exclusively invest in startups with ties to MIT.
It will “be quite natural” for The Engine to back MIT spinouts, simply because of the physical proximity to campus and because the types of companies it will target are in the “sweet spot of what comes out of MIT,” Schmidt said. But the initiative is “intended to be open, and the managers will … choose companies to invest in that are aligned with the mission of The Engine, independent of where they come from,” he added.
MIT will be a limited partner in the fund—meaning it’s an investor in the fund—and it’s out raising money from other undisclosed entities to fill out the rest of the $150 million target. In that respect, this isn’t something completely new for MIT because its endowment already invests as a limited partner in outside VC funds, Schmidt said. (The $25 million for The Engine’s fund is coming from MIT “working capital,” not the endowment, he added.)
It’s still early for the program, of course, and there are details and issues that must be worked out, such as whether or not it will invest in student-led startups, Schmidt said. “What if a student is six months from graduating but wants to start a company with a faculty member? We’re going to have to be agile in how we think about that.”
Schmidt said he thinks The Engine is something MIT has been building toward “for a long time.”
“The venture capital model has worked well for a class of startups, but not all the startups coming out of MIT,” he said. “This is to deal with the fact that at some level, we would sort of hand a diploma to somebody and then wish them well. What we see is, for these types of startups, we should play a role in helping them on the outside.”
