Scaling next-generation nuclear reactor designs will require billions of dollars in venture capital and project-level investments. But for Transatomic Power, a startup working to commercialize a molten salt reactor that recycles spent fuel rods, a couple million dollars is sufficient -- for now.

The Cambridge, Mass.-based company just closed a $2.5 million round from Acadia Woods Partners, Peter Thiel's Founders Fund, and Daniel Aegerter, chairman of the Swiss fund Armada Investment AG.

The money will be used to hire thermofluid engineers and to fund testing of components in the lab. The $2.5 million, combined with $2 million raised last August from Founders Fund, should get Transatomic through a couple of years of testing and help it finalize its reactor design, said Leslie Dewan, the company's CEO and co-founder.

"Before we release cost estimates, we need to finalize all of our components-level testing," said Dewan. "The lead time on the equipment is long. Even if we raised $50 million, we wouldn't have the regulatory pathway to do something with it."

Transatomic was founded in 2010 by Dewan and Mark Massie, the company's chief technology officer, while they were doctoral candidates at the Massachusetts Institute of Technology. The two were interested in working on something more ambitious than incremental improvements to conventional light water reactors. After researching the viability of different advanced reactor designs, Dewan and Massie came upon a molten salt technology tested extensively at the Oak Ridge National Laboratory throughout the 1960s and 1970s.

In a molten salt reactor, uranium or thorium are dissolved in fluoride or chloride salts that are liquefied at temperatures above 500 degrees Celsius. The liquid salt (which is both the coolant and the fuel) carries the heat to an exchanger to power a steam generator. The technology is touted as a safer alternative to light water reactors because the liquid turns to a solid at ambient temperatures -- thus allowing the reactor to cool down on its own without an external electricity source.

Transatomic's design builds on the work done at Oak Ridge. The company has changed the fuel salt mixture, which it says will increase fuel burnup rates and allow it to use recycled uranium fuel rods. The original reactor tested by the government required highly enriched uranium; Transatomic says its reactor can use uranium at enrichment levels below 2 percent.

The company plans to build its first demonstration plant in 2020. The next two years will be devoted to understanding how different components hold up to high temperatures, radiation and corrosive elements.

If Transatomic can prove its reactor design and prepare a precommercial project by the end of the decade, the company will need a lot more money. Dewan estimated that regulatory approval alone could add tens of millions of dollars to a project, assuming the U.S. Nuclear Regulatory Commission can improve permitting of next-generation reactors.

"The regulatory cost just isn't known at this point. There aren't any recent data points for how much it will cost when we get to that point," she said.

For now, Transatomic will continue testing and refining cost estimates for commercial deployment.

"We have our own internal ballpark estimates. But we need to figure out how all the components perform before we can be sure," said Dewan.

Watch Leslie Dewan explain the potential for molten salt reactors below.