MIT is investing $25 million in a potentially $150 million venture capital fund and opening a 26,000-square-foot startup space on the edge of its campus....But MIT hadn’t gone that route. A few months before she retired in June, former MIT Technology Licensing Office director Lita Nelsen told Xconomy she felt the Institute simply hasn’t needed to form a VC fund on campus because the school has no trouble getting “decent companies” funded. She raised concerns about conflicts of interest, clearly defining the mission of such a fund, and setting realistic expectations. Nelsen also presented a hypothetical scenario in which MIT spinouts that didn’t receive an investment from a university venture fund might have trouble raising money later from outside VC firms. “There’s a negative-select bias there for what we don’t invest in,” she said at the time. “So, better to [create] a level playing field for anybody who wants to play.”
MIT makes the announcement as follows:
The Engine is designed to meet an underserved need. In Kendall Square and Greater Boston, many breakthrough innovations cannot effectively leave the lab because companies pursuing capital- and time-intensive technologies have difficulty finding stable support and access to the resources they need.
They continue:
To fuel The Engine, MIT will seek to attract hundreds of millions of dollars of support and to make available, for entrepreneurs, hundreds of thousands of square feet of space in Kendall Square and nearby communities. The Engine will also introduce startups to their entrepreneurial peers and to established companies, in innovation clusters across the region and around the world: It seeks to power a network of innovation networks.
Frankly the above statement is in my opinion inaccurate on its face. There is a wealth of investment opportunities in the area, as in and around Stanford. It is a well running Darwinian machine. So why change?
Frankly I could not agree more with Lita. She had spend decades managing the MIT IP portfolio. As a result she had first hand experience in how VCs operate. Having done over 35 start ups myself, the investments are "ruthless". Namely the investment works or does not work. If it does then monetize it and if not burn it.
Fundamentally doing a start up is a "burn your boats" scenario. You leave the comfort of MIT, go to some cheap place, tell your story again and again, manage a team, raise money by selling a viable dream. You do not stay at MIT in some incubator.
I firmly believe that this will become a disaster. The amount of $125 million could be be spent better on MIT's mission, education and research, not high tech investment. It is worse than a telephone company trying to get into the entertainment business. It is a clash of cultures. Lita presented all the correct responses. However it appears that the ever increasing administrative hierarchy wants more and more stuff to control. Investments in and operation of a VC is NOT the way to go.
My first start up involvement was in 1969. An EG&G back company, it made one mistake and it was dean in a heart beat. How do you do this if your people are comfortable in a MIT owned and operated facility? Or is this the Millennial generations approach to high tech, never leave home and have perpetual care and up keep?
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