Fusion startups turn back to defense

Fusion power has always had a foot in the national security world. Now several startups are planting both feet there again, signing partnerships with defense agencies and contractors as the venture capital that usually funds them slows down.

The shift is visible in two recent moves: a laser fusion company taking investment from a major defense conglomerate, and another startup formalizing work with the agency that oversees the U.S. nuclear weapons stockpile.

Fusion grew out of weapons work

The fusion industry did not begin as a clean energy project. It emerged decades ago, when physicists began looking for more constructive uses of the science behind the thermonuclear bombs that spread during the Cold War. The national security angle never fully disappeared from the field.

One recent example is the groundbreaking fusion power experiment in 2022, which took place at the National Ignition Facility. That site has supported national security applications for more than 25 years.

Now, as fusion startups pursue their long-term goal of putting electrons on the grid, many are also embracing or returning to defense work. According to TechCrunch, the sector's defense ties are being rekindled rather than invented from scratch.

Climate tech dollars have stalled

The timing is not accidental. Venture dollars committed to climate tech — the pool that typically supports fusion startups — have stalled, according to the funding data cited in the report. Fusion startups have captured a large portion of recent climate tech funding, but fusion is an expensive business, and venture capitalists are generally pleased when their portfolio companies find other sources of money.

Defense budgets offer one such source. The defense industry has explored laser weapons for years, and interest has risen as drones have reshaped modern warfare. Traditional air defense systems were built to target human-piloted aircraft, which tend to be larger and fewer in number than drones. That mismatch has produced some lopsided exchanges.

About a decade ago, a U.S. ally used a $3 million Patriot missile to shoot down a $200 consumer drone. The intercept worked, but the cost ratio did not. Laser weapons promise to change that math: instead of firing one expensive, single-use missile per shot, they fire quickly and relatively cheaply, drawing electricity from a generator or a ship's reactor or engine.

Xcimer lands RTX backing

Fusion startups working on laser-based reactor designs are natural partners for that kind of weapons development. In the week before the report, laser fusion startup Xcimer announced a partnership with and investment from RTX, the conglomerate that includes defense contractor Raytheon.

Under the deal, Xcimer receives funding from RTX Ventures, while RTX can begin exploring how to use Xcimer's powerful lasers for its own purposes.

Denver-based Xcimer currently operates what it says is the largest privately owned laser system in the world, which it plans to use to develop a power plant. Inside that plant, lasers would bombard fuel targets, compressing them until the atoms inside fuse and release energy.

The startup's current laser system, named Phoenix, operates at an order of magnitude lower power than a power plant would require. Even so, it is powerful enough to have drawn attention from the defense industry.

Pacific Fusion's government agreement

Xcimer is not the only fusion company moving into the defense space. Pacific Fusion announced a memorandum of understanding last month with the National Nuclear Security Administration (NNSA) to work together on high-energy-density fusion experiments.

The startup recently broke ground on a demonstration facility in New Mexico, not far from the Sandia and Los Alamos National Laboratories. Its primary purpose is to demonstrate that the company's design can generate more power than the facility consumes, but the site has other uses as well.

The fusion reactions at Pacific Fusion's facility will be far more powerful than those the government currently uses to perform nuclear weapons experiments, according to the report.

"It turns out that the facility that we're building also has utility in this world-leading defense application," Keith LeChein, co-founder and chief technical officer at Pacific Fusion, told TechCrunch recently.

— Keith LeChein, co-founder and chief technical officer at Pacific Fusion

That overlap might look like a lucky coincidence, but the company says it was not. Defense applications were "always on our mind," said Carrie von Muench, co-founder and chief operating officer at Pacific Fusion. LeChein, who developed the company's core technology, previously worked at Sandia National Laboratories, the Lawrence Livermore National Laboratory, and the National Nuclear Security Administration.

Why the overlap is structural

The two tracks — clean power and defense — share more than a funding source. The physics behind inertial confinement fusion, in which lasers or other drivers compress a fuel target until it ignites, is closely related to the physics of nuclear weapons research. The National Ignition Facility's dual role as an energy experiment and a national security asset illustrates the connection.

For laser fusion companies, that means the same hardware can serve two markets. A laser system powerful enough to test reactor designs may also be useful for defense applications, and the reverse is true as well. Pacific Fusion's New Mexico facility is described as primarily an energy demonstration project, yet its reactions would exceed what the government currently uses for weapons experiments.

The staffing tells a similar story. Pacific Fusion's chief technical officer came out of Sandia, Lawrence Livermore, and the NNSA — institutions that sit at the intersection of fusion energy research and nuclear weapons work. That background shaped the company's technology and its view of potential customers.

What the defense industry gains

The defense industry's interest in laser weapons is not new. What is new is the pace of drone warfare, which has made the cost equation of traditional interceptors harder to defend. A missile that costs millions of dollars to intercept a target worth hundreds is a poor trade when the attacks come in volume.

Laser weapons offer a different model. They fire fast and at relatively low cost per shot, powered by electricity from a generator or a ship's reactor or engine. Fusion startups that already build high-power laser systems are positioned to contribute to that work.

For RTX, the Xcimer deal provides access to a startup's laser technology and a window into how it might be adapted. For Xcimer, RTX Ventures provides funding and a partner with defense reach.

Where the money comes from

Funding is the backdrop to both deals. Climate tech venture funding has stalled, even as fusion startups have taken a large share of what remains. Fusion is capital-intensive, and investors tend to welcome additional sources of capital when a portfolio company can find them.

Defense spending represents one such source, and the report frames the recent partnerships as a return to the industry's roots rather than a departure from its energy mission. Fusion power has come a long way since weapons scientists first imagined it decades ago, but its national security applications were never forgotten.

The report describes the recent reacquaintance between fusion and defense as perhaps overdue. It does not project how much money will flow or how quickly the partnerships will expand beyond the two companies named.

Why it matters

For readers, the significance is less about any single deal and more about which doors are opening for a capital-hungry sector. If fusion companies can draw on defense budgets while climate tech venture funding is stalled, that could change who their customers are and what their near-term milestones look like.

That dynamic could shape which technologies get developed first and how quickly, though the source material does not quantify the effect or name future participants. It also suggests that the fusion industry's ties to national security, present since its Cold War origins, may remain a durable part of its business model rather than a historical footnote.