Cracks are beginning to form in the growing funding of fusion energy

It happens in all emerging industries: founders and investors strive for the same goal, until the money starts rolling in and that shared vision begins to diverge.

Cracks are appearing in the world of fusion power, which I witnessed firsthand at The Economist’s Fusion Fest in London last week. It hasn’t dampened all the buzz, fueled by the merger watchdog’s $1.6 billion fundraising over the past 12 months. But people had different opinions on two key questions: When should a fusion startup go public? And are side businesses a distraction?

Going public was on everyone’s mind. Four months ago, TAE Technologies and General Fusion announced plans to merge with publicly traded companies. Both will receive hundreds of millions of dollars to keep their R&D efforts alive, and investors, some of whom have kept faith for 20 years, finally see an opportunity to cash out.

Not everyone agrees. Most of those I spoke to were concerned that these companies were going public too early and that they had not yet reached the milestones that many consider important in judging the progress of a merger company.

First, a recap: TAE announced its merger with Trump Media & Technology Group in December. Although the deal is not yet finalized, the joint venture has already received $200 million of the $300 million in proceeds from the deal, giving it the means to continue developing its power plant. (The rest of the money will reportedly arrive in its bank account once it has filed the S-4 form with the US Securities and Exchange Commission.)

General Fusion said in January that they would go public with a reverse merger with a special-purpose acquisition company. The deal would net the company $335 million and value the combined entity at $1 billion.

Both companies can use money.

Before the merger announcement, General Fusion was struggling to raise funds, and this time last year it laid off 25% of its workforce as CEO Greg Twinney sent out a public letter asking for investment. It got a brief reprieve in August when investors threw it a $22 million lifeline, but that kind of money doesn’t last long in the world of fusion, where equipment, testing, and labor aren’t cheap.

TAE’s situation was not that difficult, but we still needed some money. Before the merger, the company raised nearly $2 billion, which sounds like a lot, but keep in mind that the company is nearly 30 years old. In addition, its pre-valuation merger was $2 billion, according to PitchBook. Investors were breaking even the best.

Neither company has achieved scientific separation, a milestone that shows the reactor design has the potential of a power plant. Many observers doubt they will reach that mark before other private startups do. One executive told me, if they were in those shoes, they’re not sure how they’ll fill the time for quarterly calls if the companies don’t break even scientifically soon.

If TAE or General Fusion doesn’t deliver results, a few people fear that the public markets will sour on the entire merger industry.

Now, not all may be lost. TAE has already started marketing other products, including electric power and radiation therapy for cancer. That would give the company near-term income to fund shareholders. General Fusion, however, has not disclosed any such plans.

And there’s another divide: mergers and acquisitions remain divided on whether they should pursue capital now or wait until they have a viable power plant.

Some companies welcome the opportunity to make money along the way. Not a bad idea! Fusion is a long game, so why not improve your chances? Both Commonwealth Fusion Systems and Tokamak Energy say they will be selling the magnets. TAE and Shine Technologies are both in nuclear medicine.

Some startups worry that side hustles may become a distraction. Inertia Enterprises, for example, told me that it is focusing on its energy generators. That is in line with what another investor told me months ago: – they were worried that the implementation of the fusion could disrupt profitable, but strong businesses and fall into the lead.

There was no consensus on the right time to go public again. I heard several proposed measures. Some believe that startups must first reach that scientific tipping point, where the fusion reaction produces more energy than is needed to ignite it. No startup has achieved that yet. Other possibilities are plant breakdown – where the reactor produces more energy than the site needs to operate – and commercial operation – where the reactor produces enough electrons to sell a reasonable amount to the grid.

We may have an answer to that question soon. Commonwealth Fusion Systems expects to hit science sometime next year, and some think the company could use that as an opportunity to go public.