Why This Venture Capitalist Is Tackling ‘Tough Tech’

January 10, 2019, 1:30 PM UTC
Katie Rea
Katie Rae
Photograph by Tony Luong for Fortune

Venture capitalist Katie Rae is trying to prove that “tough tech” is worth the tough work. The Engine, the $200 million fund she leads, invests in startups whose products require years of research and development before they’re ready.

In short, they’re startups that many other venture capitalists avoid—like one firm that’s pursuing a viable form of fusion energy—because they require more time to get o the ground than the typical photo app and more time to pay off, if ever.

Rae’s three-year-old fund is an independent offshoot of MIT, in Cambridge, Mass. The school, a hotbed for tough tech, wanted to help founders make their potentially world-changing ideas a reality.

Since its inception, The Engine has invested in over a dozen start- ups focused on energy, agriculture, and health. The fund takes a holistic approach, providing its startups with space, equipment, and business connections along with long-term capital.

Rae is a veteran of the Boston tech scene: She cofounded venture capital rm Project 11 and Boston’s chapter of the Startup Institute, and served as managing director at Techstars Boston, a startup accelerator program. Fortune spoke with Rae about The Engine and the ethical challenges some tech companies face. The following has been edited for length and clarity.

FORTUNE: How is The Engine different from other venture capital firms?

KATIE RAE: We have a real focus on what we call tough tech, and we also have a mission to grow such startups in the Boston region. We do a bunch of things that most venture funds don’t do.

Right now we have 30,000 square feet of space. Over the next few years, we will have 10 times that amount. We help companies get access to equipment—very high-end, high-tech equipment. We have a deep relationship with MIT, and we think of that as an incredible network for these founders to join. The Engine also sets a longer time frame. We have an investing horizon of up to 18 years, which allows us to think about bigger, longer-term bets—and these could be world-changing.

FORTUNE: How does The Engine choose which startups to fund?

KATIE RAE: The first way we choose is to say, “Is there an incredible team that not only understands the technology but knows the market they’re going after and how they want to approach it?” We really want to make sure that it’s a group of people on its own mission. And do they have the team to do it that will have staying power?

Then, after that, we say, “Okay, let’s dive into the market. Are we creating a market, or are we disrupting a market? And does this team have a plan to do that?” Obviously, we’re early stage investors, so that plan evolves over time.

The Engine has invested in over a dozen startups in areas like health and energy.Photograph by Tony Luong
Photograph by Tony Luong

FORTUNE: What are some investments that you’re most excited about?

KATIE RAE: It’s hard to choose a favorite. Commonwealth Fusion Systems is such an exciting startup. If it can prove that it can develop the world’s biggest superconducting magnet that could create fusion energy, then it’s a world-changing company.

Then there’s Cellino [a startup that uses lasers and nanotechnology to program a certain type of stem cell’s growth]. The four founders—they’re a mix of physicists, biologists, and mechanical engineers.

Another one that we’re excited about: Zapata Computing. This team is working with some of the biggest industrial players to solve true problems that only quantum computing [a complicated computing process that enables faster calculations] can solve.

FORTUNE: How has The Engine affected the tech scene in Boston?

KATIE RAE: In October we held our first Tough Tech Summit, which gathered many people whom we work with in Boston—whether it’s different institutions, academic institutions, venture capitalists, or manufacturers. Yes, some of it is for our companies. But it’s also for this whole Boston ecosystem.

FORTUNE: Some startups in The Engine’s portfolio involve genetic engineering or artificial intelligence. How do you handle the ethical concerns?

KATIE RAE: I’ve been working with former Defense Secretary Ash Carter over the last year to gather some incredible people to talk through these ethical concerns: What are we unleashing in the world, and how can that be for good?

We really engage with the people who think through this, and we also engage with our companies to think through how they’re going to use their technology. There’s a bunch we haven’t invested in because we didn’t believe that they’d thought through the ethical ramifications of what they were doing. These things are often tricky and in gray areas.

FORTUNE: As a female CEO in the tech industry, what’s your view on the status of women in tech, and how do you think the #MeToo movement has affected it?

KATIE RAE: What’s exciting is that a lot of people have woken up to the fact that there are problems. It’s a conversation that’s now out in the open.

But I don’t think it’s just women. I think if you look at where capital goes, a very small percentage goes to women, but an even smaller percentage goes to African-Americans and Latinos. I think most people realize we have a problem hiring equitably in tech. We have a problem with capital allocation. I think we have to go fix that problem, and I think a lot of people want that to happen.

A version of this article appears in the January 2019 issue of Fortune with the headline “Tackling ‘Tough Tech.’”

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