More on Nano-Investing, as Promised

To get a pulse on what is going on in the diverse, often misunderstood "nano" market, I turned to my good friend Ed Moran, of the Technology, Media & Telecommunications Group at Deloitte Services LLP. Ed has been following the "nano" industry for the past five or six years, working closely with the Nanobusiness Alliance (which focuses on public policy issues for the industry), testifying on Capitol Hill and working with companies working in the field. He reports that the hottest area in nanotech right now is "cleantech," a set of emerging technologies that promise to protect the environment, remediate existing environmental issues, provide renewable or lower-impact energy sources (such as solar cells, fuel cells, better catalysts that would reduce pollution, advanced materials which lower the weights of structural materials, hence resulting in better fuel economy.) "Due to the unique properties matter has at the atomic and molecular scale, nano innovations are showing up in everything from better water filters to more efficient solar panels to more sensitive sensors," he says. Another hot area, according to Ed, is in the life sciences arena. "Drug discovery and drug delivery will likely be the areas most significantly impacted the earliest," he says. "Starpharma Ltd from Australia is doing exciting stuff, as is Combimatrix on the West Coast." Ed sits on the Committee to Review the National Nanotechnology Initiative, and reports he´s seen advances are coming from all across the spectrum -- from universities to start-ups to Fortune 500 companies like IBM, Motorola and Dupont, but says that, in his opinion, VC investing in nanotech has been limited up to this point. "Nanotech isn't like information technology," he says, "where product time horizons are short and the work can be done in your garage. Nanotech requires significant infrastructure (equipment, labs, clean rooms, etc) and is very much basic research right now that has a long way to go to commercialization. The typical nanotech innovation doesn't go from theory to commercial product in the type of time frame that permits a VC to see the kind of `relatively´ short-term ROI that they need for their limited partners." He points out that there have only been a few IPOs in nanotech companies--Altair, Advance Nanotech, Biophan-- because of the relatively early stage of the nanotech's lifecycle. "I predict that there will be a flood of nanotech IPOs and M&A activity over the next 4 to 5 years," he says. Ed says that some data indicates only about two percent of VC investment is in nanotech, but that he believes it could be more. "It´s easy to classify an investment as `advanced materials,´ or `electronics´ or `microprocessors´ when it´s really a nanotech innovation that´s being invested in," he says. VCs who ARE leading investments in Nanotech, according to Ed, include Harris & Harris Group Inc., Rockport Capital Partners, ARCH Venture Partners, Morgenthaler Ventures, Venrock Associates, and Lux Capital. Ed recommends Lux Research as a source of information on nanotech investment and other nanotech trends. Check back soon for highlights on the above-mentioned firms most recent and/or successful nano-investments. Janet's Running List of Venture Conferences: The Big Sky Venture Capital Conference August 24-25, 2006 Big Sky, Montana Dow Jones´ Emerging Venture 2006, October 16-17, 2006 The Fairmont Hotel San Jose, California National Venture Capital Association 13th Annual Silicon Valley Venture Capital/Entrepreneur Networking Luncheon December 7, 2006 Hotel Sofitel, Redwood City, California