A $150 million fund, The Engine, will back startups others find too hard

A fund and accelerator for advanced technology startups, The Engine, closed its debut fund at a robust $150 million this week, according to its President, CEO and Managing Partner Katie Rae. Last year, TechCrunch reported that MIT was investing $25 million into The Engine, becoming the anchor LP for the fund.

While The Engine is not owned and operated by the private, research university, it has strong ties with MIT. Several of its board members and advisers are faculty and staff at MIT. Additionally, startups backed by The Engine can use the funds booking app, The Engine Room, to rent or get access to labs, equipment and other resources at MIT.

Rae is careful to note, however, that The Engine will invest in teams and technologies that hail from a variety of industry and academic backgrounds, not just from the MIT ecosystem. The Engine Room, which is a unique resource to the funds portfolio companies, also helps founders and technologists get access to equipment and facilities at organizations beyond MIT in the greater Boston area.

Rae said, My philosophy on working with founders is, and with this fund will be, bet early, stay their ally through the long period of figuring it out, and be willing to look at things that other people would find too hard or unusual.

Most venture firms start out with far less capital to manage in a debut fund. Rae is a seasoned, early-stage investor and technologist, having previously led funds like TechStars Boston and Project 11. Her reputation helped The Engine close a sizable debut fund, one that looks more akin to the third or fourth vintage for a typical software-focused fund.

The Engines focus also justifies a large capital pool to invest in startups. Rae said, We hit a nerve. She explained that it typically costs more to start an advanced tech company than it does to start even the most ambitious b2b or consumer app. Her firmis interested in everything from advanced materials and manufacturing technologies to medical devices, robotics, artificial intelligence, nuclear energy, fusion and more, Rae says.

Products or services built using advanced technologies and nascent scientific discoveries can take a longer time to prototype and test. Founders building these businesses often have a harder time finding a place to work and test their inventions than their peers in software, and navigating licensing or other business services specific to advanced tech. Its not as easy to get a bench in a lab, or access to high-end equipment and testing facilities as it is to book a desk at a co-working space. And of course, theres always a risk that technology or science that works well in a controlled environment may not scale to work as well as hoped in commercial applications.

For this and other reasons, few venture funds have been willing to primarily invest in very early stage, advanced tech companies. Instead, they optimize their investments around companies that have already de-risked their technology, commercialized it to an extent, and optimized their business for growth rather than, say, ongoing tech and science breakthroughs.

The Engine stands alongside a few other firms that do early stage deals in hard tech startups, like Breakout Labs or SOSV, and firms focused on one technology type like Grishin Robotics, a $100 million VC fund. Rae said she hopes that the tools and services that The Engine works to secure for its portfolio founders lower the cost of business for them, and ultimately encourage more entrepreneurs to work on so-called hard tech.

Read more: https://techcrunch.com/2017/04/09/a-150-million-fund-the-engine-will-back-startups-others-find-too-hard/