Fusion startups are giving the government shares in exchange for awards. Is it worth it?

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1:13That's Framer.com slash tcstartups. Rules and restrictions may apply. The U.S. government has long had an on-again, off-again relationship with the fusion power sector. As of last week, well, it's definitely back on. Helion and Commonwealth Fusion Systems, or CFS, received awards totaling$260 million from the Department of Commerce under the Chips and Science Act, the 2022 law that funds domestic semiconductor development to develop advanced semiconductors used to help power and control their reactors. Helion landed$175 million, while CFS reeled in$85 million. But as with many recent government awards, these come with strings attached.

2:04Helion and CFS have agreed to give the government non-voting shares in return. With these awards, the fusion industry is finally getting the government's attention, though maybe not the sort it envisioned. Now, in the past, government support for a startup meant non-dilutive capital, meaning money that does not shrink existing investors' ownership percentages while giving the company a bigger war chest. Investors loved the deals because it meant their startups got more money without them having to pony up. The government doled out the cash to boost American innovation, though it also meant that, in most cases, the government did not directly benefit when it picked a winner.

2:49The Trump administration has been pushing to change that calculus. Now, for both companies, the total dollar amount pales in comparison to how much each has raised. CFS has raised about $4 billion, while Helion is close behind with$3.2 billion in committed capital. The awards are perhaps more important as signals that after years of cutting and then trickling out fusion funding, the U.S. government is back in the game. Fusion, which generates power by fusing atoms together as the sun does, is an expensive endeavor requiring exotic materials, sophisticated computer modeling, and complex manufacturing.

3:34Progress over the last decade has attracted private investors who have bet more than$14 billion that one or more companies will be able to put a power plant on the grid. Yet, according to the Fusion Industry Association, the sector's trade group, that is still not enough to beat other countries in the race. Last year, the trade group called on the federal government to inject a one-time infusion of$10 billion into the sector, with$5.4 billion intended for fusion startups. A spokesperson for CFS told TechCrunch, other nations are moving aggressively to accelerate their commercial fusion industries, pouring billions in state-backed efforts to win the race to fusion power.

4:21CFS is a member of the Fusion Industry Association, and a spokesperson told TechCrunch, other nations are moving aggressively to accelerate their commercial fusion industries, pouring billions in state-backed efforts to win the race to fusion power. The$10 billion ask is designed to build out the research infrastructure in the DOE's fusion roadmap and be catalytic for the U.S. domestic fusion industry to compete with China. Until recently, the federal government had been dribbling out dollars for fusion. The Biden administration introduced the Milestone-Based Fusion Development Program, a Department of Energy program that pays companies as they hit technical goals, but the dollar amounts were paltry.

5:06Less than$50 million was distributed in the first couple of years. More recent awards were a little bigger, but still well shy of money the Fusion Industry Association has called for. Now, with two companies getting$260 million, it looks like the lobbying may be starting to pay off, though not quite as planned as it comes from commerce rather than the research budget the Fusion Industry Association sought, and it does carry equity strings. The Fusion Industry Association's lobbying campaign did not include conversations about equity stakes in exchange for awards, a person familiar with the matter told TechCrunch.

5:48Yet, Helion said the government will receive$175 million in non-voting equity based on its Series G round, which valued the company at$15.5 billion. That works out to a stake of roughly 1%. The government's stake in CFS will also be non-voting and based on the company's most recent valuation, which CFS has not shared publicly. which means the size of the government stake in CFS is not known. David Kirtley, co-founder and CEO of Helion, told TechCrunch, this type of structure has become more common in large U.S. government investments in recent years. This approach aligns the interests of Helion and the U.S.

6:33taxpayer around our commercial success. The CFS spokesperson echoed those comments, saying, this U.S. equity stake will enable the U.S. taxpayer to participate in the upside of our commercial success in exchange for investing in important research and development that supports the growth of an American commercial fusion industry. Helion and CFS are the latest in a series of companies that have seen the government take a stake in exchange for federal dollars. Last year, Critical Minerals supplier MP Materials gave the government a 15 % stake in exchange for a$400 million investment coupled with a$150 million loan, offtake agreements, which are guaranteed purchases of its output, and profit sharing.

7:21Another critical minerals company, USA Rare Earth, gave up a 10 % stake for a$277 million award and a$1.3 billion loan. And Intel set an even more awkward precedent. The Biden administration had already awarded the company$8.9 billion that had not yet been paid out. Well, last year, the Trump administration turned that money into a roughly 10 % stake in Intel. And the list goes on. But not every fusion startup that has worked with the government has given up equity. Thea Energy and Avalanche Energy, which have received federal awards and contracts, along with Pacific Fusion, which has partnered with federal labs, confirmed to TechCrunch that they have not given the government a stake.

8:13Inertia Enterprises also told TechCrunch that it had not given the government any equity. The startup has a public-private partnership with the Lawrence Livermore National Laboratory to commercialize the fusion technology developed there. So far, it's just a handful of startups that have agreed to government stakes in exchange for awards. Still, it could set the tone for the industry. By directly investing in fusion startups, the Trump administration is signaling that fusion power is a strategic priority for the U.S. Such backing could boost investor confidence, though it could just as easily have a chilling effect on private investment.

8:52VCs will now have to weigh whether the dilution from a government stake is worth the trade-off. And what happens to cap tables in case of pay-to-play rounds or wind-downs? Who gets priority? The fusion industry may have raised billions of dollars in recent years, but it will need billions more to deliver on its promises. Federal awards used to be no-brainers when it came time to scale up. Now, they've grown more complicated. Will the new bargains be worth it?

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10:12You know, some interface changes and nudges like bright buttons urging you to subscribe and apps are mildly annoying, but mostly easy to ignore. Others are so in your face that you think about throwing your phone into a river. X's new push to get users to promote their posts is firmly in that latter category. Over the last 24 hours, a growing number of users have posted that a mysterious hand pointing to the promote button suddenly is showing up while they're writing a post. This has irked people across the board. With Halloween around the corner, it could be a prank meant to spook users, though X has not said so, and even some users who wanted to promote a post and spend money might be scared off after seeing the hand.

11:02TBPN Podcast's President Dylan Abrascato said that this engagement trick was the most Nikita-coded thing that he's ever seen, a nod to the growth tactics associated with Nikita Beer, X's former head of product. Beer left the program in August after almost a year at the helm. On Monday, Beer's former boss and X head of product for Snap and Discord, Peter Sellis, posted that he has taken over as X's product chief. Now, it is unclear if the hand is Sellis' doing. We have reached out to X for a comment, and we'll update the story if we hear back. The launch of the iPhone Duo, Apple's hotly anticipated foldable phone, is off to a pretty rough start.

11:51The phone was announced at this year's Surprise and Shine event, with Apple promising that it had finally gotten a notoriously tricky form factor right. Now, Bloomberg is reporting that early Duo users have been complaining about their screens cracking after just hours or days of use. Some users have reported hearing a loud crunching noise followed by the appearance of a crack. Others have reported display malfunctions. 404 Media has also reported that early adopters are dealing with big fat creases right down the middle of their$2 ,000 folding screen. TechCrunch reached out to Apple for comment and will update the story if it does respond.

12:34The company told Bloomberg that it was aware of an issue impacting the inner display on a small number of iPhone Duo units. Creating a functional, foldable phone has long been an ambition in Silicon Valley, but many of the models released so far have suffered from similar maladies. Apple promised that it had cracked the code. But these early complaints suggest it may not quite have solved the problem after all. that's all for now for the latest in tech news go to techcrunch.com

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