Developing the first advanced nuclear venture fund

Valerie Gardner, a TIA cofounder and principal, and Rod Adams, former founder of Adams Atomic Engines (one of the first advanced nuclear ventures) and current host of Atomic Insights, one of the longest-lived blogs on atomic energy, have been exploring how to make investing in advanced nuclear accessible for more investors. They have brought together a team to develop this concept, called Nucleation Capital.

Nucleation Capital has signed an LOI with AngelList to deploy as a technology-enabled rolling fund as a way to open access to the advanced nuclear sector to a broader spectrum of accredited investors. A rolling fund uses a quarterly subscription model, which spaces out capital calls on a regular quarter basis, making such an investment more affordable to those who qualify as accredited but may not be able to afford the larger minimums required of traditional venture funds, which can range from a low of $250,000 up to several million.  Currently, the only way for an accredited investor to access this sector was through making direct private investments in individual companies, something very few investors have the capability or inclination to do.

In 2019, Ms. Gardner was invited to speak at the US Nuclear Infrastructure Council’s first-ever New Nuclear Capital Conference, held July 16th and 17th in Washington, DC.  In a talk entitled “Why Advanced Nuclear is Changing the Nuclear Energy Financing Paradigm,” Ms. Gardner reviewed the changes that have been transpiring since funding for nuclear R&D was ended in the 1990s and where that has left the industry.

Prior to the Three Mile Island and Chernobyl accidents, all nuclear R&D was funded by the federal government, in an “open loop of exploration” within the National Labs.  From the point of view of the scientists, this was a safely “capital free” zone. Teams of engineers created prototype reactor designs. The federal government paid the bill and eventually large utilities financed the construction of commercial plants typically with power rates tied to “cost-plus” returns of the new capital. There was little incentive to keep costs down or, for that matter, to vet competitive designs.

But things changed in the early 1990s, when funding for nuclear R&D was cut and even projects deemed extremely important for our energy future, were shut down. In the decades since then and , few groups continued to work on R&D, and funding from the DOE ended. However, within the last half decade or more, new allocations have been implemented to provide small seed grants for private-sector nuclear energy R&D.  These new allocations, being granted through the DOE’s GAIN program, reflect the fact that, indeed, there’s been a growing number of private companies conducting engineering for advanced nuclear designs, and such designs are critical for addressing climate change.

In fact, today’s nuclear engineers, who want to work on developing new nuclear technologies, may qualify for a GAIN grant but, after that, they are at the mercy of the private capital markets for the remainder of their funding needs.

In 2018, the DOE’s total budget was $28 billion, down $1.7 billion from 2017. In contrast, the private sector allocated $28 billion just for early-stage startups and $130 billion went to all stages of Venture Capital funding—surpassing even the dot-com era! So the question that must be asked is, between the federal government and private investors, is there investor interest in funding development of a class of new nuclear designs?  We believe there is!

There’s now an increasing amount of funding for clean energy R&D through the U.S. government. Plus, far more money is available through the capital markets, through which a very diverse range of investors interested in providing capital to fund all types of commercially-viable clean energy solutions. Nuclear developers simply need to start thinking like entrepreneurs, learn to pitch their ideas to investors, and go out and compete for those private dollars.  This is called “capitalism,” because the drive to generate a profit from the use of capital is at the heart of investors’ decisions.

Click the image to download the presentation slides for “Why Advanced Nuclear is Changing the Nuclear Energy Financing Paradigm.”