Investors interested in nanotech

By SCOTT R. BURNELL, UPI Science News  |  Oct. 12, 2002 at 7:10 PM
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BETHESDA, Md., Oct. 12 (UPI) -- Investors of several stripes are interested in nanotechnology, despite the bruising experience of the dot-com implosion, several financial experts reported at a weekend conference.

Some observers have postulated that nanotech, the science of manipulating matter at the atomic or molecular level, takes too long to develop, hurting its chances of attracting investment, said Ed Niehaus, president of Neihaus Ryan Wong, a Silicon-Valley based public relations agency for new technology companies.

Niehaus, moderating a venture capital panel discussion at the 10th Foresight Conference on Molecular Nanotechnology, said improper expectations could be key to the situation.

"When people think of new things, they write it on a stick and throw it out to a time horizon," Niehaus described to attendees. "As they pass that horizon, they might think, 'That thing hasn't come to pass yet, it must not be real.' That's a very real danger for nanotechnology as a whole."

Regardless of whether or not such sentiment exists, reasonable nano projects are attracting investment, said Robert Hemphill, managing director of Toucan Capital of Washington, D.C.

"If there are good companies and business plans to be found, (venture capitalists) are interested," Hemphill said.

Of the 100 or so nanotech proposals Toucan Capital has received recently, one has been approved and another is on the verge of getting an OK, Hemphill said. That 2 percent acceptance rate is better than the fund's biotech or information technology categories, he said.

Jennifer Fonstad, managing partner at the national VC firm Draper Fisher Jurvetson of Redwood City, Calif., said her funds are well-acquainted with nanotech, having funded eight startups at an average of $2 million apiece.

Many investors are willing to provide initial funds for promising nano research, Fonstad said, even if real-world products are not expected for nearly a decade. For example, her firm is working with a company that has long-term plans for computer memory based on carbon nanotubes -- hollow cylinders of carbon with walls one atom thick.

Second-round and later investments, however, require close observation to deal with longer product development timelines, Fonstad said. Hemphill agreed committed investors will require a time-to-market plan of five years or so. The greatest concerns arise when researchers cannot demonstrate experience in commercializing a discovery, Fonstad said.

Interest in the field is not difficult to understand, said Bruce Mehlman, the U.S. Commerce Department's assistant secretary for technology policy. Even if informed estimates of a potential $1 trillion nanotech market within a decade are too optimistic, there still is plenty of financial opportunity, he told the conference.

The perception of a "funding gap" is most likely the venture capital community returning to a more rational decision-making mode, as opposed to the dot-com boom, Mehlman said. Individual "angel" investors, who devote personal fortunes to promising concepts, are following a similar path, said Alex Wong, a partner in the Apax Partners fund, of Palo Alto, Calif. Apax has funded one nano startup and is interested in several more, Wong said.

The conference is organized by the Foresight Institute, also of Palo Alto, Calif., a nonprofit organization working to ensure the proper development of nanotech and other emerging applications. The conference's primary sponsors include computer systems manufacturer Sun Microsystems of Santa Clara, Calif., and Zyvex, of Richardson, Texas, a company exploring methods of assembling devices molecule by molecule.

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