The key facts

  • Helion received $175 million and CFS $85 million from the US Department of Commerce under the CHIPS and Science Act
  • In return, the government received nonvoting equity: Helion's stake is about 1% at a $15.5 billion valuation, the stake in CFS was not disclosed
  • The industry association had previously asked for $10 billion from the DOE budget without diluting shareholders

Grants with a condition: equity in exchange for money

The US Department of Commerce has awarded two fusion startups — Helion and Commonwealth Fusion Systems (CFS) — grants totaling $260 million under the CHIPS and Science Act of 2022, which funds domestic semiconductor development. The money will go toward creating advanced semiconductors for powering and controlling fusion reactors: Helion received $175 million, CFS $85 million, TechCrunch reports. What makes the deals unusual is that both companies agreed to hand the government nonvoting equity in exchange for the funding — the first time in the fusion industry that federal grants have come with equity dilution.

How significant this is against the backdrop of past funding

The amounts themselves are modest by industry standards: CFS has raised about $4 billion, and Helion $3.2 billion in committed capital. But the grants matter as a signal: after years of cuts and meager payouts, the US government is returning to funding fusion. Earlier, the Department of Energy's Milestone Based Fusion Development Program, introduced under Biden, paid out less than $50 million in its first couple of years. Private investors have poured more than $14 billion into the sector over the past decade, yet the industry group Fusion Industry Association already last year asked the federal government for a one-time infusion of $10 billion, of which $5.4 billion was earmarked for startups — in order to compete with China's state-backed programs. According to a TechCrunch source familiar with the situation, the lobbying campaign did not include any talk of equity in exchange for grants at all; moreover, the money came not from the DOE's research budget, as the association had requested, but from the Department of Commerce.

A precedent in the lineup of government-stake deals

Helion and CFS are not the first to pay with equity. Last year, the supplier of critical minerals MP Materials gave the government 15% in exchange for a $400 million investment, a $150 million loan, offtake agreements and a profit share; USA Rare Earth ceded 10% for a $277 million grant and a $1.3 billion loan. The Trump administration also converted Intel's already awarded $8.9 billion into a stake of about 10% of the company. Outside the US, Germany's Proxima Fusion confirmed that the German government and the EU are present in its capital through the SPRIND and Deutsche Climate Tech Fonds funds. Meanwhile, other American fusion startups — Thea Energy, Avalanche Energy, Pacific Fusion and Inertia Enterprises — told TechCrunch they had not given the government any stake.

What this changes for the industry

The size of the government's stake in CFS is unknown: the company has not disclosed its latest valuation, whereas Helion indicated that the shares are issued at its Series G round with a valuation of $15.5 billion — roughly 1%. Both companies have publicly endorsed the deal structure: Helion CEO David Kirtley called it aligning the interests of the company and taxpayers, while a CFS spokesperson said the stake allows the taxpayer to participate in commercial success. TechCrunch's editorial analysis points to open questions: venture investors will now have to weigh dilution from the government stake, and it remains unclear what the priorities will be in 'pay-to-play' rounds or in the event of a company shutdown. So far only a few startups have agreed to a stake in exchange for grants, but, as the outlet notes, this could set the tone for the entire industry, which still needs billions of dollars to deliver on its promises.