Katie Rae has been tapped to run The Engine, an ambitious startup-support initiative launched by MIT that combines a venture fund, an accelerator program, and access to workspace and business services.
On Monday, Rae was named The Engine’s president and CEO, as well as managing partner of its venture fund.
Rae is well known in the Boston startup community, and her range of experience fits with what MIT is trying to build with The Engine. She has run startup accelerators: From late 2010 to mid-2014, she was managing director of the Techstars Boston accelerator program. She has also run a venture fund: She co-founded and is currently managing director at Project 11 Ventures, which invests in tech companies at the “pre-seed” stage.
“As I always tell people, I’m not afraid of how messy it is at the beginning” of a company, she says in a phone interview. “I love being there to figure out what it could be.”
That interest should serve her well in her new job. The Engine aims to support startups working in biotech, robotics, energy, manufacturing, and other complex technologies that take more time and money than most venture capitalists are willing to invest, especially at an early stage. It will provide young firms with funding, as well as access to affordable office and lab space, specialty equipment, shared legal and business services, and connections to mentors and potential business partners. (The companies don’t have to have ties to MIT, according to The Engine, but the Institute will likely be a fertile source of investment opportunities.)
“For the last seven years, I’ve been really concentrating on the earliest stages of startups,” Rae says. “The longer I do this, the more I’m interested in big, game-changing ideas and how do you get them funded right from the beginning so they have a chance to become those wonderful companies.”
The Engine is targeting $150 million for its venture fund, and MIT already committed $25 million as a limited partner in the fund. Rae declined to say how much more has been raised and who else has invested. But “we’re well on our way to closing the fund,” she says.
The plan is for The Engine to invest in companies, and then give them access to its shared office and lab space and business services, Rae says. There might be opportunities for companies that don’t receive an equity investment to access The Engine’s other resources, she says, but that’s still to be determined.
“Obviously this will evolve as we go,” she says.
The Engine aims to announce its first group of investments in the spring or summer, Rae says.
The Engine’s website says it will invest in around 60 startups over a period of several years. Rae says the exact number hasn’t been decided yet. Each company will participate in the accelerator for as little as a couple of months, to over 12 months in some cases, The Engine’s website says.
Nor has The Engine decided how large a stake it will take in its portfolio companies, Rae says. MIT previously said its stake would be smaller than what typical venture funds receive.
The Engine’s board members and advisors are a collection of big names from MIT and industry. Its board chair is Israel Ruiz, MIT’s executive vice president and treasurer. Anantha Chandrakasan, an MIT professor and head of its Department of Electrical Engineering and Computer Science, also sits on The Engine’s board.
Other board members include Robert Kraft, owner of the New England Patriots; GE Ventures CEO Sue Siegel; Jeremy Wertheimer, Google’s vice president for engineering and the founder of ITA Software; Linda Pizzuti Henry, the managing director of Boston Globe Media Partners; and Arthur Samberg, owner of the financial services firm Hawkes Financial.
The Engine’s investment advisory committee includes General Catalyst Partners co-founder and managing director David Fialkow; Joi Ito, director of the MIT Media Lab; Jonathan Kraft, president of The Kraft Group; and Amir Nashat, a managing partner at Polaris Partners and CEO of healthcare startup Olivo Labs.
Rae brushes off any concerns over potential conflicts of interest involving MIT. “There’s a whole committee set up to deal with that,” she says. “I am not an MIT employee. I manage the decisions of the fund. That’s the simplest way to avoid any conflict.”
Some observers of The Engine have raised concerns about potential “negative selection bias” or “signaling” issues, meaning startups with ties to MIT that don’t get investments from The Engine might have trouble raising money from other venture funds that wonder why the Institute’s not interested in its own teams. Rae isn’t worried about that, either.
“There are only so many companies any single fund can invest into,” she says. “I don’t think this will be a negative signal for other people.”
Rae says she’ll officially start her new job on March 15. As for her role with Project 11, she says she will continue to work with companies that she has invested in through the firm. But it sounds like she won’t be involved in making new investments through Project 11. “My new investments will be done out of The Engine,” she says.
Ultimately, Rae says she hopes The Engine will help turn “world-changing ideas” into the next wave of big companies—and that many of them will stay in Boston.
“I’m deeply committed to Boston and the region here, and I think we have one of the best innovation centers in the world,” she says. “I want to be able to amplify that.”
