Investment

There may be no greater innovation than fusion energy – we have family offices to thank for that

Back in 1985, as Gorbachev and Reagan talked peace, the nations of the world decided to create a nuclear fusion energy project called the International Thermonuclear Experimental Reactor, or ITER.

China joined late, as 35 nations got stuck in. The French secured ITER’s headquarters. Discussions, and targets, came and went. But, even now, a prototype is not due to appear until 2025, forty years after inception, at a cost of $22.5 billion. Or $65 billion if you believe a US estimate.

In a cost-sharing proposal recently submitted to the US government, CFS argues that capitalism can produce the kind of response that eludes state bodies

In contrast, Commonwealth Fusion Systems was set up in 2018 as an offshoot to MIT, the US technology institute, in a bid to create commercial applications from MIT’s research. To date, CFS has raised $200 million. 

Rather than being chewed over by politicians, CFS has put together a tight plan, backed by science and kick-started by family offices who expect a good return from their hard-earned money, plus a solution to climate change that doesn’t depend on the erection of countless windmills.

As well as hard cash, the presence of family offices on the share register has added urgency to execution, reassuring corporate backers and government agencies. If trials go well, CFS’ first reactor will fire up, seven years after inception, in 2025, around the same time ITER is due to lumber into action. 

The readiness of family offices to invest in fusion at an early stage is a crucial bridge to later funding as a vivid contrast to the leveraged market punt carried out by Bill Hwang’s maverick Archegos Capital Management.

No one pretends nuclear fusion is easy. If it works, however, it can create an inexhaustible, zero- carbon, source of cheap energy by smashing hydrogen atoms together. 

It is particularly tough to maintain energy production while controlling a stream of plasma as hot as the sun.  The energy required to keep the process running can also be more than the amount you generate through fusion.  Radioactivity is limited. And the high risk/return equation appeals to smart family offices.

A key CFS backer is Moore Strategic Ventures, run by Louis Bacon, who turned his hedge fund into a family office in 2019.  

Other backers include the billionaires behind Breakthrough Energy, led by Bill Gates; Devonshire Investors, associated with Fidelity’s Johnson family; Schooner Capital led by Vin Ryan, Starlight Ventures, led by Latin American internet pioneer Matias Mosse; Safar Partners, founded by financier Nader Mitamedy, and Future Ventures, led by Elon Musk associate Steve Jurvetson.

CFS is now building new research facilities which will contain a fusion device called Sparc, set to deliver up to ten times the amount of energy it uses up. 

To control its hot plasma flow, CFS expects to use high-temperature superconducting Tesla 20 magnet to be tested in June 2021. And if the tests work, CFS will fire up its first Sparc reactor by 2025, a mere seven years after starting to put MIT’s research to work.

In a cost-sharing proposal recently submitted to the US government, CFS argues that capitalism can produce the kind of response that eludes state bodies. 

It points to the way Nasa was losing control of low-orbit satellite launch facilities until the likes of Elon Musk, Jeff Bezos and Sir Richard Branson stepped in. CFS says: “Innovation was paramount and they were willing to risk their own money.” 

Nasa later agreed to become a space partner. And would-be space entrepreneurs continue to pop up, the latest being a SPAC backed by Barry Sternlicht and tennis star Serena Williams which supplies 3D printing to space companies.

On the fusion front, CFS says there are now twenty ventures who have raised $2 billion and started developing fusion energy. But it believes a public-private partnership will win the day: “With a strong signal and a comprehensive program, the US will snatch the best ideas from the rest of the world.”

One commercial rival is General Fusion, funded among others by Thistledown Capital backed by Tobias Lütke of Shopify and Bezos Expeditions, run by Amazon’s Jeff Bezos. It has also received grants from the Canadian government.

Tae Technologies has raised $750 million from investors including former Morgan Stanley chief John Mack; the Rockefeller family’s Venrock, Vulcan Capital and Samberg Family Office, set up by Tae’s late chairman, Pequot hedge fund founder, Peter Samberg.

Wild Family Office led by Peter Wild and UK hedge fund manager David Harding are backers to Tokamak, spun out of Oxford’s Culham Centre for fusion energy, which recently achieved a plasma flow, along with state enterprises in China and South Korea.

 

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