merger is a story, not a fundamental. The underlying technology is real but decades from commercial viability. The SPAC structure will enrich founders and sponsors while diluting public shareholders. I will not trade this SPAC until I see the S-4 filing and can analyze the redemption price, the warrant terms, and the backstop agreements. Until then, the only honest emotion is skepticism.
You can’t audit the future, but you can audit the founders. Look at their track record. Look at the SPAC sponsor’s history. In the end, the code doesn’t lie—it just doesn’t exist yet. The narrative, however, is already fully priced.