Atlas Venture partner: Avoid that startup accelerator

MIT venture capital conference features discussion on crowdfunding and the rise of the “Internet of Things”

December 18, 2014

Atlas Venture partner Chris Lynch

Atlas Venture partner Chris Lynch

Venture capital is “broken,” Atlas Venture partner Chris Lynch said in a keynote talk at the 17th MIT Venture Capital and Innovation Conference.

Introduced as the “Johnny Rotten” of venture capital, Lynch took the stage Dec. 12 at Royale nightclub in Boston in jeans and a black T-shirt and predicted that the days of “blue blazer, pedigree guys without operating experience” are numbered.

“The time was when having money was enough,” Lynch said. “That time has changed. The ‘new school’ [of investors] will have operating experience that can add value.”

Investing in startups, he said, is on the verge of dramatic change, as opportunities for investing by individuals increase. The time it takes to raise funds will go from months to hours through online crowdfunding and syndicate investment programs like AngelList, Lynch predicted.

“Anybody who's a qualified investor is simply going to be able to just invest with no friction and complete transparency, in the same way all of us can invest in the stock market,” he said.

Accelerators that take equity will disappear, Lynch said, likening them to modeling schools that dangle the hope of stardom to families from poor neighborhoods. Accelerator programs that take equity in startups in exchange for limited seed money, he said, are similarly predatory. He advised entrepreneurs to steer away from them and toward investors with operating experience who can add real value.

An update on the “Internet of Things”

A panel about the “Internet of Things” explored the future of connectivity in an age where everyday objects are being connected, controlled, and monitored through the Internet. While panelists celebrated innovations like the Nest Learning Thermostat—a household thermostat that monitors residents’ activity and optimizes home heating through a smartphone app—they also questioned what should be connected, and whether some applications border on the silly.

“Why do I care if my coffee maker is connected?” asked moderator Hyuk-Jeen Suh, director at Samsung Ventures.

Maria Thomas, chief consumer officer for SmartThings, said the proliferation of smart phones, lower cost of sensors, and other infrastructure innovations is still relatively new. Her company markets a home management application that monitors formerly non-tech home features such as door locks, and can alert users to, say, whether the basement is flooding.

“The ‘smart home’ will mean many things to many people, but we’re in the early days of the curve,” she said.

Zaid Ashai, general partner at Point Judith Capital, said every advance in connectivity carries with it increased security risk. So much so, he said, that there are things, like power plants, that should not be connected.

But, Ashai said, the infrastructure now exists for a massive proliferation of data with large implications for everything from water supplies to the insurance industry.

“The cost of sensors, of connecting to the Internet, has come down dramatically, enabling real-time data with enabled sensors,” Ashai said. “The biggest limiting factor in so many verticals is now batteries.”