Investment dollars continue to flow heavily into tech startups, but the majority of bets are placed on technology products — mostly consumer apps — that could pay dividends in three to five years. The investment predilection for lightweight digital technologies that could pay off fast is creating a talent gap for companies taking on ambitious, moonshot-type projects that are more capital intensive but could be world changing.
The Engine, an early-stage investor and startup accelerator founded in 2016, is trying to change that by putting dollars into the pockets of companies that do what it calls “tough tech.” Companies like these are searching for new ways to cure disease, produce clean energy, build human-like AI and find breakthroughs in computation.
The company’s accelerator program is fairly unique and could help usher in an understanding that long-term investments are critical to building value over time, according to Katie Rae, CEO at The Engine. “We’re trying to prove that this model can work,” she said during her presentation at this week’s EmTech 2018, an emerging technology conference hosted by the MIT Technology Review.
Bucking the short-term trend
The Engine’s push to back tough tech was the brainchild of leaders at MIT who watched students with expert knowledge abandon their research for big paychecks at companies that, say, develop dating apps, according Rae.
In the wake of initial public offering successes like Instagram, investors are focused on short-term earnings and are shying away from tough tech companies that may need 10 or 20 years to become giants, according to Rae. “The Engine was just that market intervention,” she said.
By investing in tough tech companies, The Engine is enabling experts, who have in some cases dedicated their entire academic career to a problem, to continue their research. “Many of our founders are also professors at universities and have worked on the problems for somewhere up to 20 or 30 years,” said Rae.
Founders have to keep an eye on their companies’ “North Star mission,” and they’re expected to establish and accomplish incremental goals or milestones along the way. Commonwealth Fusion Systems, a collaboration between MIT, Italian oil and gas company Eni and other investors, is “an incredible story of a department at MIT putting in many years of deep research into fusion,” Rae said.
While the project is ambitious, the company has very clear milestones at the three-year mark and again at the seven-year mark. “It looks like this moonshot, but if you break it down, it starts to look very reasonable,” Rae said.
Vision for the future
The accelerator’s vision is manifold: One hope is that by bringing together a community of researchers who are working on different problems, The Engine will expose commonalities in founding tough tech companies.
Another is to shed light on the lack of investment dollars that advance the science of, say, clean water, climate change and medicine — important areas of research for “human progress and planetary progress,” Rae said.
“If we don’t start that investment cycle now, they will never come to fruition,” she said.
Rae also hopes The Engine is just the start and that 10 funds like it are established in the next five years — in Boston alone. She also hopes that tough tech accelerators like hers combined with government, corporate and venture dollars will infuse a wave of tech advancement that make the world better for future generations.