What does it mean when Uncle Sam is one of your biggest shareholders? Chip startup xLight is about to find out

Summary

The Trump administration has agreed to inject up to $150 million into xLight, a semiconductor startup developing advanced chip-making technology, marking the third time the U.S. government has taken an equity position in a private startup and further expanding a controversial strategy that has put Washington on the cap tables of American companies. The Wall Street Journal reported Monday that the Commerce Department will provide the funding to xLight in exchange for an equity stake that will likely make the government the startup’s largest shareholder. The deal uses funding from the 2022 Chips and Science Act and represents the first Chips Act award in President Trump’s second term, though it remains preliminary and subject to change. Previous government equity investments under the Trump administration include publicly traded companies Intel, MP Materials, Lithium Americas, and Trilogy Metals. Two rare earths startups also secured funding in exchange for equity from the Commerce Department last month. You can imagine how this is all going over in Silicon Valley, where the libertarian ethos runs deep. At TechCrunch’s signature Disrupt event back in October, Sequoia Capital’s Roelof Botha jokingly offered what might be the understatement of the year when asked about the trend: “[Some] of the most dangerous words in the world are: ‘I’m from the government, and I’m here to help.’” Other VCs have similarly expressed concerns, if quietly, about what it means when their portfolio companies are suddenly competing against startups backed by the U.S. Treasury, or even when they find themselves sitting across the table from government representatives at board meetings. The four-year-old, Palo Alto, California, company at the center of this particular experiment is trying to do something genuinely audacious in semiconductor manufacturing. XLight wants to build particle accelerator-powered lasers — machines the size of a football field, mind you — that would create more powerfu...