In Conversation: Investing in Power & Non-Power Applications

30 July 2025

FusionX sat down with three prominent investors actively deploying capital in fusion: Peter Dolan, lead of a new climate-focused fund ‘Sustainable Technologies’ at Hedosophia, a growth stage investor traditionally in software and technology with $8 billion under management and 140 portfolio companies and newly with fusion exposure through leading Xcimer Energy’s Series A; Torsten Löffler investment director with Germany’s DeepTech and Climate Fund, a €1 billion government-backed, privately-organized fund investing in growth-phase deep tech and climate tech companies, with fusion exposure comes through investment in Proxima Fusion; and Charlotte Kirk, a clean-tech venture investor formerly with Fortescue, the mining company, were she focused on clean firm power, and also in the billionaire founder’s family office, which made an investment in Pacific Fusion.

In a wide-ranging conversation, we explored the complex investment landscape surrounding fusion technologies, from the long-term vision for commercial power generation to the immediate opportunities in the supply-chain and in imaging, defense and other adjacent markets.

FusionX: How do you weigh the risk-reward profile between the long-term fusion power objective versus nearer-term fusion-derived applications?

Peter: One thing we spend a lot of time thinking about is the risk-return profile of the sector. It’s rare that we invest in companies with no real near-term revenue projections. There’s always a danger when investing at the growth stage that you fundamentally misunderstand what growth means. The danger is falling into a trap where large amounts of capital raised equals growth.

When we look at a company, the real question we ask is: why are we investing in it, and how can this be a growth stage company for us?  However, fundamentally, we’re investing in the space because of the large opportunity at the end. The challenge I see is companies running toward near-term revenue opportunities because they’re being told to do so, and forgetting why they’re in this industry, which creates a very different return profile and valuation structure.

When we enter pre-revenue spaces, how can we justify that there’s a small group of companies that will take most of the winnings, and why is this company one of them? Obviously revenue is a great signal for that, but it’s not the be-all and end-all in capital-intensive sectors.

Torsten: For fusion, we obviously look for the ‘Holy Grail’ of winning the energy market. That’s the main investment hypothesis. But it’s a journey, and one option is generating revenues along the way. I think the best revenues fusion companies can generate are getting contracts from governments and other such organizations.

There are different types of fusion companies. You have the supply-chain applications – lasers, magnets, all types of technology. There are opportunities in these areas, like selling magnets to other fusion companies, or applying the technology to medical imaging. 

But coming back to the risk profile, the question is really: what are you investing in? Are you investing in the business model of generating revenues through these technologies, or are you investing in the big thing at the end? This has to match your fund strategy, fund duration, and risk profile.

Charlotte: The important thing I say to any founder is make sure you’re aligned with your investors. There’s not a shortage of capital wanting to be put into the fusion sector – whether for clean firm power, supply chains, or specific applications – but it’s about ensuring investors and their LPs are aligned with what the company is doing. 

For the capital vehicle I worked with, we were interested in clean firm power, putting electrons on the grid. That’s why we invested in fusion, for that breakthrough. Those peripheral near-term revenues, while attractive to some investors, might be seen as a distraction by others. It’s about aligning that business case.

FusionX: What size of opportunity from near-term revenues make it ‘interesting’ versus ‘a distraction’?

Peter: I think all fusion companies should ask themselves: is this decision going to get me faster to Q>1, or is this going to get me faster to electrons on grid? For us those are the only guiding features. If the answer is that it’s going to get me slower or not as fast to either goal, I don’t think you should do it.

Torsten: The ideal scenario is, if you’ve made an invention or new technology that has other applications than generating power for the grid, you can spin it out and start generating revenues. It makes sense to do so. But I agree with Peter. At the end, the question is: is it moving me forward to the ultimate goal? Not all fusion startups are focused on generating electricity for the grid, but the electricity-focused companies, they should keep that focus.

FusionX: What’s the best structure for a company pursuing long-term fusion power while also commercializing short-term technologies?

Torsten: Classical structures aren’t too bad – having a core company with core activity and, if you have spin-out activities, separating them to get both the spin-out applications moving forward while avoiding distraction in the core activity.

Peter: I agree. I get nervous when I hear about separate boards for separate entities within a company. Most fusion companies that have raised capital today have roughly two or three years of runway, give or take. I worry that everything is about speed and getting to the next milestone.  If I’m focused on revenue because I’ve been told to focus on revenue – because revenue is cash and I then don’t have to raise cash – and maybe I should spend more time on defense applications that generate capital and not on the power applications. Before you know it, the power timeline slips.

When we underwrite these companies, valuation is fundamentally just discounted future expectations. Fusion companies have very high future expectations if they’re successful, so we can give them high valuations. But a supply chain company serving a fusion industry that still needs to get created? It’s quite hard to have those two businesses together with different boards because the incentive structures might be different, and that worries us given where we are in the development cycle.

Torsten: The most important thing is keeping things in a clear structure. If there are spin-out activities, the best thing is to set up a new startup – spin it out, give them a license for the technology, find new investors, get some people from the team. Then it’s a new thing, with a new business model and applications.

FusionX: Is there tension between accessing non-dilutive capital, and evolving into a company focused on markets other than longer-term power generation?

Charlotte: As investors, you love non-dilutive capital – get as much as possible. But the business model and pitch matter because if you’re pitching to the government, it’s very different than pitching to an early-stage VC, even if your business is essentially the same. If you’re pitching to the DoD for defense applications, that’s very different than asking for $10-30 million from a VC. Maximize non-dilutive capital but shift the messaging to maximize your opportunity of winning it, without causing confusion about what you’re really trying to do.

Peter: The non-dilutive funding environment right now is an interesting one. There’s been a lot of noise, but actually, if you look at dollars in bank accounts, it’s not a lot, especially when you compare it to the capital that’s been raised by some of these companies.

There are ongoing discussions at the boards of companies that have raised a lot of money around how to either get more non-dilutive funding or how to deprioritize it. For example, if you’ve raised hundreds of millions of dollars and a public entity gives you $10 million, that’s great, but it’s not changing how you run your business.

And a defense procurement process is remarkably different from other procurement processes. It’s quite challenging for a company that’s just a bunch of engineers building a fusion magnet in their warehouse in Silicon Valley. These things take time to learn, so non-dilutive funding is great, especially for non-power applications, but be careful because it’s much harder than it looks.

Torsten: Non-dilutive funding for fusion is incredibly important. Recent decades saw fusion developed by public funding in research organizations. Now we’re in the decade of startups doing fusion, but they still need public sector support for power generation.

Instead of governments giving money to research organizations, it would be better to give money to fusion startups through contracts – develop a magnet, demo reactor, laser system. This enables the whole ecosystem because startups have revenues and can generate funding.

But purely private funding won’t move fusion technology forward at this phase. We need support, especially for demo reactors and plants – that’s hard to do based only on private money.

FusionX: What are your thoughts on addressing varied funding sources, in seeking VC or PE or family-office money?

Charlotte: Something we’re realizing in cleantech generally, with hard assets and infrastructure – heavy things that need a lot of money and time to build – is that maybe a traditional 10-plus-2 fund structure isn’t best suited for that. If you’re a family office, you can set your own constraints. If you’re a corporate investing off the balance sheet, you have different drivers and metrics. As a startup on your commercialization journey, it’s about picking the right investors because this is a very long-term game. You need to be totally aligned on the path forward.

FusionX: And strategic investment from companies who want exposure to both long-term power opportunity and near-term partnerships?

Charlotte: On the fission side, you’re seeing partnerships with data centers – the Metas, Googles, Facebooks who want energy. On the fusion side, from a corporate perspective at Fortescue, we wanted power but fusion is too far away to be putting money in today. We were a publicly listed company and our shareholders invested for iron ore, not fusion.

Peter: Fusion startup founders tend to be exceptional fundraisers, and strategics are part of that journey. We’re supportive of strategics. What are you going to use as the wedge? You’re not offering them power before 2030, but you might offer a potentially lucrative new revenue stream through partnerships which strategics love.

Public market CEOs love thinking about revenue line items. They’re good at thinking one to three years ahead, not so good at three to ten years. If you can sell them on being a critical mineral partner or supply chain partner for that next revenue kick, they tend to like that. But I’m sometimes nervous about bringing them onto the cap table quite early. Most fusion companies are very early despite raising lots of money at high valuations. Bringing on CVC investments and dealing with business development people who represent the company can get dangerous because they don’t naturally think like long-term capital.

Torsten: Financial investors don’t like strategic investors on the cap table as a general rule. For fusion, I’m much more relaxed. Getting utilities investing in fusion companies would be the next big step moving this community forward because it signals they’re starting to believe in the technology. We’re seeing discussions and announcements, which is a good sign.

FusionX: How does a company’s de-risking strategy differ when targeting non-dilutive capital compared to raising from VCs?

Torsten: If you’re not depending on permanent money inflow from the venture capital market, that reduces your risk profile. You can achieve this through non-dilutive money – lots of grants or contract revenues. That’s de-risking because you’re not depending on the next fundraise. But keep your focus. If this de-risking means you’re not moving forward with your ultimate goal, it’s not bringing you forward.

Peter: I don’t think you can de-risk yourself as a private fusion energy company just with non-dilutive or public funding. You have to play in the venture capital and private equity markets. However, we’ve seen people use public grants and non-dilutive grants as signaling that these ideas are legitimate, which helps as you get through the equity curve.

Charlotte: There are many different types of risk – technology risk, business model risk, geopolitical risk, team risk. You’re trying to de-risk as many as possible. Who your investors are, your business model strategy, the geopolitical landscape – all affect which risks you’re prioritizing at each point in time. Fundamentally, you need to try and address them all.

FusionX: At what point would you advise a full pivot versus side business for revenue diversification?

Torsten: It’s pretty simple. If your original plan fails for either technology or fundraising reasons, and you have the chance with your team and technology base to do something else that has value, then the full pivot is the right thing to do.

Peter: I use the framework of valuation and why people invest in you. We invest thinking about the future, using valuation as a metric for what people expect from you. If people don’t expect you to generate power, maybe don’t position yourself as a power company anymore.

I think we’re going to get to a point very soon where there’s a split between companies that have raised hundreds of millions and those that haven’t. It’s going to be difficult for a company that hasn’t raised hundreds of millions to say they’re going to be a fusion power company. I think we have a pretty good bet in the inertial fusion space with Xcimer. But others are going after the inertial fusion space – it’s getting competitive, and therefore, if you’re going to be that leading champion, you need to raise more money.

I won’t be surprised if in a year or 18 months, we see companies pivoting to service those leading fusion companies, which is actually great because these companies have lots of cash and revenue opportunities. They’re a fantastic customer base for supply chain companies.

FusionX: Looking at the various fusion verticals, which do you think is most promising?

Torsten: The supply chain – lasers and superconducting magnets – is the nicest field for investment. Of the others, probably imaging is picking up.

Peter: My heuristic is it’s always energy. I don’t think we’re sitting here in 10 years with an amazing fusion supply chain and no amazing fusion energy companies.

Charlotte: We all want the energy – that’s the biggest market, that’s the prize – but I do think there are some really interesting applications in defense as well.