As a mentor with MIT’s Venture Mentoring Service I’ve been hearing about The Engine for many months and eagerly awaiting news about it.
Scott Kirsner of The Boston Globe has an excellent article entitled The big Engine that very well might.
What I find laudable about The Engine is that it is aimed a funding and supporting technology that may take several years to develop.
Last October, the Massachusetts Institute of Technology unveiled a new initiative to provide money, mentorship, and workspace to entrepreneurs developing world-changing ideas that might have difficulty attracting backing from investors focused on a near-term payback.
The big news about the Engine is that Katie Rae of TechStars Boston fame has been hired to lead the Engine. While I don’t know her personally she has a sterling reputation and seems genetically engineered to run The Engine.
But I share Scott Kirsner’s concern about how political this post may become:
But it could also be one of the more political posts in Boston, with the need to serve lots of different constituencies, from MIT president Rafael Reif and treasurer Israel Ruiz, to the outside investors who put money into The Engine’s new fund, to a board of directors, advisory committee, and numerous other committees formed to have a voice into how The Engine operates. Some committees are made up of professors; others include businesspeople like Robert and Jonathan Kraft of The Kraft Group, Google executive Jeremy Wertheimer, GE Ventures chief executive Sue Siegel, and Linda Pizzuti Henry, managing director of Boston Globe Media Partners.
This concern is based on first-hand experience, that while very dated, may well be relevant. Way back in the last century when I was Director of Information Services at MIT, one of my directives was to build a campus computer store. I was told by my boss, Jim Bruce, VP of Information Systems, that I should run the store like a business, which is what we did.
And the computer store was very successful and quite popular with the students. What wasn’t popular with them was that the PC choices were limited to IBM PCs, period. It quickly became apparent to me and to my staff who ran the store that we needed to offer students a lower cost alternative. It didn’t take an MIT degree to figure out that this meant Dell computers. This decision seemed like a no-brainer; keep the IBM PCs for faculty and staff who might prefer the “name brand” and provide a reliable and low cost alternative to the students. But when I ran this decision by Jim Bruce I hit a stone wall. “Steve, don’t you know that IBM just gave Sloan (the B-School) $700 million?” There is no way we can put Dell in the computer store, that’s that.”
So my concern for The Engine is that while it’s founding premise is laudable, making it a VC firm rather than a campus incubator means that the pressure for financial performance will be at odds with it’s mission to fund tech startups that require more time (and perhaps more capital) to develop. As Kirsner writes:
At a university forum in December, (Israel) Ruiz (MIT treasurer)said he could imagine The Engine investing in “low-cost diagnostic technologies for developing countries that don’t generate much profit,” as one example. How will community good weigh against the potential financial return as companies are selected to be part of The Engine?
Also concerning is the number and makeup of the board of directors and investment advisory committee. While Google exec Jeremey Wherheimer and GE Ventures CEO Sue Siegel look like great fits, I question the added value of two Krafts – Robert AND Jonathan, and Linda Pizzuti Henry of Boston Globe Media Partners. These business people totally lack the deep technical and startup company building experience typically found in top notch VCs firms. And it probably goes without saying but VCs don’t have investment advisory committees – they are the investors!
So while I’m rooting for the engine – especially to fund some of the many post-docs who have great research that can be turned into viable companies – I’m very concerned that like the NeXT computer, which was also sold at MIT’s campus computer store, it’s a tweener. The NeXT was not nearly as powerful as the Sun and other workstations needed by researchers, but far more expensive than the PCs and Macs used by students and others who required ease of use rather than Unix and raw MIPs. Like the NeXT, The Engine seems to try to straddle the distance between being a VC firm and being an extension of the many other MIT organizations that foster entrepreneurship on campus.
It’s good that Rae seems well aware of this:
Rae calls The Engine “a very hopeful project in my mind — investing in important ideas over the long term.” But she acknowledges that it will be a balancing act between independence and collaboration with many different parties.
Let’s hope that she can keep her hands firmly on the wheel despite the crowd in her Engine room.