Fusion power startups are turning to defense contracts for funding

Fusion power is getting back to its roots. As fusion startups keep chasing their ultimate goal — putting electrons on the grid — many are also now embracing, or returning to, the defense applications that laid the foundation for the industry. The sector emerged decades ago when physicists looked for more constructive uses of the science behind Cold War-era thermonuclear bombs, and the national-security angle never fully went away: a groundbreaking fusion power experiment in 2022 happened at the National Ignition Facility, which has supported national security applications for more than 25 years.

That shift has accelerated as venture dollars committed to climate tech — the funds that typically support fusion startups — have stalled. Fusion startups have captured a large share of recent climate-tech funding, but fusion is an expensive business, and investors are glad when portfolio companies find other sources of money. That’s where the defense industry comes in: it has explored laser weapons for years, but interest has spiked as drones reshape modern warfare. Traditional air defense systems were designed for larger, less numerous human-piloted aircraft, leading to mismatches like a U.S. ally using a $3 million Patriot missile to shoot down a $200 consumer drone about a decade ago — effective, but not efficient. Laser weapons promise to alter that math, firing quickly and cheaply using electricity from a generator or a ship’s reactor.

Fusion startups working on laser-based reactor designs are natural partners for developing such weapons. Laser-based fusion startup Xcimer last week announced a partnership with, and investment from, RTX, the conglomerate that includes defense contractor Raytheon: Xcimer gets funding from RTX Ventures, while RTX can explore using Xcimer’s lasers for its own purposes. Denver-based Xcimer operates what it says is the largest privately owned laser system in the world, which it plans to use to develop a power plant where lasers bombard fuel targets until the atoms inside fuse and release energy. Its current laser system, Phoenix, operates at an order of magnitude lower power than a power plant would require, but is powerful enough to have caught the defense industry’s attention.

Xcimer isn’t the only player in the defense space. Pacific Fusion announced a memorandum of understanding last month with the National Nuclear Security Administration (NNSA) to collaborate on high-energy-density fusion experiments. The startup recently broke ground on a demonstration facility in New Mexico near the Sandia and Los Alamos National Laboratories; while its primary purpose is to prove the company’s design can generate more power than the facility consumes, its fusion reactions will be far more powerful than those the government currently uses for nuclear weapons experiments. “It turns out that the facility that we’re building also has utility in this world-leading defense application,” Pacific Fusion co-founder and chief technical officer Keith LeChien told TechCrunch recently. Co-founder and chief operating officer Carrie von Muench said defense applications were “always on our mind” — LeChien previously worked at Sandia National Laboratories, Lawrence Livermore National Laboratory, and the NNSA.

Why it matters

Fusion’s return to its defense roots gives cash-strapped startups a second funding path beyond climate-tech venture money, but it also ties the sector’s commercial future more tightly to defense budgets and priorities.