I want to start with a belief held by a lot of technologists here in Silicon Valley: that next-gen nuclear, things like fusion and small modular reactors, is inevitable. From your vantage point, how close are we, and are the timelines different or similar for fusion versus SMRs?

This is the big risk for the industry: the almost dichotomy between what's necessary for the company in order to get to its next fundraise and the messaging it has to put out to the market. You see a lot of press releases from the industry citing customer offtake agreements. These tend to be non-binding and aren't worth the paper they're written on, but they give the company something to talk about and more credibility in the market and in the VC community, and they help it raise its next round. I think the reality is that there are still enormous technical, regulatory, political, and financial hurdles for these businesses. Any timeline that gets put out, you can almost certainly be assured it will not be met by any individual company.

So I think the question is, does this messaging, which the industry almost feels compelled to put out in order to keep raising the next round, start to send the false signal to government that this technology is inevitable? That SMRs or advanced nuclear or fusion is inevitable, and that the private sector has it? In my opinion, there are still many, many hurdles that necessitate continued strong government interaction.

What are the core technical hurdles you feel are still holding the technology or the space back?

It's different for the different categories of nuclear. There's the traditional light water reactor, your AP1000. There are attempts to make that smaller, which is what the SMR, the small modular reactor, is, but still using light water reactors: the AP300, for instance, which is about 70% smaller. There are the advanced reactors, then there's fusion, and then there are even micro reactors. They each have their own issues associated with them.

We already have the AP1000, so making it smaller is relatively straightforward. The question is the economics, of course. The advanced reactors and the micro reactors still have a number of challenges, but I think there is probably a sight line to reality there. We can talk about what some of the hurdles are. Fusion, of course, has the biggest hurdles to commercial success, but it has probably the most potential upside should the industry get there.

From a venture lens, and to bring this back around to what we talked about at the beginning, should VCs even be funding these companies today? Or are we so far from realistic commercial time horizons that it doesn't make sense? You have the starting point, the seed round or the Series A, but before this actually gets in the hands of customers, it's going to be a five, 10, 15-plus-year time horizon, and someone or something needs to bridge that gap.

It's a great question. Historically, VC and nuclear were a tough match. The timelines and the amount of capital necessary to get to commercial proof were an order of magnitude or two away from what was traditionally VC. I think the VC industry has shown more patience of late and a willingness to hold private investments well past the traditional 10-year window.

I do have lots of worries about whether there's a natural funder for what I call Series C to E, because you start talking about very large checks with still very significant technological risk and economic risk, and less upside. So it's a lot of risk, less upside, and the need to raise a lot of money.

There have been scores of companies. I've been surprised at the number that have been funded with tens of millions of dollars. There have been a handful that have been able to raise in the hundreds of millions of dollars. One that I know of, Commonwealth Fusion, has raised about $2 billion. And I think the question is, is the industry able to syndicate the billion-dollar-plus rounds in the future?

Some of this goes to the Gartner hype cycle. You had the peak of inflated expectations that I think we were in from the '21 to '23 or '24 years. And then the question is, where does the industry go from here? If there's not that natural funder, if you can't syndicate the multi-billion-dollar round with the risk-return characteristics I described, then is that the market failure that necessitates a role for government?

You mentioned Commonwealth, and then Helion is the other one I'm aware of that has raised in what I'd call the half-a-billion-dollar-plus range. But to your point, there's a very real question: if we're trying to solve this problem, do we want just two or three companies, or do we want dozens of companies taking different angles of attack on a similar problem? Part of why I was excited to catch up with you is that you've consistently raised the idea over the past year or two that public funding could, and perhaps should, step in to provide a milestone-based solution to what's very obviously the biggest non-technical risk for next-gen nuclear, which is capital. This has been common over the arc of history. SpaceX is an instructive example, where the NASA COTS program was instrumental in the very early days of the company. Do you have a specific vision for what this would look like with next-gen nuclear?

I think that analogy works very well. There are many government programs to support nuclear, but most of them are either on the front side or the back side: grants when a company is nascent to pursue a certain technology, or tax credits on the back side once you're producing. I'm really worried about that valley of death, and this is where I think a milestone-based funding program could work very well.

SpaceX was the great example of it. NASA had retired the space shuttle and decided it needed to find a new means to put people and supplies into space. How was it going to do it? It had gotten very frustrated with its prime suppliers, so it was looking for a new model that would be respectful of taxpayer money and create the right incentives for competition, without the government necessarily having to choose on day one who the winner is.

They came up with this milestone-based funding program. It's a negotiation up front as to what technological hurdles it takes to get from here to commercial viability. Let's break those up and say, if you get to step one and prove it, then we will give you a certain amount of money, and if you get to step two, we'll give you even more money. That provides confidence of continued funding: if these companies are successful technologically, they can withstand the ebbs and flows of the VC market, and investors get more confident that if they fund today, there'll be capital there in the future. It also rewards success, is more diligent and respectful of taxpayer money, and doesn't have the government choosing winners and losers as much as a grant program does.

Do you have a sense of how much we're talking about from a dollars-and-cents point of view? Is it $1 billion, $10 billion, $50 billion? What would be the Goldilocks amount here?

There's an existing program. It was funded very small, to the point where, when you start spreading that across the number of companies in the space and the number of technological hurdles they have to meet, each hurdle was in the single-digit millions of dollars. Companies I've spoken with looked at it and said it wasn't even worth the time. It's difficult to work with the government. There needs to be a significant carrot at the end for it to be worth the time to engage, and there wasn't. So I think the program has been pretty much a failure to date, just from lack of engagement by industry.

I think you probably need to take it to something in the $5 billion-plus range to get industry really excited about it, and then be willing to consider future rounds of it, like they did with the Commercial Orbital Transportation Services program, the COTS program, where they did two rounds. SpaceX was one of the companies chosen, and it got a series of awards from it that I think ended up being close to $800 million ($396 million).

I think you're correct. We think about the uncanny valley. Even from the VC lens here in Silicon Valley, I know of a couple dozen companies that have raised anywhere from, let's say, half a million dollars to $20, $30, $40 million. But that's where the gap really starts to kick in, to your point. You have one or two, like Helion or Commonwealth Fusion, that have been able to cross, but the $50 million to $500 million funding range is a real cavern right now. So I think it makes a lot of sense. Is the best way to solve for this from a policy point of view? Is this something you're spending a lot of time and energy on with Arnold Ventures, or what's ultimately the solve here from your point of view?

If you look at the Venn diagram of which energy sources Republicans like and which Democrats like, there are a few things that fall in the middle, and nuclear is definitely one of them today. It's been remarkable how dramatically the Democratic Party's view of nuclear has changed in the past five years, as I think the realization of the problems of intermittency with wind and solar necessitates a low-carbon baseload energy source. There aren't many options there. Both sides of the political aisle have coalesced around geothermal and nuke as those potential answers, so both industries have a lot of political support behind them. Again, the question is, what next? If there is political support, is there the financial support and the regulatory support to make sure the industry can overcome the hurdles it faces?

Why do you think there has been such a sudden swing in adoption from both sides of the political aisle? Is it a recognition that we don't want to be dependent on foreign sources for energy? I agree with you. It feels like overnight people went from "nuclear bad" to "nuclear good." We're even talking about bringing back Three Mile Island with Microsoft, from a GPU and AI compute perspective. Do you have a view on why the pendulum swung back so hard?

I think conservatives have always been favorable toward nuke. It's a good question why, and I don't know. But Democrats, after the series of scares the industry has had, certainly pulled back, and there was a lot of opposition to nuclear. Again, I think there's this realization that Democrats want to decarbonize the energy system rapidly, and wind and solar alone, or wind, solar, and batteries alone, just aren't going to get you there, at least in any time frame the Democrats want. So you start having to look at where you can get very significant baseload energy supplies. I think that's the hope and the dream of next-gen nuclear.

The second issue is that, to the extent it can be proven, you can place nuclear anywhere. There are parts of the world, and parts of the United States, that have more renewable resources. Texas has more renewable resources than New York State, for instance, so Texas has been able to decarbonize its grid much quicker, even without any mandates, just because wind and solar are very cost-competitive here. New York State does not have very good solar and does not have very good onshore wind. The offshore wind resource up in the New England area is extraordinarily expensive and has really failed on its economic promise, along with the increasing political headwinds. One of the promises of next-gen nuclear is that you can put it anywhere, so it is a source of power for places that don't have good renewable resources.

I think you said it best: today, next-gen nuclear is bipartisan and extremely important, and if done correctly, it can and should be a huge unlock for the country, and frankly the world. I'm hopeful that people like you can continue the great work, and VCs like us can continue the work on the funding side at the earliest stages, and that we can bridge that gap and deliver on the promise of fusion and SMRs, because I think it's critically important for the next phase of growth. John, thanks so much for joining us. It's great to have you.

Thanks.