Latest / The Series A Show with Fexingo: Early-Stage Funding, Pitch Decks, and Startup Milestones / How Fusion Startups Raised Over 100 Million Each
Transcript
- Lucas: Alright, let's start with a number that caught my eye this morning. Every fusion startup that has raised over $100 million. That's the headline from Techcrunch, and when I started digging, the list is shorter than you'd think but the dollar figures are staggering. Luna: How many are we talking? Lucas: Around a dozen companies globally, but the top five have collectively raised well over $5 billion. The leader is Commonwealth Fusion Systems, spun out of MIT, with over $2 billion. Helion is close behind, TAE Technologies has raised over a billion. And these are all pre-revenue, pre-commercial companies. Luna: Right, because fusion doesn't actually generate electricity yet. So what exactly are investors buying? Lucas: They're buying a bet on physics. Each of these companies has a different reactor design — tokamak, stellarator, field-reversed configuration — and the bet is that one of them will achieve net energy gain at commercial scale within this decade. The capital is going into building prototype reactors, hiring top plasma physicists, and securing supply chains for rare materials like beryllium and tritium. Luna: And the timeline. How far out are we talking? I know Helion has been promising fusion power by 2028. Lucas: Helion has a deal with Microsoft to deliver power by 2028, which is incredibly aggressive. Most experts say commercial fusion is still 15 to 20 years away. But the capital is flowing anyway because the payoff — a virtually unlimited, carbon-free energy source — is so massive. And there's a sense that the government is now a backstop. The Department of Energy has a 'Bold Decadal Vision' for fusion, and they're putting money behind it. Luna: So we've got private capital and public money both chasing the same goal. That's a powerful combo. But what's the risk for a typical VC fund that puts $50 million into one of these? Lucas: The risk is total loss. Fusion is hard. It has been 50 years away for 50 years. But the structure of these deals is interesting. Many are structured as convertible notes or SAFEs with valuation caps, because there's no revenue to base a valuation on. And investors are okay with that because they're making a portfolio bet — put a small percentage into ten deep-tech moonshots, hope one hits. Luna: And the recent headlines about US government contracts — I saw something about the DOE awarding up to $50 million to a few fusion companies to develop pilot plants. That de-risks the private investment a bit. Lucas: Exactly. And that brings us to the business model question. These companies aren't just building reactors. They're also positioning themselves as future energy sellers. Commonwealth Fusion Systems talks about selling fusion power plants to utilities. Helion wants to sell electricity directly to corporate off-takers like Microsoft. So the path to revenue exists — it's just far out. Luna: What about the ones that didn't make the $100 million list? Are there smaller fusion startups that are more capital efficient? Lucas: Yes, there's a whole ecosystem of smaller players like Zap Energy, which uses a Z-pinch design, or First Fusion, which is using a different approach. They've raised less but they're also moving faster in some ways. The question is whether they can scale without the massive capital that the leaders have. Luna: And the dollars themselves — how are these companies spending the money? It can't all be reactor parts. Lucas: A huge chunk goes to talent. Plasma physicists with PhDs from top programs command salaries over $200,000 easily. Then there's the specialized hardware — superconducting magnets, vacuum chambers, diagnostics. A single magnet system for a tokamak can cost over $100 million. And then the computing infrastructure for simulations — these companies run massive simulations on supercomputers. Luna: So it's capital intensive from day one. That explains why the bar for entry is so high. Lucas: Right. And it's also why we're seeing consolidation. There have been a few acquisitions — for instance, TAE Technologies acquired a fusion startup called Tri Alpha Energy a few years back. The idea is that bigger companies can absorb the IP and talent of smaller ones. Luna: Speaking of that, I remember that in prior episodes we talked about earnouts and phantom stock to retain talent. I wonder if fusion companies use similar structures when they hire. Lucas: They do. Fusion startups offer significant equity packages, often with long vesting schedules — four or five years — because they need to retain key scientists through the long development cycle. Some also offer retention bonuses tied to milestones like achieving first plasma or net energy gain. Luna: Makes sense. So if you're a founder considering this space, what's the key takeaway? Lucas: The key takeaway is that fusion is a long game, and you need a clear path to showing progress. Investors want to see milestones — design reviews, construction start, first plasma, and eventually Q > 1. That's the energy gain ratio. Without hitting those milestones, you won't raise the next round. And the rounds are increasingly large, so you need to show you can deploy capital effectively. Luna: And for the listener who's building or running something, whether it's fusion or any deep-tech hardware — I think the lesson about communicating milestones is universal. Investors want to see progress, not just PowerPoint. Lucas: That's a good way to put it. And if these conversations are useful for what you're building or running, I'll mention that a handful of listeners chip in monthly through buy me a coffee dot com slash fexingo. That's literally what funds making this many of these. So if it's helpful, that's the place. Luna: Yeah, it's a small group that keeps this ad-free. And we appreciate it. Lucas: Back to fusion — one more interesting data point. The stock of companies like PLTR, ticker P-L-T-R, and NVDA, N-V-D-A, have been up significantly recently, partly because investors are betting that AI and simulation will accelerate fusion research. So there's a crossover between these worlds. Luna: And that's a whole other episode — how AI is speeding up fusion simulations. But for today, I think the core takeaway is that fusion is real, it's funded, and it's happening, but it's not happening overnight. Lucas: Right. Keep an eye on the milestone calendar. Next big one is likely Commonwealth Fusion Systems' SPARC reactor achieving net energy in a test, which they're targeting for 2027. If that happens, expect another wave of capital into the sector. Luna: And if it doesn't, the money may slow down. But for now, the bet is on.