After Escher Exit, MIT Sandbox Aims to Mold More Student Startups
[Editor’s note: This is part of a series of stories examining entrepreneurship on MIT’s campus and beyond.]
It also provided some validation for MIT Sandbox, the program that gave Escher—a developer of back-end software tools for augmented reality applications—an early cash infusion two years ago. Niantic’s purchase of Escher marked the first acquisition of a company from Sandbox’s program, a two-year-old initiative on MIT’s campus that offers entrepreneurial students up to $25,000 in grant funding, entrepreneurship education, and connections with mentors, such as venture capitalists and corporate executives.
Sandbox was one of several fueling stations along Escher’s road to the exit. Other stops included participating in the National Science Foundation’s I-Corps program hosted on MIT’s campus, the MassChallenge startup accelerator in Boston, and the Y Combinator accelerator in the Bay Area. But Sandbox was an important spark for Escher, co-founder Ross Finman says.
He was pursuing a PhD when Escher (formerly known as AR Spirit) got support from Sandbox. Without such a program, student entrepreneurs might expend a lot more time and energy trying to grab small amounts of early-stage funding—“chasing after little rabbit holes,” as Finman puts it. Sandbox also gives students a safe environment in which to explore whether their ideas can translate into real-world products, he says.
“It provided us the resources and the structure to incubate the idea,” says Finman, sitting in the office of Sandbox executive director Jinane Abounadi during a recent visit to campus. “There is now no reason not to try these things.”
Through the fall of 2017, Sandbox had doled out $3.1 million in equity-free funding to approximately 1,400 student entrepreneurs working on 707 ventures that span software, mobile apps, hardware, healthcare, and other sectors, according to data shared with Xconomy. (See more detailed data in the box below.)
Sandbox is “giving lots and lots of students a little bit of juice to start their voyage,” says Amir Nashat, a partner with the venture capital firm Polaris Partners. Nashat’s firm was one of the initial organizers and sponsors of the program. Other Sandbox sponsors include investment firms such as General Catalyst Partners, Pillar Companies, and Accel, and companies like Amazon, Philips, Tata Group, and Danaher.
Over the past few years, MIT has been investing more in initiatives aimed at fostering innovation and entrepreneurship. In addition to Sandbox, other campus programs launched in recent years include the MIT Innovation Initiative, intended as a connector of various campus entrepreneurship groups; StartMIT, a two-and-a-half-week course that exposes students to startups and helps them refine their innovative projects; STEX25, a program focused on helping startups form partnerships with big companies; and DesignX, a startup accelerator run by MIT’s School of Architecture and Planning.
But the biggest splash was made by The Engine, a $200 million venture fund and incubator created by MIT, located on the outskirts of its campus in Cambridge, MA. The Engine is set up as an entity separate from MIT and is open not just to MIT-born startups, but the Institute kicked in $25 million as a limited partner in its debut fund.
As Xconomy has chronicled over the past couple of years, MIT’s more urgent focus on nurturing entrepreneurship comes amid a boom in startup interest among prospective and current students, as well as a more supportive attitude from the Institute’s administrators. Other big research universities around the country have also ramped up support for would-be company builders, with recent programs at Harvard University, Stanford University, the University of Washington, and the University of Wisconsin-Madison, among others.
|MIT Sandbox by the numbers|
|Program stats through fall 2017|
|—$3.1M in grants awarded|
—51 percent of teams received less than $1,000
—36 percent received $1,000-$5,000
—13 percent received $5,000-$25,000
—707 ventures funded, 43 of them nonprofit
—1,400 entrepreneurs supported; 69 percent men, 31 percent women
—32 percent working on bachelor’s degrees
—25 percent in MBA programs
—22 percent in other master’s program
—21 percent pursuing PhD
|Source: MIT Sandbox|
While a better-funded effort like The Engine might grab more headlines, a program like Sandbox is worth watching, too, because it focuses on earlier-stage ventures and touches more students. Its leader, Abounadi—a former executive at Kayak and ITA Software (now part of Google)—sees Sandbox as the top of the funnel that leads promising ventures to other groups that can support them. If her program helps mold students into promising entrepreneurs, that boosts the rest of the startup community, she says.
“I think we make a program like The Engine also stronger because we’re here incubating ideas and” helping entrepreneurs advance “to the point where they can compete to become part of The Engine,” Abounadi says.
Indeed, one of The Engine’s first investments was in Kytopen, a Sandbox alum, she says. Several Sandbox participants have also gone on to the Y Combinator program, she adds. Other notable achievements by Sandbox alumni include Lightmatter recently closing an $11 million venture funding round.
Two of Sandbox’s selling points are its accessibility and flexibility, Abounadi says. The threshold for receiving a small amount of initial funding is relatively low, and teams can apply for additional cash as they demonstrate progress—developing a product prototype, conducting market research, meeting with potential customers, and so on.
Through last fall, just over half of the teams who had received Sandbox funding were awarded less than $1,000. Around 36 percent of teams had received between $1,000 and $5,000, and 13 percent had received between $5,000 and $25,000, according to Sandbox data.
“Our $1,000 level is really the way we bring in students at stages where they’re really exploring their ideas, and it’s time where they can use some resources and funding to decide if it’s [worth] going after this idea,” Abounadi says. If an idea doesn’t pan out, the team might switch to another one, or perhaps step back from the program to take relevant classes and develop their skills, and then apply to Sandbox again later, she says.
Sandbox holds sessions in the spring, summer, and fall, and there’s no limit to the number of semesters that a team can participate in the program, Abounadi says.
Polaris’s Nashat sees Sandbox as a valuable addition to the local tech ecosystem, and he says his firm’s sponsorship of the program is “already paying dividends” in the quality of deal pitches Polaris is receiving from ventures coming out of MIT.
“The entrepreneurs are a couple years more educated, and they’ve had the experience of raising money, using money, asking for more money,” Nashat says.
Sponsoring Sandbox could give Polaris an early look at startups and entrepreneurs it might invest in, but Nashat says that’s not the firm’s priority. (Sponsors and mentors agree to put students’ education and interests first, among other official Sandbox guidelines. Hard to say exactly how that’s measured, but MIT can remove partners from the program if it deems they violated the rules.) The goals are more about ensuring the environment for startup creation at MIT and the greater Boston area is “healthy and sound,” Nashat says.
Sandbox contributes to MIT having “a very dynamic and open culture around entrepreneurship,” Nashat says. In the past, he says he would speak on campus, and he would feel conflicted when students with good ideas pitched him after the event. He found it difficult to recommend the student drop out of school because the venture might fail, and the person could “end up in a bad way in life, and I’m going to have this karma hanging around my neck,” he says.
Being involved with Sandbox can help resolve that issue. The program is designed to give students an opportunity to try their hands at entrepreneurship as part of their campus education.
“We have to be very sensitive to the academic constraints that they have and the fact that they need to focus on completing their academic requirements and research requirements,” Abounadi says. “We have to be flexible.” (Of course, the program can’t stop students from dropping out of school anyway to focus on their startup.)
An outcome like Escher’s sale makes Abounadi happy for the entrepreneurs, she says. It was also lucrative for her program; Escher said it would donate an unspecified amount of money to Sandbox after its acquisition, following through on a voluntary pledge all participating entrepreneurs sign. But Abounadi insists exits are not her main goal.
“Some of [the participants] will go on to build companies, but some of them won’t,” she says, noting that some students might opt for jobs at large corporations or in academia. “The main thing is that they take what they learned wherever they go next. Ultimately, our measure of success is just how we impact the students.”
[Top photo of Sandbox participants taken by Lillie Paquette, published courtesy of Sandbox.]