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MIT Spinout VC has raised $400 million to tackle AI and climate

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MIT Spinout VC has raised $400 million to tackle AI and climate

HEating waves are currently ravaging parts of the United States, while others are experiencing record amounts of rainfall and flooding – a stark reminder of the effects of climate change. Tackling this problem is a key focus for Katie Rae, CEO and managing partner of The Engine Ventures, which invests early-stage in startups focused on sustainability, health and infrastructure. The tools we have today, she said, cannot solve the world’s environmental problems.

“When you get to the heart of the matter, no one believes we will achieve our climate goal without developing new technology,” she said. Forbes.

Today, The Engine Ventures announced a third $398 million fund, its largest to date and nearly twice the size of the $250 million fund it raised in 2020. This increase brings the company to more than $1 billion in assets under management. The Engine has invested in more than 50 companies to date, which have collectively raised more than $5 billion in investments and have more than 3,100 employees.

The new fund will give Rae’s company more flexibility in the size of the checks it writes for seed and Series A rounds. “It means you can really develop these companies into the B and C rounds, where you can definitively de-risk the technology and start scaling,” she said.

The Engine was first created in 2016 as a spinout from MIT, with Rae as founder and CEO. The idea was to create a venture firm and an accelerator for early-stage startups developing complex technology in the areas of climate technology, advanced computing and infrastructure systems, and biotechnology. It has since built a 150,000-square-foot facility in Cambridge, near the MIT campus, that will provide lab space, manufacturing technology and more for the accelerator.

“There is a bipartisan consensus that we need to have a manufacturing base.”

Katie Rae, CEO of The Engine Ventures

In 2023, the company split the accelerator and venture firm into two different companies. Rae became CEO of The Engine Ventures while still serving on the board of The Engine Accelerator. A report co-produced by The Engine and Pitchbook found that their investment market areas saw a compound annual growth rate in funding of 21% between 2016 and 2023, compared to an average of 6% for other sectors, although they saw the same funding decline in 2023 as other sector venture investment areas did well.

A big driver of this growth, Rae said, has been a “major policy shift” from the federal government to strengthen infrastructure and climate technology with measures like the CHIPS Act and the Inflation Reduction Act, which put more government money behind these sectors and stimulate the economy. the private sector to do the same. “There is a bipartisan consensus that we need to have a manufacturing base,” she said. “The capital stack is much stronger than it was seven years ago.”

When it comes to climate technology, The Engine Ventures has a broad portfolio. It has invested in Commonwealth Fusion, which develops nuclear fusion technology. It also supports Form Energy, which builds iron-based batteries for the electric grid, and VEIR, which makes superconducting wires that can carry more electricity than copper.

The current AI boom – and the power-hungry chips on which it depends – is an area where Rae sees an opportunity to develop new classes of chips with lower environmental and financial costs. For example, there is Celestial AI, which builds chips based on energy-efficient light instead of electricity. Investments are also being made in companies that push the boundaries of quantum computing and other new hardware. “Power, climate and computing all go together,” she said.

Despite the size of his investments, Rae sees them all as interconnected. For example, its portfolio company Vaxess is developing vaccines that do not require refrigeration, improving both accessibility and sustainability. The lessons from the company’s first two funds, Rae says, are encouraging even bigger steps to tackle hard-tech problems with the third fund. “Let’s keep going and go even bigger because the potential capital returns and impact returns are huge,” she said.

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