Recent progress in the theoretical understanding and design of compact stellarators is described. Hybrid devices, which depart from canonical stellarators by deriving benefits from the bootstrap current which flows at finite beta, comprise a class of low aspect ratio A<4 stellarators. They possess external kink stability (at moderate beta) in the absence of a conducting wall, possible immunity to disruptions through external control of the transform and magnetic shear, and they achieve volume-averaged ballooning beta limits (4%–6%) similar to those in tokamaks. In addition, bootstrap currents can reduce the effects of magnetic islands (self-healing effect) and lead to simpler stellarator coils by reducing the required external transform. Powerful physics and coil optimization codes have been developed and integrated to design experiments aimed at exploring compact stellarators. The physics basis for designing the national compact stellarator will be discussed.