Tough Tech Today with Meyen and Miller

Tough Tech Venture Capital and America's Innovation Engine with Orin Hoffman

October 06, 2020 Jonathan Miller, Forrest Meyen, and Orin Hoffman Season 1 Episode 5
Tough Tech Today with Meyen and Miller
Tough Tech Venture Capital and America's Innovation Engine with Orin Hoffman
Chapters
0:00
Identifying investable technology fields
1:20
Joining iRobot
3:03
Military minesweeping and… a vacuum?
4:05
Deploying oversees to save lives with robots
6:13
How’d-I-get-here-moment: Nosediving into Iraq in a C-130
7:15
Frustrations with tough tech
8:27
The Engine’s investment thesis
10:51
Gaps in the ‘capital stack’ faced by entrepreneurs
13:34
Standing up better grant programs, such as the Endless Frontier Act
15:34
Identifying investable technology fields
17:57
Analytical Space: An example of a successful public-private partnership
20:07
VC perception of public-private partnerships
22:03
Understanding The Engine
23:47
Wetlabs, machine shops, and vast entrepreneurial workspaces
25:14
Our portfolio: Climate change, Human health, and Computing of Tomorrow
26:36
Balancing tolerance for technical risk and a startup’s potential for risk
29:11
Patient capital = 18-year timelines
31:02
Orin’s career pathway: engineering, government, investing
33:12
When a software engineer realizes he hasn’t booted into Linux in two years
34:09
A breakthrough area of tough tech?
35:25
Re-enabling and re-invigorating industries that left the United States
36:58
Workforce distribution and diffusion of innovation
39:50
Improving access to capital
40:33
Are distributed workforces compatible with tough tech companies?
41:30
The Engine is an experiment and is growing beyond Boston-Cambridge
43:02
TikTok, ITAR, and algorithms affecting psychological perception
44:32
Set-asides for tough tech companies promoting employment and on-shoring tech
45:27
If you were king for a day…
46:13
Early-stage tough tech startups need diversified capital
47:37
Supporting n = 1 startups with large financing needs
48:53
Tough tech entrepreneurs: “Come talk to us,” earlier rather than later
49:57
Must technical founders pair-up with a business partner?
Tough Tech Today with Meyen and Miller
Tough Tech Venture Capital and America's Innovation Engine with Orin Hoffman
Oct 06, 2020 Season 1 Episode 5
Jonathan Miller, Forrest Meyen, and Orin Hoffman

While aboard a plane nosediving into Baghdad, one may be forgiven for pondering how one’s life path could lead from vacuum cleaners to minesweeping robots. Yet, not only does Orin Hoffman, of MIT’s The Engine venture capital firm, share this humbling connection, but also how it advances an overarching narrative of the United States national industrial innovation base, VCs, and the crucial roles served by tough tech entrepreneurs. 

Public-private partnerships may not be what immediately comes to most people’s minds when asked about frontier tech, though government funding for basic scientific research has been commonplace in the United States for a century. “Patient capital” – a class of investors with a temperament to nurture big-bet science and engineering ventures – is helping to bridge gaps in the national “capital stack”, Orin shares on Tough Tech Today. We learn from Orin about how his team at The Engine cultivates their investment thesis, about whether a technical founder should find a business-savvy partner, and work-in-progress ideas for improving the United States as a whole by nurturing deeply technical startups via diversified, trusted capital networks.

Show Notes

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Show Notes Transcript Chapter Markers

While aboard a plane nosediving into Baghdad, one may be forgiven for pondering how one’s life path could lead from vacuum cleaners to minesweeping robots. Yet, not only does Orin Hoffman, of MIT’s The Engine venture capital firm, share this humbling connection, but also how it advances an overarching narrative of the United States national industrial innovation base, VCs, and the crucial roles served by tough tech entrepreneurs. 

Public-private partnerships may not be what immediately comes to most people’s minds when asked about frontier tech, though government funding for basic scientific research has been commonplace in the United States for a century. “Patient capital” – a class of investors with a temperament to nurture big-bet science and engineering ventures – is helping to bridge gaps in the national “capital stack”, Orin shares on Tough Tech Today. We learn from Orin about how his team at The Engine cultivates their investment thesis, about whether a technical founder should find a business-savvy partner, and work-in-progress ideas for improving the United States as a whole by nurturing deeply technical startups via diversified, trusted capital networks.

Show Notes

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Orin Hoffman:

I think there are always those surprising recollection moments in the career as you're looking back and that that How did I get here moment? I think the biggest one was my first trip into Baghdad on a C 130. They don't tell you this, but you know you're flying in at night. And then in order to, you know, be as safe as possible you get over the airport and essentially go into a nosedive to land and I kind of had this moment of man, life in western Massachusetts was like pretty nice. I find myself in a nosedive over a rock.

Announcer:

Welcome to Tough Tech Today with Meyen and Miller. This is the premier show featuring trailblazers who are building technologies today to solve tomorrow's toughest challenges.

Jonathan:

Welcome to Tough Tech Today with Meyen and Miller. Today, we have the honor of having Orin Hoffman, venture partner at MIT's The Engine investment group. Orin has quite the background in product development, specifically in robotics. So for example, he was a Chief Technologist at endeavor robotics, which itself was a spin out from his work at iRobot. And so with that, welcome, Orin.

Orin Hoffman:

Thanks. Great to be here. Yes.

Jonathan:

elaborate a bit on on who you are, and what you've been working on lately.

Orin Hoffman:

Yeah. One of those. Just thinking about before the show the weird career arcs that we take. So I think it's important to start a little bit earlier than maybe some guests. So I went to school in western Massachusetts, and was a, you know, to go Western Massachusetts hippie had hair down to my waist and was working at Mount Holyoke teaching after college. And I ended up getting recruited to join a company that was kind of pre its its growth stage in Boston iRobot, which for roboticist was a pretty cool opportunity. So moved to Boston and started working at iRobot iRobot, at the time, was really kind of a, you know, an r&d house doing a bunch of sbrs, and DARPA programs and things like that, but just kind of sussing out different areas of product that robot technology could be applied to. And then 911 happened in the conflicts, I merged. And it was a weird time when you think of a duel US company, because, essentially, almost simultaneously, there was this huge demand to figure out a way to rapidly translate all of these DARPA research robots into this needed element to protect our warfighters abroad, which was the improvised explosive device threat. And then at the same time, some of our government research had lent itself in a funny roundabout way to the Roomba vacuum cleaner, where, and this is true, and a lot of people don't know this, the actual original cleaning algorithm of the Roomba was based on a DARPA mind sweeping project algorithm. So it turned out that the to optimize the the clearing of a minefield was a very similar algorithm to the optimizing the floor coverage of a room and for floor vacuum cleaners, battery to coverage is always the the trick and so that kind of Roomba product was in its early infancy, and was was starting to take off. And I went towards the government and industrial side of the house. And just enter this this amazing moment in history for an engineer where we were essentially being asked by the government to to take these total prototypes and turn them into reliable rugged, small to large scale robotic systems that we could send out into harm's way so that our warfighters didn't have to go walk down the street to disarm a bomb. And I spent, you know, the next eight years responding to kind of these requirements overseas. And in so doing, somehow found myself in these product development cycles of around every six to eight months, we would have to design a new robot system. And I ended up deploying overseas to Iraq and Afghanistan on seven occasions to actually train and learn in the field, how the robots were performing. And so for me, it was an amazingly satisfying period of my career. Because you know, it's actually seeing the impact of your engineering, save actual lives. And that was sort of when I fell in love with tough tech because I was seeing you know, these these super high tech devices actually have a real world super impactful result. And then we we spun out endeavour robotics once after a little bit after iRobot went public for a number of reasons. And endeavour robotics was later acquired by one of the defense primes, FLIR systems. And around that time, I got tapped to join a early innovation. So within the government defense innovation unit experimental, which was stood up by Ash Carter, who is a longtime friend of tough tech, and has similar frustrations, as the engine has around why tough tech doesn't turn into real commercial companies for a national industrial base, and how we can better get government to collaborate with non traditional companies and private capital. And so for three years, I worked on the front lines of creative government contracting and reducing friction for non traditional companies to work with government, which was a natural kind of flow into my job at the engine, which, as a venture partner working with the investment team on investing in founders and tough tech startups, and I also run the engines government practice, to continue pushing forward with our government partners on on how to fund the various valleys of deaths that are that our companies see.

Forrest Meyen:

Wow, what what a journey?

Jonathan:

Yeah, that's sure sounds like it's, you know, one thing has led to another on a very, very specialized path. Did it look like that on you know, that on the past, you were, Was this something that it was like, I kind of I want to be in this position? Or that it that in some ways it it kind of evolved to be the case? Well, I

Orin Hoffman:

think there are always those surprising recollection moments in the career as you're looking back and that the How did I get here moment, I think the biggest one was my first trip into Baghdad on a C 130. They don't tell you this, but you know, you're flying in at night. And then in order to, you know, be as safe as possible, you get over the airport and essentially go into a nosedive to to land and I kind of had this moment of man, life in western Massachusetts was like, pretty nice. I find myself in a nosedive over a rock landing. But I you know, I think every tear point where I now as I look back at, it just seems like such a natural fit, in retrospect, but certainly couldn't have predicted it.

Forrest Meyen:

So you mentioned some of the, you know, the frustrations of working with the government for a tough tech company. Can you kind of elaborate on what those frustrations are?

Orin Hoffman:

No. Wow. Um, so, you know, I think what I'll say, first and foremost, is that there are a lot of folks in government right now that that recognize kind of the two important things, one from a, from a US perspective, you know, obviously, there's a whole conversation around China and the new economy or in industry 4.0, and where we sit and global competitiveness, and there are kind of obvious gaps to, to how we're supporting our national industrial base, both from a private capital and public capital perspective. And I think there is there's also a recognition that there is a, you know, an emerging mass of global problems, you know, COVID, being, you know, an obvious example of where our lack of infrastructure, and a national industrial base that can respond to global problems is the increasingly debilitating at the global scale. And so, you know, the thing that I love most about the engine and the engines mission is we are taking a swing at at these tremendous global problems that are incredibly difficult to run through the full lifecycle of the company. But you know, if successful, these will be the foundational companies of tomorrow. And so that's a, that's an incredibly exciting mission to be on. And one piece of our thesis as the engine was looking to get set up is that, you know, pure venture capital is is necessary, but not sufficient for these top tech companies. There is a network around these companies that has to exist that involves academia. It involves corporate partners, involves different types of financing through what we call the capital stack, especially as we look to later stage, and then there's a critical component of the government both at the early stage, and at later stages when these massive swing companies are looking to scale up. So where we see the two kind of biggest gaps in government funding right now is that your traditional government funding tends to support either companies that are gonna be focused purely on on government issues, and DD being the largest kind of SPI or budget, it's generally on DVD issues, and then kind of what I would call service provider type companies and both of those types of companies have a incredibly important role to play in our national industrial base. The gap that's left there is that current government allocation of capital is kind of being done in a vacuum to private capital, where it's not coordinated. So a big part of what the work that we and our partners are doing is trying to remove friction for these tough tech companies that need a combination of public and private capital. And there's a lot of creative programs going on within the government. And I just want to take a moment to tip my hat to the folks in government right now weigh, you know, left behind who are still fighting the good fight, and it is incredibly hard, incredibly frustrating. And it is a it is such a necessary thing. And I think we're seeing some really exciting results in these innovation programs that we're seeing emerge over the last couple of years.

Jonathan:

I have a question that mentioned about the the capital stack and access to capital is something that so many tough tech entrepreneurs are either facing or maybe haven't realized yet that that that can definitely be a crunch for them throughout various phases of their of the company's life. So is, could you clarify on like the trusted capital network, and the role that that group may play? If any, I'm part of this for the tough tech entrepreneur?

Orin Hoffman:

Yeah, so so there are a couple of initiatives within government to collect a network of private capital that is trusted capital, there's, I think you're referencing the trusted capital marketplace. But there's also DARPA, as investor working group, and several other networks of investors. And the government's motivation, there is just, you know, frankly, to make sure that, that they're pushing companies to collaborate with investors that come with, I'll just call it clean money, and the right motivations, but

Jonathan:

what that means the clean money and right motivations.

Orin Hoffman:

Yeah, you know, there's, there's, there's been a lot of study around kind of IP theft and foreign ownership. And so I think, depending on what kind of work the company is, is getting into, there's kind of different levels of safe capital or trusted capital that that a company needs to watch out for. And I think the government is frustrated that organizations like cepheus always have to go in with the stick and fix problems that happened. The things like the trust capital marketplace are trying to get ahead of that. And, you know, it's it's good to assemble those those cadres of investors, the engine is certainly one of them. But you know, that the organization of investors is kind of step one, what the government's next step needs to be is figure out how to incentivize those investors to invest in companies that are of national strategic value for national industrial base and national security industrial base, and then, you know, as a as a benefit to the government, the government can then leverage the extreme multiplication that having, you know, leveraging private capital gift of government, as well as giving the government early access to these companies, and only goodness happens when you create a community of government and corporate and academics around these companies. Because to my earlier point, for these companies to be successful, they need they need that community of all those stakeholders.

Forrest Meyen:

And now is most of the work to try to push towards that. Is that happening from within the government organizations? Or is there legislation pending that might, you know, assist with partnering with private capital?

Orin Hoffman:

Yes, so there's, there's some, some interesting programs going on. You know, the do E and NSF and army and appleworks is definitely leading the way on a lot of these matching grant programs, which I think is a great first step. acworks is generally focused a little bit later stage. But and, you know, it'd be great to stand up some of these matching grant programs at the seed stage to more effectively pull these breakthrough technologies out of universities, whether through the STTR SPR program or whatnot. But I think that at some point, there is a policy restriction on the way that the government needs to interact with these companies. You know, the government generally does not like to choose winners, it does not like to push chips in. It kind of smears risk around just by by nature, and spread money around and they're there for tough tech companies that are so capital intensive and have such a long runway. You know, we're not going to build the first global future. reactor based on stacking up a bunch of svrs. You know, we're not going to build grid level energy storage that way. So it's at some point, we need to open up both early and later stage capitals to support these companies. So there is legislation, things like the endless frontier act, I think, are positive moves. I think there's some reform of the SPR and sdic programs to kind of further incentivize and enable these, these really dedicated program managers to have more flexibility in how they interact with these companies and with the private capital markets,

Jonathan:

when with the considerations around the government environment, that a lot of these sounds like a lot of the companies that you work with, must interact, how does that influence the way that you go about to developing an investment thesis on behalf of the engine to figure out which, which areas of technology could be really interesting. And then furthermore, than sort of hunting for the whales looking for the really great teams that are exploring those areas.

Orin Hoffman:

And he's probably time for, for an anecdote, just to kind of bring things down to tangible I think it's traditionally VCs are a little bit wary of government investment in companies or companies whose whose kind of plan is to go after research and development contracts and whatnot. But where we've seen it really work is where the government aligns the commercial growth of a company and supported that commercial growth that also meets government product requirements. So you can call that dual use, you can like just good business, but that that to an investor is extremely appealing. And so I'll just give one example from one of our portfolio companies analytical space, they had a series of initial kind of early stage contracts with the Air Force. And that kind of helped on combined with the engine and investment helped kind of push their product roadmap and, and develop as a company. But then where it got really exciting is they were selected for the Air Force a stratified program, which is a very significant matching grant. I don't know if I can disclose the the number, but it's in the, you know, 10s of millions of dollars. And what that stratified contract does for a company like asi is enables them to essentially go out to investors and say, Look, we are we've established this public private partnership with the Air Force, where they are going to fund a significant portion of the initial capital expenses of putting these satellites up in space. And in return for that they're going to be a customer. For our data book, we've done the technical homework to make sure that we can interoperate with government assets, as well as with commercial assets. So we can also go after these commercial data markets. And so what that means to investor is, man, I'm now leveraging this public dollars with my private dollars to create, you know, significant leverage on on my dollars, and I have a government partner who is extremely competent at launching and testing space systems. And so there is goodness, sort of across the board in those kinds of public private private partnerships. And so, you know, I think that, you know, it's always hard to predict, and I don't want to put overpressure on the particular company, but I think that this, this moment, is going to launch them in a growth cycle that was was far higher than than they would be without this public private partnership. And I didn't mean to use launch, as upon but fair enough.

Forrest Meyen:

And you said that was the stratified

Orin Hoffman:

program. stratified? Yeah. So that afterwards has taken an interesting tact on kind of dividing up what they call small bets, midsize bets and big bets. And so the small bets are sort of the early stage sprs. And there's some mid mid sized bets in the couple hundred grand a couple of million. And then they want to make a couple of small bets, or a couple of large bets on kind of big swings that they recognized couldn't exist with just private capital, and couldn't have a market growth opportunity without public capital. And so asi was selected for that program, because there was a clear dual use application for their technology. And so that's that's just super exciting. And it's how public pregnant public private partnerships should work. We got to come up with a name that's not public private partnerships, because I feel like I'm doing Peter Piper every time I see

Jonathan:

you're doing well with it. With the public, private, now, give me your public private partnerships. As it as a coming from the venture capital point of view, have you found that that you or your colleagues would view that kind of the public work as non recurring revenue, and thus it may not? It may be a strategic value, but not necessarily like a like, wow, this on the path to IPO? Because the amount of money being made that stratify may have given 10s of millions of dollars, but that was kind of like a one time opportunity?

Orin Hoffman:

Yeah, that's a great question. So you definitely when when dealing with government, need to separate what is either research and development funds, or NRA funds that push you along your product roadmap, that for us, fundamentally, for a dual US company. You know, having government as an end customer is great, but you need to be commercially successful, first and foremost. So any government money that comes in that is distracting from that commercial roadmap, is bad money. But so you need to separate the NRA and research development dollars from government as a customer, which is a whole other bag of contracting worms and competing with defense primes and whatnot. But, you know, part of the value of things like the stratify is that not only did it provide the NRA to get, you know, the satellites up in up in orbit, which would be challenging to do piecemeal with venture capital dollars. But it also set up the Air Force to be a recurring data as a service customer, as well as open up the door to other government customers. And so I think you can sell to the government in more of a commercial way than just doing the typical program of records, and compete with defense primes on a battlefield that you're probably not going to win, if you just look at the statistics.

Forrest Meyen:

So can you talk a little bit more about, you know, what you do at the engine, for companies that might be interested in, you know, pitching to The Engine, what stage you're looking at, and what type of companies you're really looking to invest in?

Orin Hoffman:

Yeah, so the the engine is, it's many things, but it's, it's three things, we are a venture capital fund, we do have patient capital, so it's a longer fun life than than traditional venture capital. But we are a for profit fund. Because, you know, we believe that, in order to make these these companies scale and be globally impactful, and globally scalable, you know, they have to make money. So we have to make sure that we're, we're taking the biggest swings, we can, and doing the hard work of figuring out how to make these companies both impactfully successful as well as financially successful. And so that's kind of the fun side. But then there are other in order to make these companies successful and reduce some of the friction that tough tech companies have historically found. We provide infrastructure, so that's lab space, wet labs, Chem, labs, bio labs, etc, as well as working space. Because one of the the, the huge points of frictions for breakout technologies out of universities is, you know, it's very hard as a, you know, three to four person startup to buy millions of dollars of capital equipment right out of the gate. So giving giving companies a couple of years of space to figure out who they are as a company, what what their exact product roadmap, and then what their capital and lab space needs are moving forward, was a hugely critical part of the engine, we're super excited that you know, we have our place in central square. And in a couple years, we'll be opening up what we call our next space, which is several hundred thousand square feet. With many hundreds of entrepreneurs, it's going to be you know, where they walk in the Chocolate Factory of tough tech. And it's going to be just this incredible place to walk around and just see see the world change in front of your eyes. And then the third piece of the engine is what we call the network which I referenced earlier, which is the need to surround. You know, oftentimes first time founders, oftentimes technical founders, with other founders, with other like minded investors, with academia partners, with government partners with corporate partners. And and in so doing, we create kind of a network effect amongst the tough tech community. And it really is amazing to just watch how, you know a founder in a, in a energy company is can be going Through the same issues as a founder from a totally separate, you know, biotech company. The challenges that founders face in tough tech are are oftentimes startlingly similar, regardless of the space that they're in. You asked, what kind of companies we look at tough tech is, is the term that we use that, you know, we don't, we don't like to artificially been companies, but but generally speaking, we look at kind of three categories, companies that are involved in, in combating climate change. So that's where most of our energy portfolio companies go, as well as industrial companies, and really exciting space, human health. Which, you know, we're not investing in drug development or pharmaceuticals, really looking at exciting platform technologies, you know, whether it's how to use AI and lasers to build human tissue, just incredibly exciting game changing biotech, and then computing of tomorrow, which is things like quantum computing, software, and photonics and autonomous driving and, you know, just the kind of exciting component technologies that will have a significant effect on as we look at sort of advanced systems and what computing tomorrow is going to look like.

Jonathan:

You have your cover a large variety of topics, and it on the entrepreneur side, it may be the case that the problems I face in energy, may also have comparable issues like a founder that's in robotics, but then on on the investor side, these are, these are very different technical domains. So how do you get smart on a new topic that maybe of future sort of frontier investment interest?

Orin Hoffman:

It's great question. So we, we I guess, first and foremost, we don't ever believe that we're experts in the fields that the founders are, are coming to us with, if we are probably, you know, not the right investment, because even if a robotics company crosses the door, you know, three years, four years out of being a roboticist. And so, you know, it's actually oftentimes harder to view things where you have some expertise, and because you kind of know enough to be dangerous, I think, you know, we do do technical diligence on the companies, we have experts and academic colleagues and government lab scientists that that we pull in to, you know, certainly do a healthy technical diligence, but at the stage that our companies are in, you know, a big part of what we look at is, you know, the team, you know, is the founder, you know, the founding team, do they have, you know, the technical chops to plan the people that they're going to bring in, as well as the breakthrough technology in order to create this kind of globally changing company. And so we try to at the same time, but it's, you know, as with any investment, you're balancing kind of your tolerance for risk, tactical risk, with kind of your, your belief in the impact that this company could have. And I think it's, it's important to lean in to the fact that, if anything, is a sure thing, it's probably not tough tech, and we shouldn't be involved in it. So, you know, we're taking big swings here. And so there's always going to be a lot of a lot of risk, and you you just want to see a team that you believe can can not just break through the one wall, but the 1020 different walls that they're gonna have to break through and the in the time it's going to take them to, to really grow into the company that they want to be.

Forrest Meyen:

And you mentioned your patient capital, what is what is actually that mean? Like, what's the scope of that? 10 years, 20 years, he makes 100 year bets.

Orin Hoffman:

So timeline is always complicated. So it's a it's it's up to an 18 year investing timeline. But I, you know, I would, I would stress that when we think about timelines for these, these companies, you know, it may take quite a long time for you know, to create the next you know, GE of the US or the next, you know, foundational company. And so, you know, we we spent a lot of time thinking about not just Investment today, where we're, you know, early stage seed round series around investors, but also, what is their full capital stack gonna look like in order to reach the ambition that that they're laying out? And, you know, we spend quite a bit of time you're working with other financial partners to figure out, you know, can we fill those gaps with the mechanisms we have today? Or do we have to go find the partners and, and figure out a way to fill those gaps. And I think that is a that is a really exciting part of the job, because figuring out, you know, how companies can go from, you know, a relatively small seed check to building a $200 million, first of its kind plant at doing something is, you know, these are not typical, invest in software and flip it into yours for whatever it is. And, you know, I think that, that that's a really exciting part of our mission here.

Jonathan:

How goes back back to some of your earlier days, when you were a software engineer, yeah, fresh faced, I get it, presumably, out of out of college software engineer at iRobot, which I'm sure was probably a exciting gig for you. And and now, how did you start to move toward this, this interest on the business side of thing, sort of things where you are now on venture capital, I guess, is technically a part of financial services? So

Orin Hoffman:

yeah, it's, it's great. So I, you know, I took it, a detour through government on my way there. And I think that that was sort of the thing that kind of flipped in my head, you know, I, the most satisfying part of my career, as I said, was, you know, that, that feeling that the the technology that you were developing was having an impact, and quite literally saving human life. And that was kind of one widget saving one person. And as, as I went to government, and I saw these, these companies that were attacking kind of larger problems, but it still had that same feeling of, you know, if we can apply this technology and actually build a company around it, you know, you can have effect on not just one person, but on the entire world. Right. And so, yeah, I guess as I as I got older, it just, you know, moving into to investment role, just felt like, given given my experience in government that I had something to bring to the table on my experience, as a as an operator within a tough tech company. And that this is a way that that I can just in any small way out push these kind of more global swings. And that's just a just an amazing part of being at the engine and just feeling that that energy around that mission, every day that we used to go into work.

Jonathan:

Everybody wants to know, or at least me is, is it? Have you chosen to keep up the coding skills, since since you're three years out of robotics land?

Orin Hoffman:

Yeah, there, there comes a moment. You know, whether you're you're an individual contributor to company, and you go up through the management track, or in my case is went off to government. And you have this moment where you look back and you're like, man, I haven't booted into Linux, and like two years, and then your laptop breaks, and you buy another one, and you don't even bother to install it. And then you're like, Okay, that was it. But I do I do help my nephew, do stem type robotics, and I still try to do some stem workshops, when I have the time. So give me a Lego mindstorm and I can still, you know, throw a couple things together as my coding days are sadly over of anything more advanced than that.

Forrest Meyen:

What do you see as the area of tough tech that you're most excited about right now something that you think's gonna have the big breakthrough that if the United States can can seize it and create a company around it could really increase our standing in the world. It's not

Orin Hoffman:

an individual company. But I think I think all of us have gone through a time of reflection during this kind of COVID epoch. And one of the things that I experienced deeply in government working with with God is, you know, there is certainly a very real global competitiveness, state of affairs, especially with China and you know, kind of where, where we're going to be able to economically and militarily compete and I think there is if that motivates the the government and the citizenry to push tough tech companies farther along than I think that's a great motivation. But I'm I'm also motivated by these changing trends in a world and making sure that we figure out ways to apply technology and capital to equity. And so when I think about what has happened, just looking at the US and you know, the offshoring the the drying up of low and mid wage jobs, I think that there is a scenario in which we can make investments into enabling technologies and companies that will enable us to pull some of these industries that have basically shuttered in the US are in the process of shuttering or offshoring back into the US and offer not just high tech jobs, but also jobs for the whole population. And I think, you know, when you look at companies like Boston metal, which is, you know, a distributed metal manufacturing, technology that has the capacity to totally revolutionize the industry, and also provide amazing industry jobs to a cadre of people that are I, I think we all are concerned that are being left out of the economic growth that some of the country is seeing, and we have a lot of companies that are in that arena, via separations. synergy, you know, the list goes on and on. But I but I think that that that trend is something that I would very much like to lean into, as we kind of do this introspection around COVID. And look at what's on the other side, for this economic recovery that needs to happen.

Jonathan:

Is there a are there some fundamentals that you may have seen that a an engineer, or business person working on a frontier technology, trying to commercialize it, some fundamentals that that would translate beyond just in the United States? For the many folks that are working on on tough technologies outside the US?

Orin Hoffman:

So are you asking me to contrast like kind of what China's strategy to develop their national industrial bases vise, the US strategy or more entrepreneurial level,

Jonathan:

on the entrepreneurial level for now is, for example, if we have a team, that's whether they're based in, say, in the UK, or in part of Africa, what are there some fundamentals that you've seen that were because they're not necessarily part or easily looped into some of the specialness of the US ecosystem? Or especially like the Cambridge Boston ecosystem?

Orin Hoffman:

So that's a great question. And I actually think if, if there was a, a, one of the the benefits that we've seen, as we've all tried to figure out what what work is like in the time of COVID, is you right now, capital is essentially spread to a couple of different focus areas, Boston, New York, Austin, Silicon Valley, etc. And it leaves a lot of potentially innovative hubs in the US, and across the around the world, in the cold from a capital perspective. And one of the things that we've seen that has actually been heartening with this distributed online workforce is companies that historically would only hire locally, which kind of keeps these high tech jobs, either brain draining from the Midwest or just leaves folks out have the ability to participate in that part of the economy. There's been this willingness to open the aperture to run the experiment of having a more distributed workforce. And I think what they found is that they found talent in places that they didn't suspect were there. And that had been incredibly useful. And that's not just in underrepresented places in the US, but also globally. So then we may see over the next several years, during the to the mid COVID, and eventually the post COVID, new normal, that

Jonathan:

aspirationally, that there may be more variety of choices of where someone can choose to work to work on this kind of technology, and it's not going to be just in some of the main capital investment capitals.

Orin Hoffman:

Yeah, I think that would be a terrific outcome. I mean, the there there's, there's a pretty significant disparity in access to capital and hopefully these workforce evolutions, as well as some of the efforts like an analyst frontier act of creating regional Innovation Hub. And underrepresented areas can help kind of diversify that access to capital. Because I think if there's if there's one thing that is kind of a truism in in startup communities that, you know, obviously, it's impossible to predict which founders are going to be successful or not. Otherwise, there'd be no such thing as VC. And I think there is. There are a lot of different types of founders out there that could work on a lot of different types of companies. And I think the more that we can open the door to those types of founders, especially underrepresented founders, I think that is that is part of our mission at the engine as well.

Forrest Meyen:

Now, how much does that distribute pneus of the new workforce effect of tech companies, though, because one thing that you mentioned as a resource that the engine provides is, you know, these lab spaces and these expensive machines. And so there's still going to be a very centralized aspect, at least the work that you're doing.

Orin Hoffman:

Yeah, absolutely. I mean, at some level, when you got to run a centrifuge, you had to be in front of a centrifuge. But I do think that there are, especially when we look at the increase in these regional hubs. And the one of the things that we try to do at the engine from an infrastructure perspective is not just provide organic infrastructure from the engine, but also to partner with all of the amazing infrastructure that's in the Boston area. So you know, there's a supercomputer in Western Mass and, you know, Natick labs has certain capital intensive equipment and MIT Lincoln labs has an amazing foundry. And so to create a frictionless way for our founders to be able to collaborate with both that equipment as well as with the research scientists in those locations, has been a big effort for us over the last couple of years. And I think, you know, we'll see, we'll see how it goes. But I think that that can be expanded on a geographically diversified basis.

Forrest Meyen:

So in the long term, you're saying the engine might also be focusing like, how much do you focus on investments around Massachusetts, around Cambridge, are you kind of expanding your focus to be more nationally,

Orin Hoffman:

whether you should be noted, that, you know, the engine fundamentally is, is a great stacking up of different experiments on how to best support the tough tech ecosystem in the US and globally. And so, in the first couple of years of the engine, you know, it was very important to have this kind of cohort, mostly local model, we've done some experimental investments in companies outside of I shouldn't say experimental investments, we've done some investments as experiment. outside of Boston, we have a company in Oakland and company, Houston. And those have been working out great. And, you know, so we'll, we'll see how how the engine evolves over time.

Jonathan:

What's your perspective on on a, we might call a non tough tech company Tech Talk, and some of the the issues that have emerged from that where there's a focus on the algorithms and the opportunities or dangers of having perception, psychology influenced by what's shown to individuals on mass.

Orin Hoffman:

Yeah, I'm gonna punt on that I have too much on my plate to deal with the tick tock dramas. Tough tech is hard enough.

Jonathan:

Good, that does come down to things like CPS, right, and sort of the nation state issues that that we come up against them on top tech, but now in a more consumer oriented play.

Orin Hoffman:

Yeah, I think it's it's definitely rocked the consumer simar world. But I will say just on cepheus and ITR restrictions in general, that we really need to move as a national strategy from again, this just sort of stick approach to preventing companies from growing through foreign capital and things like that to adding a carrot where, you know, if if we declared a national strategy to unwind a deal, then there needs to be some way that the government is providing an opportunity for those companies to grow. And right now, that's not really a seamlessly and frictionlessly running system. And so is my hope that as we look at, you know, who knows what, what happens in the next administration, but if we look at significant infrastructure investments being budgeted for in Congress right now, is my hope that significant dollars are being set aside for these tough tech categories that will move the needle not just for the Companies but for, as I mentioned across the board employment and will allow these companies to stay in the US and not go overseas, whether they're going overseas to get capital or to, you know, cheaper labor or whatever it is. And so, you know, I think that there is a, an investment in tough tech that is, is yet to come. And the cepheus problem is just sort of the tippy tip of the iceberg of that.

Jonathan:

If you were then like King for the day, what how might you go about changing to add some of that incentive incentives? to better align the whole marketplace or industry?

Orin Hoffman:

Are you authorized to make me King for the day?

Jonathan:

Where's my little Burger King [crown]?

Orin Hoffman:

Well, I will, I will just lay out two sort of tactical but but sweeping policy recommendations that we're actually working on now. So it's a timely question. And it is kind of goes to how the government supports both early stage and later stage valleys of death in the earliest age, you know, one kind of fundamental assumption for tough tech, as I mentioned, is that it requires a lot of diverse types of capital, of which, you know, government putting capital in in a vacuum has historically not been that effective in pushing tough tech companies forward, given tough tech company capital requirements. And the venture capital community, likewise, has not been as effective as it needs to be in investing in these companies in the early stage. So figuring out a way to create a pretty significant consortium of money and entrepreneurs, you know, whether it's $500 million, or billion dollars, in order to essentially match up entrepreneurs that get investment of private capital, that then you know, much like appleworks is doing with their later stage matching matching grants, where these companies get matching dollars from the government, which kind of avoid them having to spend a bunch of time applying for two different kind of low probability when SPI RS and whatnot. So really to incentivize both government and private capital to work together at the early stage. So I think there's a small fund of that, that would be great to see Congress push through and to provide the policy leniency for for the government to be able to execute on that kind of a vision. And then, really importantly, in the later stage, as we're looking for, first of its kind, these are companies whose pilot projects, you know, the n equals one, don't currently have a natural fit in the capital stack. So you know, once you've built your third plant, and you've proven the revenue model, and whatnot, you're eligible for project finance and debt and sort of other kind of traditional financial structures. But if you're building a 100 $200 million, first of its kind plant, it's it's hard to get traditional finance for that. And so things like the DMV Loan Program Office, have been historically stood up to help reduce friction in those. And so I think a, one of our recommendations is for a more national tough tech Loan Program Office to be stood up so that, you know, across the board for these big swing companies, there's a way for the government to help back. Finance, that that goes to these first of a kind projects. So those are my two kings for the day policy swings.

Forrest Meyen:

Well, now that now that you're on, you know, the wide audience of tough tech today, you know, people hear those and probably make it happen, right?

Orin Hoffman:

Yes, make it so. So

Forrest Meyen:

well, we're getting to the, to the end of the time slot. So we just wanted to give you a moment, if you had any last things to say, to our audience, especially anyone that's aspiring to found a tough tech company or maybe, you know, has an idea and a technology that they're trying to commercialize. What advice would you have for them?

Orin Hoffman:

Yeah, come talk to us. I mean, I think one of the things that that you we really lean into is spending time with potential founders and entrepreneurs. I mean, it is a is a fundamental core part of our mission to be in various academic and government labs. And, you know, for folks that maybe you've never considered the entrepreneurial path, just to kind of help mentor work with programs like icore and activate and programs like that, and the innovation that MIT has several great programs. But, you know, I think there's a historical misidentification. That, you know, technical founders, you know, need to go find an MBA or whatnot. And that is not something that we lean into. So we, we encourage you, if you are a technical founder that isn't sure exactly what their ideas and but just kind of wants to explore taking a swing at whether your piece of breakthrough technology is commercializable you know, please reach out we have a link on our website where you can just sort of put a couple of sentences in on your idea and we will talk to you because it is the the best part of our job is, you know, talking to early stage potential entrepreneurs and and, you know, in the hopes that we can, you know, make an investment in them and in their dream and so, talk to us earlier rather than later, I think would be my message to entrepreneurs that are are thinking about it.

Forrest Meyen:

Awesome. Thank you very much. We'll make sure we put that link in the description of the video and the podcast, so people can check that out.

Orin Hoffman:

Awesome. Well, it's great spending the hour with you guys. Thank you for what you guys are doing I think it's a really enjoyed the the podcast so far. Hopefully your blooper reel on me is the first of a long real but appreciate the time.

Jonathan:

public private placement.

Orin Hoffman:

There we go. Had to get it.

Jonathan:

Yeah, I had to really think about it constantly. Well, thank you so much, or and we really appreciate having you on the show.

Forrest Meyen:

Thanks for joining us on this episode of tough tech today. If you enjoyed the episode, please leave a five star review on any podcast app, or give a thumbs up and subscribe on YouTube. Next week. We'll be sitting down with Mazdak of Trace atters, and we'll be discussing how he got his mass pectrometer company off the ground. Thanks again and stay toug

Identifying investable technology fields
Joining iRobot
Military minesweeping and… a vacuum?
Deploying oversees to save lives with robots
How’d-I-get-here-moment: Nosediving into Iraq in a C-130
Frustrations with tough tech
The Engine’s investment thesis
Gaps in the ‘capital stack’ faced by entrepreneurs
Standing up better grant programs, such as the Endless Frontier Act
Identifying investable technology fields
Analytical Space: An example of a successful public-private partnership
VC perception of public-private partnerships
Understanding The Engine
Wetlabs, machine shops, and vast entrepreneurial workspaces
Our portfolio: Climate change, Human health, and Computing of Tomorrow
Balancing tolerance for technical risk and a startup’s potential for risk
Patient capital = 18-year timelines
Orin’s career pathway: engineering, government, investing
When a software engineer realizes he hasn’t booted into Linux in two years
A breakthrough area of tough tech?
Re-enabling and re-invigorating industries that left the United States
Workforce distribution and diffusion of innovation
Improving access to capital
Are distributed workforces compatible with tough tech companies?
The Engine is an experiment and is growing beyond Boston-Cambridge
TikTok, ITAR, and algorithms affecting psychological perception
Set-asides for tough tech companies promoting employment and on-shoring tech
If you were king for a day…
Early-stage tough tech startups need diversified capital
Supporting n = 1 startups with large financing needs
Tough tech entrepreneurs: “Come talk to us,” earlier rather than later
Must technical founders pair-up with a business partner?