The Two Body Problem
The Two Body Problem
A new GTM framework for fusion companies
We at Coral are big fans of fusion, and have written before that a fusion company will be one of the ten most valuable businesses in the world within the next decade. We stand by that assessment, but are also of the opinion that the current entrants into the space are not maximizing their chances of success. We’d like to help, and so offer a not-remotely-modest proposal for a new GTM framework and implementation, which we hope they borrow and apply. We want to see a fusion reactor plugged into the grid.
Current Strategies
The three best-capitalized fusion companies in the US are Commonwealth Fusion Systems (raised $1.8bn), Helion Energy (raised $500m), and Zap Energy (raised $250m). Each shows different strategies to bring their technology to market and, ultimately, interconnection:
CFS, near Boston, has mostly been in the news for colossal fundraises, and a shiny new 50 acre corporate campus. They spun out of MIT and have publicly committed to interconnection in the early 2030s, with considerable fanfare and ribbon cutting ceremonies with state & federal politicians.
Helion, near Seattle, recently signed a high-profile deal with Microsoft to provide fusion electricity in 2028, years before the preponderance of scientists and researchers believed the technology will be viable. While details of the agreement haven’t been released, it’s for about 50 megawatts of power, and both companies have confirmed that it contains financial penalties for non-performance if Helion doesn’t deliver.
Zap, also in WA State, has been the quietest of these companies from a commercialization perspective, with their key move to date being the announcement of a $2m feasibility study to turn their home state’s last remaining coal plant into a fusion reactor site. The study is non-binding and no dates have been given for a final go-ahead decision. We think Zap is the closest to doing this right. Much more soon.
So we have three different, but widely understood strategies; Public / private partnership, sell to corporations, and replace existing equipment with minimal impact. All three miss the best initial wedge for fusion. Which is what, I hear you ask?
Universities
Campuses, which are largely self-contained real estate, the beneficiaries of government grants / subsidies / tax breaks, focused on monetization of IP, and looking to attract the best & brightest doctoral students, are the key to successful monetization of fusion.
There are ~1,500 separate university campuses in the United States. Of those, 278 have sufficiently large onsite power generation facilities to effectively “island” from the electrical grid, per Reuters. That number is expected to rise, as climate change and population increase lower overall grid stability, and colleges take action to alleviate the risk of lost classes. These plants are, by and large, among the dirtiest emitters of power in the continental US. Harvard, the endowment of which is larger than the GDP of 120 countries, uses fuel oil to power two boilers installed in the Kennedy Administration. UNC, with an endowment of $6.5bn, runs on coal power.
The Two Body Problem
The fusion company wanting to exploit this monetization pathway needs a team of two; The analyst and the communicator.
Analyst - Nailing fusion GTM requires incredibly careful site selection. Time is the most precious resource in the development cycle, especially with fusion’s long feedback loop, and 278 prospective sites is too few to risk burning time and relationships. To successfully target sites, the analyst needs to develop models for fusion readiness score and site readiness score.
The fusion readiness score designates universities most ideally suited for fusion. We see this product as an increasingly complex data model. To start, four factors inform the score; location (onsite plant, estimated time remaining to replacement), presence of a nuclear engineering or applied physics program, in-state political & regulatory climate, and endowment of over $2.5bn (initial estimate). Over time, this is built out to incorporate significant nuance, including university’s endowment performance, IP monetization, detailed inventory of the existing plant, and sentiment from state-level politicians.
The second data product is trend analysis of site readiness score, compared against the company’s technological roadmap & development in order to assess any risks of delivering energy to the company’s customers on the predicted schedule. Building fusion reactors is hard, and we see significant risk of non-performance to the first several customers. This risk needs to be assessed and quantified, and used as a critical input in contract design. Contracts with a 50/50 chance of pushed delivery dates should be written with less prohibitive non-performance penalties than the de-risked agreements that come later in the development cycle.
Communicator - Business developer, lobbyist, teacher, salesman. This role requires the metrics orientation and effort of the best startup sellers, the patience and long-termism of a sculptor, and the ability to translate the complex into simple of a professor. A lobbyist’s chameleon versatility, significant business training, and an economist’s financial modeling ability wouldn’t hurt either. We see this role interfacing equally with politicians and staff, facilities leaders, and endowment chairs.
The Motion*
Initial data intake to inform V1 readiness scores
Round 1 meetings with 10-20 finalists
Identify state-level political stakeholders for outreach & education
Create feedback loops with internal product development teams, ensuring that client feedback is appropriately incorporated
Travel to sites periodically, inform and educate at every stop
Negotiate & sign power-purchase agreements
*this will take 2+ years
The Pitch to Universities
The father of one of your writers is fond of saying that “universities have become hedge funds with some dorms stapled on.” When he’s right, he’s right. Harvard’s endowment, as previously mentioned, is closer to a country than a bank account. Yale’s, the second largest, is considered one of the best-performing investment funds in the world, and David Swensen, the fund manager, is an industry legend.
The power plants used on these campuses are filthy, and also quite old; Many have seen their usable life extended decades too long. The equipment is going to need replacing, and a lot of colleges have pledged to divest from fossil fuels. Their choices become renewables, which suffer from high intermittency (wind, solar), and geographic specificity (geothermal, hydro), and are therefore unsuitable for campuses. Or fusion.
Fusion also enables tremendous value-capture for universities. All three of the companies we’ve looked at have significant university affiliations, to MIT and the University of Washington, respectively. They are developing intellectual property which can be patented, licensed, and serve as the basis for peer-reviewed publications. Their employees can teach and guest-lecture, and eventually start companies of their own. Where might a Zap Energy alum on a first-name basis with many University of Washington professors and post-grads source talent for her own deep-tech startup, we wonder?
The Value to Fusion
One of your writers is an accomplished enterprise seller and has worked with many universities (Harvard, MIT, Boston College, Stanford, UMich, and more). They’re pain-in-the-ass clients, with short annual procurement windows, long decision cycles, opaque finances, and murky incentives. It is equally true that they make decisions with high permanence, have a seemingly inexhaustible supply of federal and state funding, and are populated by smart, talented, mission-driven humans.
The value to fusion companies of this GTM design is much simpler. They gain access to campuses with a highly favorable set of characteristics for reactor installation, the government money cannon, and a ready-made talent network. Let’s play this out. A fusion company getting close to interconnection is going to need to hire a lot of people, with highly specific backgrounds. Let’s say that the company installed a reactor on the UW campus, which allowed that institution to attract the world’s best cohort of nuclear physics PhD students, who then spent years learning about that reactor. Those bright young people will eventually be considering career opportunities. Do we need to keep going?
Closing Thoughts
We want fusion to work, work quickly, and work huge, and we hope this piece offers a map to that future. Achieving commercial-scale fusion power still has many scientific and engineering challenges ahead, requires significant additional investment, and is still the answer for abundant, safe, clean energy. Fusion companies are pursuing different technologies, have received funding from various sources, and are starting to show further differentiation with their GTM approach. A successful GTM design needs to consider the market, distribution, resources, capabilities and risks of the business. To create a scalable, sustainable, long-term model, starting with universities is the answer. Please let us know what you think!