MIT’s The Engine, Now With $200M, Makes First Bets: 3 Takeaways
[Updated 9/20/17, 8:18 am. See below.] Now the real work begins for The Engine, MIT’s ambitious venture fund and incubator.
The organization announced its first batch of seven investments on Tuesday (see below), and revealed that it has raised $200 million, with plans to back 40 to 50 so-called “tough-tech” companies over the next few years. The Engine initially raised $150 million for its first fund, but later tacked on the additional $50 million. MIT is one of the investors in the fund; it chipped in $25 million.
MIT launched The Engine almost a year ago to provide resources to startups whose technologies might get stranded in the research lab because they would take more time and money to develop than most venture capitalists are willing to invest—think biotech, medical devices, robotics, advanced manufacturing, materials science, and energy. The Engine combines a venture fund and access to work space, expert advisors, educational workshops and events, and business services. The initiative is part of a broader push by the Institute in recent years to support entrepreneurship on campus.
Katie Rae was hired in February to be The Engine’s CEO and managing partner of its venture fund. She later brought in Reed Sturtevant as a general partner. The pair previously worked together at Project 11 Ventures and Techstars Boston’s startup accelerator.
The Engine declined to say how much it has invested in each of the first seven companies, but a spokeswoman says it will generally pour between $250,000 and $2 million into each venture.
Here are three things that stood out to me about The Engine’s initial investments, along with what to watch for in those areas:
1. Breadth of ideas: The seven startups cover a broad range of sectors and technologies. They span space tech, energy storage, artificial intelligence for self-driving vehicles, genetic engineering, drug delivery, industrial materials, and “digital olfactory sensors.”
The question is how well The Engine can serve a group of such disparate, complex companies, which will need a wide variety of resources and expertise to succeed.
2. MIT ties: The Engine doesn’t invest exclusively in startups with roots at MIT, but Institute officials have said it would likely be a fertile source of investment opportunities. That’s how things have played out so far. Six of the seven initial companies have a link to MIT. (One of them was founded by Harvard Business School graduates.)
The companies’ founders include MIT professors Bob Langer, a prolific life sciences inventor, and Yet-Ming Chiang, a materials science and engineering expert who previously helped start A123 Systems, American Superconductor, and Desktop Metal. (They are involved with startups Suono Bio and Baseload Renewables, respectively.)
The Engine says it will only invest in companies being built in the Boston area. It will be interesting to see how far beyond MIT’s campus the organization goes to find companies. Perhaps The Engine will become a draw for companies to move to Boston.
3. Early stage: The Engine isn’t afraid to bet on raw ventures. Most of the companies were born in the past two years, and some are brand new. Kytopen, for example, is just two months old, The Engine says. C2Sense appears to be the oldest in the group—it was formed four years ago, according to LinkedIn.
It will be worth watching to see if The Engine sticks with its early-stage focus, or if it eventually adds more mature businesses to its portfolio. (It wouldn’t be the first early-stage investor to evolve and move downstream, although there’s no indication that The Engine will go that route.)
Below are the seven companies. (Their founders are pictured above.)
—Analytical Space is developing systems that use radios and laser technology to communicate data from satellites. The Engine says the technology has applications in fields such as agriculture, climate monitoring, and city planning. Analytical Space recently raised nearly $4.5 million from investors, according to an SEC document filed last week. [Funding added—Eds.]
—Baseload Renewables is developing low-cost energy storage technology, with the goal of using renewable energy—instead of fossil fuels—as the source for baseload electric power. The company has raised $2 million from investors, an SEC filing shows. [Funding added—Eds.]
—C2Sense says its gas sensors can be used for a variety of applications, including monitoring the freshness of food, detecting hazardous gases in industrial settings, and monitoring air quality in cities.
—iSee is working on artificial intelligence software for autonomous vehicle systems and other applications that require machines to understand human intentions. The company just raised $2.7 million from investors, according to an SEC filing.
—Kytopen is developing a system to speed up the process of genetically engineering cells.
—Suono Bio is developing technology to enable ultrasonic, targeted delivery of drugs and molecules to various tissues, with an initial focus on the gastrointestinal tract. The company has raised at least $1.3 million in debt financing, according to an SEC document filed in June. [Funding added—Eds.]
—Via Separations is developing molecular filtration membranes that the company says use less energy than traditional methods of separating materials, which has implications for making food, drugs, plastics, chemicals, and other goods.