Updated: Highland, Charles River, Others Back New Incubator In Bold Move To Stay Relevant

Incubators such as Y Combinator, TechStars and 500 Startups Accelerator are reshaping the seed company landscape. VCs know they need to respond. But they aren’t sure how.

On Monday, five top firms including Charles River Ventures and Highland Capital Partners took a step at becoming more relevant in seed investing.

They came together to form CriticalMass, an incubator that will exist inside the Cambridge Innovation Center incubator in Boston. By doing so, they appear to want to copy the high-volume spray-and-pray Internet startup strategy modern incubators deploy.

The costs of starting Internet companies are lower than ever before, thanks to distribution and customer acquisition costs that have fallen through the floor thanks to platforms like Facebook and Twitter. With costs so cheap, why not fund large batches of companies and cull the best?

This is how seed funds and incubators are stealing the Internet thunder from traditional VCs, who might in the past have incubated one or a small handful of companies in preparation for a $3 million or so Series A round. These Series As now come later in a company’s development, and VCs are losing some control over the early ecosystem. This is especially true as incubators and angels offer small pots of funding at very attractive terms.

CriticalMass appears to want to respond. It will comprise 2,500 square feet of space with branded conference rooms and pay the $250-a-month fee for 48 startups to work in the Cambridge Innovation Center’s co-working facility, according to a report in the Boston Business Journal. Update: The firms describe the space as desks for entrepreneurs and shy away from the phrase incubator. But they say it should give them visibility into company development at an earlier stage and could be a source of deals.

Along with Charles River and Highland, Flybridge Capital Partners, Bain Capital Ventures and the New England Capital Association are behind the effort. The firms will provide mentoring and other programs.

In this changing world, joint efforts are a smart move. Expect to see more of them.