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

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The U.S. government has long had an on-again, off-again relationship with the fusion power sector. As of last week, it’s definitely back on.
Helion and Commonwealth Fusion Systems (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. Helion and CFS have agreed to give the government nonvoting shares in return. With these awards, the fusion industry is finally getting the government’s attention, though maybe not the sort it envisioned.
In the past, government support for a startup meant nondilutive capital, meaning money that doesn’t 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 didn’t directly benefit when it picked a winner.
The Trump administration has been pushing to change that calculus.
Small awards with big consequences?
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. Progress 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’s 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.
“Other nations are moving aggressively to accelerate their commercial fusion industries, pouring billions in state-backed efforts to win the race to fusion power,” a spokesperson for CFS told TechCrunch. CFS is a member of the Fusion Industry Association. “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; less than $50 million was distributed in the first couple 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 carries 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. Yet Helion said the government will receive $175 million in nonvoting 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 nonvoting and based on the company’s most recent valuation, which CFS has not shared publicly. That means the size of the government’s stake in CFS is not known.
“This type of structure has become more common in large U.S. government investments in recent years,” David Kirtley, co-founder and CEO of Helion, told TechCrunch in a statement. “This approach aligns the interests of Helion and the U.S. taxpayer around our commercial success.”
The CFS spokesperson echoed those comments. “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.”
Not alone
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. Another 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 hadn’t yet been paid out. Last year, the Trump administration turned that money into a roughly 10% stake in Intel. The list goes on.
Outside the U.S., Germany-based fusion startup Proxima Fusion confirmed to TechCrunch that the German government and the European Union are on its cap table. It also has received equity investments from German government-backed funds, including SPRIND (Germany’s federal agency for disruptive innovation) and DCTF (Deutsche Climate Tech Fonds).
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, and Pacific Fusion, which has partnered with federal labs, confirmed to TechCrunch that they have not given the government a stake. Inertia 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. VCs 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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