(Reuters) - Helion, a startup working to generate electricity from nuclear fusion, on Tuesday said it has raised $425 million in venture funding from a group of investors including SoftBank Group's Vision Fund 2.

The Everett, Washington-based Helion said the funding will help it speed up the development of its next generation fusion reactor design, which aims to tap into the same reactions that power the sun to make carbon-free electricity without long-lasting radioactive waste. The company has an agreement with Microsoft ( MSFT ) to begin providing power in 2028.

Helion is among the dozens of public and private groups looking to crack the key challenge of fusion: how to get more electricity out of the nuclear reaction than it takes to create and contain it.

Rather than use fusion to heat water into steam that would turn a power turbine, Helion uses powerful magnets and electronic components such as capacitors and thyristors - which allow power to flow in only one direction - to capture fusion energy directly through electromagnetic induction.

In an interview, Helion Chief Executive David Kirtley said the 6,000 massive capacitors and 50,000 thyristors needed for the firm's current machine were secured from outside suppliers and often had to be adapted from industrial uses.

Helion, which employs 450 people, plans to start manufacturing its own capacitors, which will help add about 100 jobs.

"It took years to get all them in-house from external suppliers, and we need to turn up those rates," Kirtley said. "That's the goal - to do that all in house in the United States."

Kirtley said the funding will also help Helion design and prototype custom thyristors for the next machine.

Other investors in the funding round include Lightspeed Venture Partners and a major university endowment fund that Kirtley declined to name.

Also joining the round were Helion's existing investors: OpenAI CEO Sam Altman; Mithril Capital, which was co-founded by Peter Thiel; Capricorn Investment Group, Facebook co-founder Dustin Moskovitz; and steel producer Nucor ( NUE ).

(This story has been corrected to clarify that Helion's funding round includes significant participation from new and existing investors in paragraph 1)