Now comes the MIT Engine, a $200 million investment fund. It
is not really a venture fund, it is something that is between a post-doc
operation and what is called an incubator. As Technology Review states[1]:
Located behind an unassuming storefront in Cambridge’s
Central Square, The Engine’s 26,000-square-foot headquarters is home to seven
startups, including iSee, which is working on artificial intelligence to make
self-driving cars more practical, and Analytical Space, which is planning to
launch a network of low-orbit satellites to transfer large amounts of data from
space using lasers—at speeds 10 times faster than radio for about the price of
a cellular data plan. The Engine provides resources to help these startups
develop their technologies, with investments to date of between $500,000 and $2
million and use of dedicated office space and shared lab and fabrication space
for as long as they need it. Rae and her team also offer business advice and
connections to help them find customers.
Now take the satellite case. This will require billions not
to mention a global licensing effort. I have seen this done a few times before.
Now one wonders if this is just a research effort pretending to be a venture
fund. Is it fair to the students to have them believe they are building a
business? As this is done under the rubric of MIT is it fair for an academic
institution whose aim is leading edge research to choose winners and losers.
Faculty compete in the open market of funding from third party entities. Why
should the startups not do the same.
The article also notes:
The idea for The Engine emerged as MIT was finalizing
real estate developments in the biotech and software hub of Kendall Square. “We
were focused on what MIT could do that would be additive and beneficial,” says
executive vice president and treasurer Israel Ruiz. In conversations with
scientists and engineers, he learned that the biggest need was in bridging the
“valley of death” between producing an innovation in the lab and getting it to
market. That is particularly difficult in industries that require sophisticated
hardware, such as alternative energy, transportation, space, and medical
devices, and thus may need more capital investment up front than digital
ventures. “They said, we need money, but we also need access to infrastructure
and specialized equipment, and we need to create a community,” Ruiz says.
“Those elements got put together in The Engine.”
The "valley of death" metaphor has merit.
Universities get faculty and students to work on a multiplicity of leading edge
ideas. They are research as they should be. They are not business ideas. They
are driven by technological breakthroughs. Taking that and making a business is
non-trivial. It requires a team, a market, financing, and good timing and
execution. Those things are well beyond the ken of academics. They then
continue:
The concept dovetailed with MIT president Rafael Reif’s
vision of “innovation orchards,” an idea he expressed in a 2015 op-ed in the
Washington Post. Such environments, he wrote, could “provide what universities
alone cannot: the physical space, mentorship, and bridge funding for
entrepreneurs to turn new science into workable products.” He added: “This
would make investing in tangible or tangible-digital hybrid innovations no riskier
than investing in the purely digital.”
It is not the responsibility of a university to develop
businesses. They train students and perform research. The vetting process of
starting a business means breaking the academic umbilical and in the classic
mode of "burning the boats", eschew all the comfort of the academic
world and begin anew. Turning new science into workable products is but a small
step. You have to have a product that someone wants. The dogs must eat the dog
food! I have seen many good science projects turned into good products, which
unfortunately no one wanted! You need a market and the MIT President's
statement above reflects the insular mindset of the academic.
The article continues:
Yet another aim is to seed new industries that can
diversify the Boston area’s portfolio of tech companies beyond biotech and
medical. “Boston has had a seat in what we would call transformative
technologies for a long time,” says Nashat. During the 1970s and 1980s, New
England got an apparent head start in the electronics industry, only to see
Silicon Valley become the center of that world. “To put it bluntly, the East
Coast needs to up its game if it’s going to attract top young talent and
industrial vitality,” Lassiter says. “We have that in biotech and the medical
area, but we need more of it in more areas if Boston is going to be as
important in the next 50 years as it was in the last 50. Ultimately, you need
an economy that is more than professors and Uber drivers.”
I did my first start up, as a member of the team, in 1969.
It was an EG&G funded effort to make an early version of a credit card
validation system. It failed. But what I learned is that customers and
attention to detail is a sine qua non. The "good idea" or even a
"workable product" is a mere first step. One should ask why
California got the start. My answer is a bot convolved. Because MIT and its
surrounding companies had been feeding at the DoD trough for years and
continued to do so. It was a one hour flight. California was six hours to DC
and thus needed a Plan B. Boston forgot the Plan B and California won. Lesson,
always have a Plan B and never rely upon a "sugar daddy".
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